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TMI Blog2021 (12) TMI 1081X X X X Extracts X X X X X X X X Extracts X X X X ..... Appeal under Section 260A could be admitted only on the High Court being satisfied that the case involves a substantial question of law. - R/TAX APPEAL NO. 165 of 2021 - - - Dated:- 14-7-2021 - HONOURABLE MS. JUSTICE BELA M. TRIVEDI and HONOURABLE DR. JUSTICE ASHOKKUMAR C. JOSHI MR.VARUN K.PATEL(3802) FOR THE APPELLANT(S) NO. 1 MR MANISH J SHAH(1320) FOR THE OPPONENT(S) NO. 1 ORDER (PER : HONOURABLE MS. JUSTICE BELA M. TRIVEDI) 1. The present Appeal has been filed by the appellant Principal Commissioner of Income Tax, Vadodara-3 under Section 260A of the Income Tax Act, 1961 (hereinafter referred to as the said Act ) being aggrieved by the order dated 04.10.2019 passed by the Income Tax Appellate Tribunal (hereinafter referred as the ITAT ) in ITA No. 855/AHD/2008 for the assessment year 2004-05. The Appeal has been filed proposing the following substantial questions of law: (a) Whether the ITAT has committed the gross error of law in not upholding the addition on account of the provision for doubtful debt of ₹ 2,52,36,800/- made by the assessing officer to the book profit u/s. 115JB of the Income Tax Act? (b) Whether the ITAT while ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ommitted an error on the face of the record in not upholding the order of the Assessing Officer making addition on the issue of provision for doubtful debts to the extent of ₹ 2,52,36,800/- to book profit, inasmuch as the assessee on one hand had debited the provision for doubtful debts i.e. administration and marketing expenses relating to sundry debtors, and on the other hand the assessee had reduced the corresponding amount in asset side under the different head i.e. loans and advances, and therefore the assessee s claim of provision for doubtful debt did not match to the non-recovery of loans/advances given by the assessee and consequently write-off of such amount would be hit by the clause (c) of Explanation below Section 115JB of the said Act. Learned Advocate Mr. Patel further submitted that as per the contentions of the assessee it had supplied Aniline to Camox Laboratories Limited during the financial year 1996-97 and 1997-98 amounting to ₹ 374 lacs which was credited to Profit Loss Account and in respect of which dispute was pending in the High Court and therefore it could not be said that the provision made for bad and doubtful debt was irrecoverable. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was not a mere provision made by the assessee by merely debiting the Profit and Loss Account and crediting the provision for bad and doubtful debt, but by simultaneously obliterating such provision from its accounts by reducing the corresponding amount from the loans and advances on the asset side of the balance sheet and consequently, at the end of the year showing the loans and advances on the asset aside of the balance sheet as net of the provision for bad debt, it would amount to a write off and such actual write off would not be hit by clause (i) of Explanation (1) to section 115JB. The judgment in case of Deepak Nitrite Limited(supra) fell in the former category whereas from the brief discussion available in the judgment it appears that case of Indian Petrochemicals Corporation Ltd. (supra), fell in the later category. 6. The ITAT vide the impugned order considering the said Judgment of Full Bench in case of Vodafone Essar Gujarat Limited (supra) held as under in para No. 38: 38. The learned counsel for the assessee took us through Schedule-8 (PB-13) for sundry debtors wherein an amount of ₹ 377.37 lacs has been written off and not merely provisions. The amou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... substantial question of law. In exercise of powers under Section 260A, the findings of fact of the Tribunal cannot be disturbed. It has to be kept in mind that the right of appeal is neither a natural nor an inherent right attached to the litigation. Being a substantive statutory right, it has to be regulated in accordance with law in force at the relevant time. The conditions mentioned in Section 260A must be strictly fulfilled before an appeal can be maintained under Section 260A. Such appeal cannot be decided on merely equitable grounds. 15. An appeal under Section 260A can be only in respect of a 'substantial question of law'. The expression 'substantial question of law' has not been defined anywhere in the statute. But it has acquired a definite connotation through various judicial pronouncements. In Sir Chunilal V. Mehta Sons Ltd. v. Century Spinning Mfg. Co. Ltd., AIR (1962) SC 1314, this court laid down the following tests to determine whether a substantial question of law is involved. The tests are: (1) whether directly or indirectly it affects substantial rights of the parties, or (2) the question is of general public importance, or (3) whether i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t previously settled by law of the land or a binding precedent,AIR 1962 SC 1314 (2001) 3 SCC 179 and must have a material bearing on the decision of the case, if answered either way, insofar as the rights of the parties before it are concerned. To be a question of law involving in the case there must be first a foundation for it laid in the pleadings and the question should emerge from the sustainable findings of fact arrived at by court of facts and it must be necessary to decide that question of law for a just and proper decision of the case. An entirely new point raised for the first time before the High Court is not a question involved in the case unless it goes to the root of the matter. It will, therefore, depend on the facts and circumstance of each case whether a question of law is a substantial one and involved in the case, or not; the paramount overall consideration being the need for striking a judicious balance between the indispensable obligation to do justice at all stages and impelling necessity of avoiding prolongation in the life of any lis. 20. In Hero Vinoth (Minor) Vs. Seshammal (2006) 5 SCC 545, 556, this Court has observed that: The general rul ..... X X X X Extracts X X X X X X X X Extracts X X X X
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