Tribunal directs reassessment for accurate book profit calculation under section 115JB.

The Tribunal allowed the appeal for statistical purposes, directing the Assessing Officer to verify the books of account and financial statements to determine the correct computation of book profit under section 115JB. The Tribunal emphasized the need to ascertain the provision for doubtful debts and compute the book profit accordingly. The assessee was granted the opportunity to present its case effectively.

---

---

Issues Involved:
1. Legality of the order passed by the CIT(A).
2. Confirmation of non-deduction of Rs. 67,69,460/- on account of bad debts written off against the provision created in earlier years in the computation of book profits under section 115JB of the Income Tax Act, 1961.
3. Permissibility of adjustments to book profit under section 115JB.

Issue-wise Detailed Analysis:

1. Legality of the Order Passed by the CIT(A):
The assessee challenged the legality of the CIT(A)'s order dated 13/12/2016, claiming it was "bad in law and wrong on facts." The Tribunal did not specifically address this broad assertion separately but focused on the substantive issues regarding the computation of book profits and the treatment of bad debts.

2. Confirmation of Non-Deduction of Rs. 67,69,460/- on Account of Bad Debts Written Off:
The core issue was whether the bad debts written off, amounting to Rs. 67,69,460/-, should be deducted from the book profits under section 115JB. The assessee argued that the bad debts written off were adjusted against the provision for doubtful debts created in earlier years and should be considered under clause (i) of Explanation 1 of section 115JB. The CIT(A) allowed the claim of bad debt under regular provisions following the Supreme Court decision in TRF Ltd., but disallowed it under section 115JB, stating that the bad debts did not appear in the Profit & Loss Account and thus could not be adjusted as per the Explanation 1 of section 115JB.

3. Permissibility of Adjustments to Book Profit Under Section 115JB:
The Tribunal examined whether the adjustments made by the assessee to the book profits were permissible under section 115JB. The CIT(A) had rejected the assessee's claim on the grounds that the bad debts written off did not appear in the Profit & Loss Account and thus could not be adjusted under the specific provisions of section 115JB. The Tribunal referred to the Supreme Court's rulings in Apollo Tyres Ltd. and Malyalam Manorama, which clarified that neither the assessee nor the Assessing Officer is permitted to make any adjustments to the book profits except those specifically provided in the Explanation to section 115JB. The Tribunal concluded that the matter required verification with the books of account and financial statements to determine whether the bad debts written off were appropriately accounted for.

Conclusion and Directions:
The Tribunal restored the issue to the file of the Assessing Officer for verification of the books of account and financial statements to ascertain the correct computation of book profit as per Explanation 1 below section 115JB. The Assessing Officer was directed to verify the amount of provision for doubtful debts in the books of accounts and compute the book profit accordingly. The appeal of the assessee was allowed for statistical purposes, ensuring the assessee would be afforded adequate opportunity to present its case.

Order Pronounced:
The order was pronounced in the open court on 14th October 2021, allowing the appeal for statistical purposes.

---