TaxTMI 
TaxTMI 
2014 (9) TMI 1240
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...."1. That on the facts and in the circumstances of the case, the Ld. CIT(Appeals) was not justified and grossly erred in confirming the disallowance of the provision for non-performing assets of Rs. 366,00,000/- provided in the accounts in accordance with the prudential norms of the RBI. 2. That on the facts and in the circumstances of the case, the Ld. CIT(Appeals) was not justified and grossly erred in confirming the addition of Rs. 4,80,00,000/-, being the amount transferred to Special Reserve, in computing book profit u/s 115JB of the Act. 3. That on the facts and in the circumstances of the case, the Ld. CIT(Appeals) was not justified and grossly erred in confirming the addition of Rs. 16,30,00,000/- being the amount t....
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....al of the assessee. 4. The first ground relates to the claim of the assessee in respect of the provision of non-performing assets amounting to Rs. 3,66,00,000/- added by the assessing officer in the computation of income as per the normal provisions. After hearing the rival submissions, we noted that this issue is no more resintegra in view of the decision of Hon'ble Suprme Court in the case of Southern Technologies Ltd vs JCIT, 320 ITR 577 (SC) in which Hon'ble Supreme Court has held as under:- "Analysis of section 36(1)(viia) Section 36(1) (vii) provides for a deduction in the computation of taxable profits for the debt established to be a bad debt. Section 36(1)(viia) provides for a deduction in respect of a....
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.... As stated above, section 36(1) (vii) after April 1, 1989 draws a distinction between write off and provision for doubtful debt. The Income -tax Act deals only with doubtful debt. It is for the assessee to establish that the provision is made as the loan is irrecoverable. However, in view of the Explanation which keeps such a provision outside the scope of "written off" bad debt,section 37 cannot come in. If an item falls under sections 30 to 36, but is excluded by the Explanation to section 36(1)(vii) then section 37 cannot come in. Section 37 applies only to items which do not fall in sections 30 to 36. If a provision for doubtful debt is expressly excluded from section 36(1)(vii) then such a provision cannot claim deduction unde....
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....n 1 to section 115JB(2), the amount / amounts set aside to provisions made for meeting liabilities, other than the ascertained liabilities are also to be added for computing the book profit. No doubt the provisions made for ascertained liabilities has not to be added. The ld. A.R even though vehemently contended that the reserve has to be created as per the provision of RBI Act but could not convince us against what ascertained liability it has been created. The reserve created as per the RBI in our opinion cannot be converted into a provision unless it is proved it is against a liability. The reserve is always created in order to meet future exigencies. This reserve in our opinion cannot be regarded to have been created against a partic....
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.... the assessee that it is a provision for a known liability. We therefore, set aside the order of the CIT(A) on this issue and allow the ground no.3 taken by the assessee. 8. Ground no.4 relates to the provision for NPA added in the computation of book profit. This issue in our opinion is to be decided in favour of the revenue in view of clause (i) inserted to explanation 1 to section 115JB(2) by the Finance Act, 2009 w.e.f. 1.4.2001. Therefore, after hearing the rival submissions and carefully considering the same the addition made by the assessing officer has to be sustained. The provision for NPA account is created for diminution in the value of the asset. This fact cannot be denied. The ld. A.R even though vehemently contended but cou....