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TMI Blog2024 (8) TMI 1120X X X X Extracts X X X X X X X X Extracts X X X X ..... ote that there is a corresponding reduction from the loans and advances on the asset side of the balance sheet and consequently showing the net of provision for bad debt. Hon ble Supreme Court in case of HCL Comnet Systems and Services Ltd. [ 2008 (9) TMI 18 - SUPREME COURT] has observed that such actual write off would not be hit by clause (i) of explanation to section 115JB. Thus it cannot be only considered as a mere provision of account of bad and doubtful debts debited in the P L account. As noted that in case of CIT vs. Vijaya Bank Ltd.[ 2008 (9) TMI 18 - SUPREME COURT] has also observed that, by debiting to P L Account for provision of bad and doubtful advances and by reducing the same amount from the loans and advances as appearing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d and verified by the AO in the assessment order passed under section 153A dated 25.9.2021 for AY 2017- 18. 2.2. The learned Principal Commissioner of Income Tax, Central, Bangalore erred in concluding that the addition of Provision for doubtful debts of Rs. 1,67,51,026 in computing book profit under section 1151B has not been considered and hence the assessment order is erroneous and prejudicial to the interests of revenue. 2.3. Without prejudice, the learned Principal Commissioner of Income Tax, Central, Bangalore erred in concluding that the Provision for doubtful debts of Rs. 1,67,51,026 is required to be added back in computing book profit under section 115JB as per clause (i) in Explanation 1 to section 115JB. 2.4. The learned Princip ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iled its original return of income for year under consideration on 22/03/2018 declaring total income of Rs. 4,66,38,270/-. The assessment was completed u/s. 153A r.w.s. 143(3) of the act on 25/09/2021. 2.2. Subsequently, the show cause notice u/s. 263 of the act was issued to revise the assessment order passed u/s. 153 of the act dated 25/09/2021 by the Ld.PCIT on 31/01/2024. The Ld.PCIT noted that, during the course of the assessment proceedings u/s. 153A, the issue of book profits calculation u/s. 115JB was not examined and verified by the Ld.AO. The Ld.PCIT noted that the assessee had debited Rs. 1,67,51,026/- as provision towards doubtful debts and added the same in computation of income under the normal provisions however it was not co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssar Gujarat Ltd. reported in TS-5721-HC-2017(Gujarat)-O dated 04/08/2017 Hon ble Karnataka High Court in case of CIT vs. Yokogawa India Ltd. reported in TS-5560-HC-2011 dated 29/08/2011 2.4. The Ld.PCIT however after considering the submissions of the assessee relied on the decision of Hon'ble Karnataka High Court in case of State Industrial Infrastructure Development Corpn. Ltd. vs. DGIT reported in (2021) 128 taxmann.com 412. The Ld.PCIT submitted that, the decisions relied by the assessee do not have any relevance for the year under consideration as it is passed prior to the insertion of clause (i) in Explanation after section 115JB(2). The Ld.PCIT was thus of the opinion that post the insertion of clause (i) in Explanation to secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rved that the then existing clause (c) did not cover a case where an assessee makes the provision for bad or doubtful debts and with the insertion of clause (i) to the explanation with retrospective effect, any amount or amounts set aside for provision for diminution in the value of the asset made by the assessee, would be added back for computation of book profit u/s. 115JB of the act. Hon ble Court further observed that even if this 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 balan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. Hon ble Supreme Court in case of HCL Comnet Systems and Services Ltd. (supra) has observed that such actual write off would not be hit by clause (i) of explanation to section 115JB. Thus it cannot be only considered as a mere provision of account of bad and doubtful debts debited in the P L account. 4.2. It is noted that Hon ble Supreme Court in case of CIT vs. Vijaya Bank Ltd. (supra), has also observed that, by debiting to P L Account for provision of bad and doubtful advances and by reducing the same amount from the loans and advances as appearing in the balance sheet there has obliterated the said provision from its accounts and therefore would be an instance of write off and not a mere provision. 4.3. Hon ble Karnataka High Court in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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