Tribunal Upholds Exclusion of Written Back Provision for Tax Deduction

The Tribunal upheld the revision order passed by the Commissioner of Income-tax, ruling that the amount credited by the assessee company for provisions written back should be reduced from the eligible profit for the assessment year 1990-91. The Tribunal concluded that failure to adjust the written back provision would distort the profit calculation for section 32AB purposes. The appeal filed by the assessee was dismissed, affirming the Commissioner's decision to exclude the written back provision amount from the eligible profit calculation for claiming deduction under section 32AB.

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Issues:
- Claim of deduction under section 32AB by the assessee company.
- Revision order passed by the Commissioner of Income-tax under section 263 of the Income-tax Act, 1961.
- Crediting amount to profit and loss account for provisions written back.
- Interpretation of provisions of section 32AB(3) for making adjustments to profits.
- Dispute regarding reducing profit by withdrawn provisions credited to profit and loss account.

Analysis:
1. The appeal involved a dispute regarding the deduction claimed by the assessee company under section 32AB for the assessment year 1990-91. The Commissioner of Income-tax, Bombay City-V, passed a revision order under section 263 of the Income-tax Act, 1961, challenging the assessment order passed by the assessing authority on the grounds of excess allowance granted to the assessee company.

2. The crux of the issue was the amount of Rs. 25,60,000 credited by the company in its profit and loss account for provisions written back. The Commissioner found that this amount did not form part of the eligible profit for claiming deduction under section 32AB, resulting in an excess allowance of Rs. 5,12,000. The Commissioner proposed to revise the assessment order based on this discrepancy.

3. The assessee company argued that the provision written back was a balance from an earlier assessment year and should not impact the current year's eligible profit. The company explained the history of the provision made for disputed wages and subsequent payments, asserting that the written back amount was not considered in earlier assessments for increasing profits under section 32AB.

4. The Tribunal analyzed the provisions of section 32AB(3) in detail, focusing on the items by which profits are adjusted for the purpose of deduction. The Tribunal emphasized that the law did not impose conditions on reducing profits by withdrawn provisions credited to the profit and loss account based on previous consideration in earlier assessments.

5. Ultimately, the Tribunal upheld the revision order passed by the Commissioner of Income-tax, ruling that the amount credited by the assessee company for provisions written back should be reduced from the eligible profit for the assessment year 1990-91. The Tribunal concluded that failure to adjust the written back provision would distort the profit calculation for section 32AB purposes.

6. In summary, the appeal filed by the assessee was dismissed, affirming the Commissioner's decision to exclude the written back provision amount from the eligible profit calculation for claiming deduction under section 32AB.

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