TaxTMI 
TaxTMI 
2014 (7) TMI 84
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.....09 at an income of Rs.7.43 crore under the normal provisions and Rs. 6.68 crore u/s 115JB of the Act. The AO noticed that the assessee had actually debited a sum of Rs. 1.50 crore towards 'Provision for warranty & other expenses' instead of Rs. 1.12 crore which amount was initially disallowed by him. Notice u/s 154 was issued. In the order so passed, the AO computed income under the regular provisions as under:- "Income assessed as per order u/s 143(3)/147/250 Rs.6,30,59,307/- Add: Warranty & Other expenses Rs. 37,60,240/- Add: Provision for doubtful debts written back Rs. 53,19,000/- Add: Provision for doubtful debts Rs. 5,00,000/- Add: Provision for gratuity Rs. 9,75,846/- Total Income Rs.7,36,14,393/- Less: B/F losses/unabs....
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.... order dated 29.08.2012, the Tribunal in ITA No.812/Del/2011 has ordered for the deletion of addition of Rs. 1.12 crore on account of provision for warranty and other expenses by holding it to be an ascertained liability. Since the addition made by the AO in the original proceedings for some amount of provision for warranty and other expenses does not stand, there can be no question of making the remaining part of the amount of the provision. We, therefore, approve the action of the ld. CIT(A) in deleting this addition. 7. The second item of addition is a sum of Rs. 53.19 lac representing 'Provision for doubtful debts written back'. It is noticed from the assessee's Profit & Loss Account that the assessee itself included the sum of Rs. 53.....
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....at the time of writing back of such provision. In the otherwise situation, the AO will proceed as per law. 8. The next item is provision for doubtful debts of Rs. 5 lac which has been added by the AO to the total income in proceedings u/s 154. The ld. AR stated that the provision for this sum was made by way of a debit to the Profit & Loss Account and the same amount was added back voluntarily in the computation of total income. This fact is verifiable from page 31 of the paper book, which is copy of computation of total income for the instant year. It can be seen that the assessee has added back provision for doubtful debts amounting to Rs. 5 lac to the amount of profit before tax as per Profit & Loss Account. Since the AO has started his....
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....ccount for which the AO initially made addition of Rs. 1.12 crore. Clause (c) of Explanation 1 u/s 115JB deals with the 'computation of book profit.' It provides that the amount of net profit shown in the Profit & Loss Account shall be increased by certain items listed in clauses (a) to (i). Clause (c) is 'the amount or amounts set aside to provisions made for meeting liabilities, other than ascertained liabilities.' The essence of this provision is that any provision made for unascertained liabilities is to be added back to the profit as shown in the Profit & Loss Account for the purposes of computation of 'book profit' as per Explanation 1 to Section 115JB. The Tribunal in the original proceedings for the same assessment year has held tha....
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....ot recovered. Hence Cl (c) of Expl. to sec. 115JA does not apply. Similarly cl.(b) is also not applicable as it is a provision and not reserve. However , it is pertinent to note that the legislature has stepped in to nullify the effect of this judgment by making an amendment made to sec. 115JB by way of insertion of Cl.(i) to Explanation by the Finance (No.2) Act, 2009 w.r.e.f. 1.4.2001. In view of the substitution of Clause (i) to Explanation 1 to Section 115JB, the amount of provision for doubtful debts amounting to Rs. 5 lac is held to be rightly added by the AO in the computation of book profit. The ld. AR was fair enough to concede this position. The view taken by the ld. CIT(A) on this score is, therefore, overturned. 13. The last it....