2014 (1) TMI 1765

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....eved on deletion of the additions made under the head "Aircraft flying rights charges" and "retainership fees" paid to M/s. Sreebala (P) Ltd. 4. Facts apropos are that Assessing Officer while computing the book profit of assessee under section 115JB of the Act added back provision of Rs. 1,01,01,000/- made by assessee against diminution in the value of investments and provision of Rs. 6,24,70,000/- made against doubtful debts. Assessing Officer considering the amendment made under section 115JB of the Act by Finance (No. 2) Act, 2009 was of the opinion that provision for diminution in value of any asset was required to be added to the book profit. Assessing Officer noted that amendment was retrospectively done with effect from assessment year 2001-02. 5. Ld. CIT(Appeals), on assessee's appeal confirmed the above addition. According to him, vide amendment made under section 115JB by Finance (No.2 ) Act of 2009, any amount set aside as a provision for diminution in the value of any asset, was required to be added to the book profits. According to him, Clause (i) of Explanation 1 to Section 115JB(2) was clear in this regard. 6. Now before us, ld. AR strongly assailing the ord....

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....as seen from Schedule 5 of its balance-sheet as on 31.03.2007. Total value of investment as per Schedule 5 is Rs. 3,056.53 lakhs from which the provision for diminution Rs. 251.01 lakhs has been reduced and the net figure of Rs. 2805.52 lakhs alone has been carried to the Balance-sheet. Hon'ble Karnataka High Court in the case of Yokogawa India Ltd. (supra) while dwelling on the applicability of Clause (i) of Explanation 1 to Section 115JB(2) of the Act to a claim made for provision against bad and doubtful debts, held at para 8 of its judgment dated 29.08.2011 as under:- "8. In the present case, the debt is an amount receivable by the assessee and not any liability payable by the assessee and, therefore, any provision made towards irrecoverability of the debt cannot be said to be a provision for liability. Therefore it was held that Item (c) of the Explanation is not attracted to the facts of the case. Item (c) in Section 115J A and 115-JB(1) are identical. In order to attract the Explanation the debt which is doubtful or bad should satisfy the requirement contemplated in Item (c) of the Explanation. It is the amount or amounts set aside as provisions made for meeting the liabi....

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....and loss account but simultaneously also reduce the loans and advances or the debtors from the assets side of the balance sheet to the extent of the corresponding amount so that, at the end of the year, the amount of loans and advances/debtors is shown as net of the provisions for the Impugned bad debt. Therefore, in the first place if the bad debt or doubtful debt is reduced from the loans and advances or the debtors from the assets side of the balance sheet the Explanation to Section 115JA or JB is not at all attracted. In that context even if amendment which is made retrospective the benefit given b the Tribunal and the appellate Commissioner to the assessee is in no way affected. In that view of the matter, we do not see any merit in this appeal". Once assessee has reduced amount shown by it as a provision for diminution of investment from its total value of investment, it no longer remained a provision. Effectively it was a write off. This view is supported by the decision of the Hon'ble Apex Court in the case of Vijaya Bank -vs.- CIT(2010) 323 ITR 166. Therefore, the claim of assesee with regard to diminution in value of investment has to succeed. 9. Vis-a-vis the claim....

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.... of addition on account of expenditure incurred towards retainer-ship fee paid to M/s.Sreebala (P) Ltd. 3. Having heard both the sides and perused the relevant material on record, it is noticed that the authorities below have relied on their respective decisions taken in the earlier years on the same ground for the purpose of not allowing and allowing the deduction. The appeal of the assessee for the immediately preceding assessment year i.e., 2004-05 came up for decision before the Tribunal. Vide order in ITA No. 566/Kol/2009, the Tribunal has accepted the assessee's claim on this issue by following the earlier order of the Tribunal. Relevant discussion is made in para-3 of the Tribunal order (a copy of which is available on record). Respectfully following the precedent, we uphold the impugned order in granting the deduction in respect of retainership fee paid to M/s Sreebala (P) Ltd. This ground is not allowed". "8. The last ground is against the deletion of addition under the head "Aircraft flying rights charges". The facts apropos this ground are that the assessee claimed deduction of Rs. 3.40 crores in respect of "Aircraft flying rights charges". On being called upon to ....