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TMI Blog2016 (8) TMI 1467X X X X Extracts X X X X X X X X Extracts X X X X ..... at the additional ground of Assessee needs to be decided against the assessee and therefore to be dismissed. MAT computation - Book profits u/s 115JB - provision for bad debts debited to profit and loss account for calculating book profit u/s.115JB (MAT) - in all the decisions that are relied upon by Ld AR, the issue in those appeals was not with respect to clause (i) to Explanation 1 of s. 115JB and therefore the benefit of those decisions will not be applicable to the facts of the present case. On the other hand we find that Hon ble Punjab Haryana High Court in the case of CIT v. Steriplate (P.) Ltd. [ 2011 (5) TMI 645 - PUNJAB AND HARYANA HIGH COURT] , in the case of CIT v. Mysore Breweries Ltd [ 2009 (9) TMI 829 - KARNATAKA HIGH COURT] and CIT v. Yashaswi Leasing Finance Ltd. [ 2011 (8) TMI 765 - KARNATAKA HIGH COURT] have held that in view of insertion of clause (i) to Explanation 1 to s. 115JB, with retrospective effect, amount set aside as provision for diminution in value of assets is to be added back for computation of book profits u/s 115JB of the Act. In view of the fact that the provision made by the assessee is covered by the clause (i) to Expln.1 to s.115JB of the act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; 4,19,740/- and book profit u/s.115JB of the Act was determined at ₹ 5,36,62,677/-. Since the income-tax payable on the total income was less than 10% of the book profits, book profit u/s.115JB of the Act was deemed to be total income of the assessee. Aggrieved by the order of the Assessing Officer (AO), assessee carried the matter before the ld.CIT(A), who vide order dated 28-08-2012 (in Appeal No. CAS.I/285/2011-12) dismissed the appeal of the assessee. Aggrieved by the order of ld.CIT(A), assessee is now in appeal before us and has raised following ground:- 1. On facts and circumstance of the case and in law, the learned CIT(A) erred in confirming the action of the LAO of making addition of ₹ 4,37,67,477/- being provision for bad debts debited to profit and loss account for calculating book profit u/s.115JB (MAT). 2.2. Subsequently, assessee vide letter dated 27/06/2016 has raised additional ground which read as under:- 1. In the facts and circumstances of the case, action of Ld. AO in levying interest u/s.234B of the Act is not justified in the eye of law. 3. With respect to additional ground, ld.AR submitted that the additional ground being legal in nature, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unts it is shown as "Provision for Bad Debt". From a perusal of the audit report, grounds of appeal and submission of the appellant it is established and undisputed fact that it is a provision only. There are no inventories, no sales or no receipts except share income from firms, Dividend income, interest income on FDRs and LTCG (becomes loss after indexation) MAT income has been shown at ₹ 98,42,382/-. Provision for Bad Debts pertains to 8 parties of loans & advances and 3 parties of share application money. Break-up of the same is an under: Share application money 1,54,00,000 Loans & Advances 2,83,64,477 4,37,64,447 10. From a perusal of the above facts it is apparent that appellant has reduced "Loans and Advances" and "Share Application Money" by provision for bad debts. However, share application Money is in fact not a debt at all. It is an investment. The "Loans and Advances" have been given by appellant to various' persons. However, no interest income has been shown from them in A.Y. 2008-09 or A.Y. 2008-09. Therefore, the same are non income earning assets of appellant. Moreover, the appellant has also purchased some d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nution in the value of an asset'. The Hon'ble HC did not discuss the provisions of clause (i) to explanation 1 below section 115 JB(2). The only reference to clause (i) comes in the form of arguments of the counsel for the Revenue (para 7 of the order). However, the decision of the Hon'ble HC then deals with only clause 'c' of explanation 1, under which the amount was added by the A.O. in the case of Yokogawa India Ltd. (Supra). In the observations of the Hon'ble HC reference to clause (i) comes only in following sentence in para 8 of the order: "Realising the fatality of the said argument, it is contended now that item (i) can not amount to satisfaction as provision for diminution in the value of asset is substituted, in