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TMI Blog2021 (2) TMI 1038X X X X Extracts X X X X X X X X Extracts X X X X ..... ount, it shall be added to the net profit as shown in the profit and loss account for the purpose of computation of book profit. It is well settled in law that law does not contemplate or require the performance of an impossible act. See LIFE INSURANCE CORPORATION OF INDIA VERSUS COMMISSIONER OF INCOME-TAX [ 1996 (2) TMI 5 - SUPREME COURT] . Even if the provision for doubtful debt is added back to the net profits, the resultant book profit is still negative and even though the assessee was prevented from adding back the provision for bad and doubtful debts to the net profit due to reasons beyond its control, it has at the first opportunity demonstrated to the authorities that book profits are still negative on adding back the provision for bad and doubtful debts and therefore, no adverse inference could have been drawn against the assessee. It is also pertinent to note that the assessee had added the provision for bad and doubtful debts for Assessment Years 1998-99 to 2000-01. Decided in favour of the assessee. - I.T.A. NO. 11/2021 - - - Dated:- 5-2-2021 - HON BLE MR. JUSTICE SATISH CHANDRA SHARMA AND HON BLE MR. JUSTICE V. SRISHANANDA APPELLANT (BY SRI. A. SHANKAR SENI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of ₹ 8,69,21,384/- (business loss of ₹ 8,66,44,321 and long term capital loss of ₹ 2,77,063/-) under the Income Tax Act, 1961 (for short, the I.T Act ). The appellant returned income of ₹ 10,60,14,200/- under the provisions of Section 115JB of the Act (Minimum Alternate Tax). 6. The above return filed by the appellant was taken-up for scrutiny and the assessment was completed under Section 143(3) of the I.T. Act, and determined the assessed business loss at ₹ 7,57,82,336/- under provisions of the I.T. Act by making various additions/disallowances. 7. Learned counsel for the appellant submits that on the very same issue relating to the disallowance has been raised in the appellant s own case for the assessment year 2009-10 and admitted by this Hon ble Court in ITA No.409/2014 on 27.02.2015 for the Assessment Year 2008- 09 and admitted by this Hon ble Court in ITA No.183/2017 on 05.12.2017 and for the Assessment Year 2010-11 and admitted by this Court in ITA No.184/2017 on 05.12.2017. Learned counsel prays to allow the appeal and set aside the findings to the extent against the appellant in the common order passed by the Income Tax Appell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded to the net profit in computation of book profit for MAT purposes under section 115JB and thereby importing the provision of section 14A read with rule 8D into the MAT provisions on the facts and circumstances of the case? 2. The factual background, in which the aforesaid substantial questions of law arise for our consideration need mention. The assessee is a company and is an undertaking of Government of Karnataka. The assessee is engaged in financing industrial units in the State of Karnataka. The assessee filed the return of income for the Assessment Year 2009-10 on 30.09.2011 declaring NIL income under normal provisions of the Act. Thereafter, the assessee returned income of ₹ 13,60,88,457/- under the provisions of Section 115JB of the Act. The return of the assessee was selected for scrutiny and assessment was completed under Section 143(3) of the Act. The Assessing Officer vide order dated 21.11.2011 determined the loss at ₹ 1,73,60,700/- under the normal provisions of the Act and determined the book profits under Section 115JB of the Act at ₹ 30,01,07,991/-. 3. The assessee thereupon filed an appeal before the Commissioner of Income Tax (Ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... annot perform the impossible i.e., adding back to the net profit of the provision for bad and doubtful debts, based on a provision, which was inserted later. It is also pointed out that the assessee had added the provision for Assessment Years 1998-99 to 2000-01. It is also argued that any disallowance computed under Section 14A of the Act pertains to computation of income under normal provisions of the Act and cannot be read into provisions of Section 115JB of the Act pertaining to computation of book profits by levy of Minimum Alternate Tax (MAT). In support of aforesaid submissions, reliance has been placed on decisions in 'LIFE INSURANCE CORPORATION OF INDIA VS. CIT (1996) 219 ITR 401 (SC), 'CITY UNION BANK LTD. VS. ACIT', (2020) 425 ITR 475 (MADRAS), 'HUDA AND ANOTHER VS. DR.BABESWAR KANHAR AND ANOTHER', (2005) 1 SCC 191, 'CIT VS. GOKALDAS IMAGES P. LTD.', (2020) 122 TAXMANN.COM 160 (KAR.), 'CIT VS. BENGAL FINANCE INVESTMENTS PVT LTD.', ITA NO.337 OF 2013 DATED 10.02.2015 and 'CIT VS. M/S ESSAR TELEHOLDINGS LTD.', ITA NO.438 OF 2012 DATED 07.08.2014 . 6. On the other hand, learned counsel for the revenue submitted that the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in Explanation to Section 115JB(2) has been inserted by Finance Act, 2009 with retrospective effect i.e., from 01.04.2001 and therefore, no fault can be found with the view taken by the authorities. It is also urged that the decisions relied upon by the learned Senior counsel for the assessee were rendered prior to 2009. 8. We have considered the submissions made by learned counsel for the parties and have perused the record. The Supreme Court in 'CIT VS. HCL Comnet Systems and Services Ltd.', (2008) 305 ITR 409 (SC) held that provisions for bad and doubtful debts cannot be added under Explanation to Section 115JB of the Act. In order to ensure that provision for bad and doubtful debts debited to profit and loss account, is increased to the net profit for the purposes of computation of book profit under Section 115JB of the Act. Clause (i) in Explanation to Section 115JB(2) has been inserted by Finance Act, 2009 with retrospective effect i.e., from 01.04.2001. From perusal of para 40.2 of Circular dated 03.06.2010, it is evident that clause (i) in Explanation after Section 115JB(2) has been inserted so as to provide that if any provision for diminution in the value of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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