Appeal Success: Provision Treatment in Book Profits

The revenue's appeal under section 260A of the Income-tax Act regarding the treatment of provisions for non-performing assets/doubtful debts/advances in the computation of book profits under section 115JA was successful. The court held that the amended provision allowing for provisions for diminution in the value of any asset to be added back to book profits applied to the case. The court emphasized the distinction between setting aside an amount and making a provision for future write-offs, ruling in favor of the revenue. The Tribunal's order was set aside, and the assessing authority's view was upheld based on the new legislative amendment.

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Issues involved: Appeal by revenue u/s 260A of Income-tax Act regarding treatment of provisions for non-performing assets/doubtful debts/advances in computation of book profits u/s 115JA.

Summary:
1. The dispute in this case revolves around the computation of book profits of the assessee company for the assessment year 1999-2000 as per section 115JA of the Income-tax Act, 1961.
2. The revenue contended that provisions made for bad and doubtful debts should be added back to the book profits, while the assessee argued against it.
3. The Assessing Officer disagreed with the assessee, but the Commissioner (Appeals) and the Income-tax Appellate Tribunal ruled in favor of the assessee.
4. The revenue appealed, citing a legislative amendment introduced by the Finance (No. 2) Act, 2009, which added clause (g) to the Explanation of section 115JA, allowing for provisions for diminution in the value of any asset to be added back to book profits.
5. The court held that the amended provision applies to the case, as it covers situations where provisions are made for future diminution in asset value, even if not actually carried out.
6. The court emphasized the distinction between setting aside an amount and making a provision for future write-offs, ruling in favor of the revenue based on the new legislative amendment.
7. The appeal by the revenue was allowed, setting aside the Tribunal's order and upholding the assessing authority's view based on the new clause (g) of the Explanation to section 115JA.
8. The assessee's request for reserving liberty to claim benefit of a Supreme Court judgment in case the new provision is found invalid was declined by the court, citing speculative nature of the request.

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