Provision for diminution in asset value must be added back to book profit under section 115JB; separate fund not required.

Amounts set aside as a provision for doubtful advances, being a diminution in the value of assets, fall within clause (i) of Explanation 1 to section 115JB and must be added back while computing book profit. The provision was separately reflected in the balance sheet, showing proper accounting treatment, and the clause was read as covering any provision appropriated towards asset diminution. The argument that a separate fund had to be created was rejected as unsupported by the statutory language. The book-profit adjustment was therefore sustained against the assessee.

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Issues: Whether the amount debited as provision for doubtful advances, representing diminution in the value of assets, was required to be added back while computing book profit under section 115JB.

Analysis: The expression in clause (i) of Explanation 1 to section 115JB covers amounts set aside as provision for diminution in the value of any asset. The provision in question was reflected separately in the balance sheet and was not a case of mere reduction in book value without accounting treatment. The language of the clause, read as a whole, shows that provisions appropriated as diminution in asset value are to be included in book profit, and the contention that a separate fund must be created has no basis in the provision.

Conclusion: The addition to book profit was justified and the issue was decided against the assessee.

Final Conclusion: The appeal failed and the assessment adjustment under section 115JB was sustained.

Ratio Decidendi: Amounts appropriated as a provision for diminution in the value of assets fall within clause (i) of Explanation 1 to section 115JB and are includible in book profit, without any requirement of creating a separate fund.

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