case of the assessee falls under item (c)." From the language of the above reference it cannot be Interpreted that Hon'ble HC gave any specific finding on clause (i). After the above observation that the Hon'ble HC discussed the explanation to section 36(i)(vii) which was also a retrospective amendment and dismissed the appeal of the revenue by relying on the decision of Apex Court in the case of Vijaya Bank (Supra). T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h retrospective effect from 01.04.1989 and not the Explanation l(i) introduced below section 115JB(2). (b) As against the above judgement of Hon'ble Karnataka High Court which did not given any specific decision regarding clause (i) to Explanation 1 below section 115JB(2), there is a direct decision of Hon'ble High Court of Punjab and Haryana dated 30.05.2011 in the case of Steriplate (P.) Ltd. reported in 338 ITR 547 which has specifically discussed the provision of clause (i) to Explanation 1 below section 115JB(2) and held that such provision would be added to Book Profit u/s 115JB. (c) The ITAT Mumbai in its decision dated 09.03.2011 in the case of TCFC Finance Ltd. (Supra) held that provision for diminution in the value of investment being unquoted share (similar to Share Application Money in the present appeal) is to be added to book profit under clause (i) to Explanation 1 below section 115JB(2). This judgement has discussed the decision of Apex Court in the case of M/s Vijaya Bank, the very foundation of the judgements of Hon'ble Karnataka HC and Hon'ble ITAT Ahmedabad relied upon by the appellant. (d) In this background when we revert to the decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pra), though available on the date the Hon'ble IT AT Ahmedabad gave its decision, has not been considered by ITAT. 14.2. In this context an issue arises that whether the CIT(A) should follow the decision of ITAT Ahmedabad in the case of Vodafone (Essar) Gujarat or the decision of a Superior Court i.e. Punjab and Haryana High Court which has passed a speaking order on this issue. Another issue involved is that the Apex Court in the case of HCL Comnet Systems & Services Ltd. reported in 292 ITR 299 has held that 'provision for bad and doubtful debt amounted to "provision for diminution in the value of assets". After that decision clause (i) to Explanation 1 below section 115JB(2) has been added which provides that 'provision for diminution in the value of asset' is to be added u/s 115JB. This means that there is a specific provision in the Act for "provision for diminution in the value of asset" and the Apex Court has defined this phrase to mean 'provision for bad and doubtful debts'. Can C1T(A) in such a situation take a view which is contrary to the judgement of Apex Court and specific provisions of the Act ? 14.3. Without prejudice t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pective amendment to the Act and for this proposition he relied on the decision in the case of Dy. CIT v. Uttam Sugar Mills Ltd. [2012] 20 taxmann.com 223 (Delhi). Ld. Sr. DR, on the other hand, supported the orders of AO and ld.CIT(A) and further submitted that in the decisions relied upon by the assessee the facts were different as it was not a case where clause (i) of Explanation-1 to section 115JB of the Act was considered. He further submitted written submissions which read as under:- "2. In this case, during the hearing ld.Counsel for the assessee has made submission that the issue of adjustment of provision of bad and doubtful dates u/s.115JB is covered in assessee favour by citing following decisions: (a) CIT v. Kirloskar Systems Ltd.(220 Taxman 1) (Kar.) (b) Naroda Enviro Projects Ltd. v. ITO - ITA No. 2976/Ahd./2010 and others. (c) ACIT v. Vodafone Essar Gujarat Ltd. ITA No.1999/Ahd./2008. 3. However, in this regard, I wish to submit and put on record following judgments of various High Courts and ITAT, which clearly decided the issue in revenue's favour. (1) CIT v. Steriplate (P.) Ltd. - 20 Taxmann.com 375 (P&H) (2) CIT v. Mysore Breweries Ltd. - 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the year assessee had debited ₹ 4,37,67,477 on account of bad debt provision to the profit and loss account but while calculating the book profits u/s 115JB the same was not added to the Net profits. Ld.CIT(A) has noted that the provision on account of bad debts which has been debited to the profit and loss account by the assessee is not on account of bad debts but is on account of loans and advances which are