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of <h1>Tribunal rules in favor of company in tax dispute, exempts doubtful debts & wealth-tax from book profit calculation</h1> <h3>USHA MARTIN INDUSTRIES LTD. Versus JOINT COMMISSIONER OF INCOME TAX.</h3> The Tribunal ruled in favor of the assessee, a domestic company engaged in manufacturing and sale of steel wires and ropes, in a tax dispute. The Tribunal ... - Issues Involved:1. Confirmation of prima facie adjustment by the AO u/s 143(1)(a) regarding disallowance of provisions for doubtful debts and wealth-tax while computing book profit u/s 115JA.2. Denial of credit for income-tax deducted at source amounting to Rs. 12,07,079.Summary of Judgment:Issue 1: Prima Facie Adjustment u/s 143(1)(a)- The assessee, a domestic company engaged in manufacturing and sale of steel wires and ropes, filed a return showing a loss but disclosed book profit for the purpose of s. 115JA.- The AO processed the return u/s 143(1)(a) and added back Rs. 1,56,00,000 (provision for doubtful debts and advances) and Rs. 1,25,000 (provision for wealth-tax) to the net profit for computing book profit, resulting in a higher tax liability.- The assessee appealed, arguing that these provisions should not be disallowed as they do not fall under the adjustments specified in the Explanation to s. 115JA(2).- The CIT(A) upheld the AO's adjustments, but the Tribunal disagreed, stating that: - Provision for doubtful debts does not fall under cl. (c) of the Explanation to s. 115JA(2) as it pertains to diminution in value of assets, not liabilities. - Provision for wealth-tax cannot be equated with income-tax and thus does not fall under cl. (a) of the Explanation.- The Tribunal concluded that the sums of Rs. 1,56,00,000 and Rs. 1,25,000 should not be added back to the net profit for computing book profit u/s 115JA.Issue 2: Credit for Income-Tax Deducted at Source- The assessee contended that the AO failed to grant credit for income-tax deducted at source amounting to Rs. 12,07,079.- The CIT(A) did not address this ground in their order.- The Tribunal restored this issue to the CIT(A) for reconsideration after providing the assessee an opportunity for a hearing.Conclusion:- The appeal of the assessee was allowed, with the Tribunal ruling that the provisions for doubtful debts and wealth-tax should not be added back to the net profit for computing book profit u/s 115JA.- The issue regarding the credit for income-tax deducted at source was remanded back to the CIT(A) for further consideration.
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