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TMI Blog2014 (9) TMI 1240X X X X Extracts X X X X X X X X Extracts X X X X ..... f the book profit u/s 115JB - Merely the reserve has to be created under a separate statute, it cannot be converted into a provision for ascertained liabilities. Under sub-clause c of explanation 1 to section 115JB(2), the amount / amounts set aside to provisions made for meeting liabilities, other than the ascertained liabilities are also to be added for computing the book profit. No doubt the provisions made for ascertained liabilities has not to be added. The ld. A.R even though vehemently contended that the reserve has to be created as per the provision of RBI Act but could not convince us against what ascertained liability it has been created. The reserve created as per the RBI in our opinion cannot be converted into a provision unless it is proved it is against a liability. The reserve is always created in order to meet future exigencies. This reserve in our opinion cannot be regarded to have been created against a particular liability. We therefore do not find any illegality or infirmity in the order of the CIT(A) in sustaining the addition u/s 115JB. Thus this ground stands dismissed. Addition while computing the book profit u/s 115JB being the amount transferred to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... BER Appellant by : Shri Amit Agarwal,ACA. Respondent by : Shri Ravi Jain, CIT. O R D E R PER P.K. BANSAL This appeal has been filed by the assessee against the order of CIT(A), Kolkata dated 28.02.2011 for the assessment year 2008-09 by taking the following grounds of appeal :- 1. That on the facts and in the circumstances of the case, the Ld. CIT(Appeals) was not justified and grossly erred in confirming the disallowance of the provision for non-performing assets of ₹ 366,00,000/- provided in the accounts in accordance with the prudential norms of the RBI. 2. That on the facts and in the circumstances of the case, the Ld. CIT(Appeals) was not justified and grossly erred in confirming the addition of ₹ 4,80,00,000/-, being the amount transferred to Special Reserve, in computing book profit u/s 115JB of the Act. 3. That on the facts and in the circumstances of the case, the Ld. CIT(Appeals) was not justified and grossly erred in confirming the addition of ₹ 16,30,00,000/- being the amount transferred to Debenture Redemption Reserve, in computing book profit u/s 115JB of the Act. 4. That on the facts and in the circumstances ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 36(1)(viia) has been amended to provide that in respect of provision for bad and doubtful debt made by a scheduled bank or a non-scheduled bank, an amount not exceeding a specified per cent of the total income or a specified per cent of the aggregate average advances made by rural branches, whichever is higher, shall be allowed as deduction in computing the taxable profits. Even section 36(1) (vii) has been amended to provide that in the case of a bank which section 36(1)(viia) applies, the amount of bad and doubtful debt shall be debited to the provision for bad and doubtful debt account and that the deduction shall be limited to the amount by which such debt exceeds the credit balance in the provision for bad and doubtful debt account. The point to be highlighted is that in the case of banks, by way of incentive, a provision for bad and doubtful debt is given the benefit of deduction, however, subject to the ceiling prescribed as stated above. Lastly, the provision for NPA created by a scheduled bank is added back and only thereafter is deduction made permissible under section 36(1)(viia) as claimed. Whether provision on NPA is allowable under section 37(1)? As stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded for computing the book profit. No doubt the provisions made for ascertained liabilities has not to be added. The ld. A.R even though vehemently contended that the reserve has to be created as per the provision of RBI Act but could not convince us against what ascertained liability it has been created. The reserve created as per the RBI in our opinion cannot be converted into a provision unless it is proved it is against a liability. The reserve is always created in order to meet future exigencies. This reserve in our opinion cannot be regarded to have been created against a particular liability. We therefore do not find any illegality or infirmity in the order of the CIT(A) in sustaining the addition u/s 115JB. Thus this ground stands dismissed. 7. The third ground relate to the sustainance of addition of ₹ 16,30,00,000/- while computing the book profit u/s 115JB being the amount transferred to Debenture Redemption Reserve. The facts relating to this addition are that the assessing officer noted that the assessee has made a provision for Debenture Redemption Reserve for ₹ 16,30,00,000/-. The assessing officer added the same for computing the book profit u/s 11 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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