treated as investments by the assessee and the investments. The aforesaid finding of Ld CIT(A) has not been controverted by the Ld AR. S.115JB is a special provision for payment of tax by certain companies and stipulates payment of Minimum Alternate Tax (MAT) based upon the book profit computed as per provisions of s.115JB(2) of the Act. Book profits shall be computed as per s.115JB(2) of the Act which stipulates that book profits means net profits as shown in the Profit and loss account prepared for the financial year in accordance with Part II and III of Schedule VI of the Companies Act, 1956 and also complying with other conditions as stipulated in s.115JB(2) of the Act. Such book profit has to be increased by item no (a) to (k) of Explanation (1) to s. 115JB of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this ground of Assessee. 5.3. As far as the additional ground of charging of interest u/s 234B is concerned, we find that the assessee had filed the return of income on 30th September 2009 whereas the amendment to clause (i) to Explanation was made by Finance (No 2) Act 2009 with retrospective effect from 1st April 2001 meaning thereby that at the time of filing of return of income, the amendment(had already come into force and that the assessee was aware about it. In such a situation, we are of the view that the ratio of decision in the case of Uttam Sugar Mills Ltd. (supra) would not be applicable to the facts of the present case because in the case of Uttam Sugar Mills Ltd. (supra) the facts were the assessee had filed the original return of income without considering the adjustment of deferred tax and which was as per the law prevailing at the time of filing of return of income. Subsequently during the course of regular assessment proceedings, Assessee voluntarily revised the computation of income on the basis of newly inserted s.115JB(2) Explanation 1(h). In such a situation it was held that when the assessee was under a bona fide belief and based his estimate of income as p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contrary to the decision of ITAT Ahmedabad. Moreover, the decision of Hon'ble Karnataka High Court is the case of Yokogawa India Ltd. does not discuss the issue of clause (i) of Explanation 1 below section 115JB(2), except mentioning it as revenue's arguments. On the other hand, the decision of Hon'ble Punjab and Haryana HC (supra), though available on the date the Hon'ble ITAT Ahmedabad gave its decision, has not been considered by ITAT. 14.2. In this context an issue arises that whether the CIT(A) should follow the decision of ITAT Ahmedabad in the case of Vodafone (Essar) Gujarat or the decision of a Superior Court i.e. Punjab and Haryana High Court which has passed a speaking order on this issue. Another issue involved is that the Apex Court in the case of HCL Comnet Systems & Services Ltd. report in 292 ITR 299 has held that 'provision for bad and doubtful debt' amounted to "provision for diminution in the value of assets". After that decision clause (i) to Explanation 1 below section 115JB(2) has been added which provides that 'provision for diminution in the value of asset' is to be added u/s.115JB. This means that there is a speci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no explanation or offers explanation which is found to be false or is not able to substitute the explanation and is also not able to prove that the explanation is bona fide, the addition made would amount to concealment of particulars, of income. It is well settled that the parameters of judging the justification for addition made in the assessment case of the assessee is different from the penalty imposed on account of concealment of income or filing inaccurate particulars of income and that certain disallowance/addition could legally be made in the assessment proceedings on the preponderance of probabilities but no penalty could be imposed u/s. 271(1)(c) of the Act on the preponderance of probabilities and Revenue has to prove that the claim of expenses by the assessee was not genuine or was inflated to reduce its tax liability. Further merely because additions have confirmed in appeal or no appeal has been filed by assessee against additions made, it cannot be the sole ground for coming to the conclusion that assessee has concealed any income. Before us, ld.AR has given the reasons and the facts which had resulted into addition. These submissions have not been controverted by th ..... 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