TaxTMI 
TaxTMI 
2023 (3) TMI 556
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....een the provision for debt receivable and provisions for debt payable. 4. The Commissioner of Income Tax-LTU (Appeals) failed to note that Clause (c) of the Explanation appended below Section 115JA(2) of the Act provides that amounts set aside to provisions made for meeting liabilities other than ascertained liabilities should be added back to the net profit as per the profit and loss account for the purpose of computing the "book profit" within the meaning of the said statute. 5. The Commissioner of Income Tax-LTU (Appeals) failed to note that the items which come within the ambit of clause (c) of the explanation to Section 115JA are only those with respect to liabilities and that too on account of unascertained liabilities. Once the provision is not for any liability, the question whether the liability is ascertained or unascertained does not arise. 5.1 The Commissioner of Income Tax-LTU (Appeals) has erred in concluding that a provision for doubtful advance is an item which should necessarily to be added back without resorting to accounting terminology whether it is a liability or diminution in value of assets. 5.2 Having regard to the observa....
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....ions made towards book profit computed u/s.115JA of the Act, towards provision for bad and doubtful debts by following the decision of the Hon'ble Supreme Court in the case of CIT v. HCL Comnet Systems & Services Ltd., reported in 305 ITR 409. The Revenue challenged the order of the Tribunal in further appeal u/s.260-A of the Act, before the Hon'ble High Court of Madras. The High Court of Judicature at Madras vide their order dated 30.11.2022, set aside the order of the Tribunal and restored the issue back to the file of the Tribunal with a direction to re-consider the issue of computation of book profit by taking into account amendment to section u/s.115JA of the Act, by Finance (No.2) Act, 2009, w.e.f.01.04.1998. The relevant findings of the Hon'ble High Court are as under: 16. We have given a careful consideration to the facts and circumstances of the case. The dispute in the present case pertains to the Assessment Year 1998-1999. Section 115JA of the Income Tax Act, 1961 deals with deemed income relating to certain companies. 17. As per the aforesaid provision where in the case of an assessee, being a company, the total income, as computed under the Act in res....
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....ovisions of this clause shall not apply if the amount of loss forward or unabsorbed depreciation is nil; or iv. the amount of profits derived by an industrial undertaking from the business of generation or generation and distribution of power; or v) the amount of profits derived by an industrial undertaking located in an industrially backward State or district as referred to in sub- section (4) and sub-section (5) of section 80-IB, for the assessment years such industrial undertaking is eligible to claim a deduction of hundred per cent of the profits and gains under sub-section (4) or subsection (5) of section 80-1B; or vi. the amount of profits derived by an industrial undertaking from the business of developing, maintaining and operating any infrastructure facility as defined in the Explanation to subsection (4) of section 80-IA and subject to fulfilling the conditions laid down in that sub-section; or vii. the amount of profits of sick Industrial company for the assessment year commencing from the assessment year relevant to the previous year in which the said company has become a sick industrial company under subsection (1) of section 17 of t....
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....he light of the above observation, leaving all issues open to be canvassed by both the appellant and the respondent. 22. Considering the fact that the impugned order pertains to the Assessment Year 1998- 99, the Tribunal may endeavour to pass a final order in the denovo proceeding within a period of six months from the date of receipt of a copy of this order. 23. This Tax Case Appeal stands disposed with the above observation by way of remand to the Tribunal. No costs. 4. The present appeal is posted for hearing in pursuant to direction of the Hon'ble High Court of Madras in Tax Case Appeal No.1316 of 2009 dated 30.11.2022. The Ld.Counsel for the assessee referring to certain judicial precedents, including the decision of the Hon'ble Gujarat High Court in the case of CIT v. Vodafone Essar Gujarat Ltd., reported in [2017] 397 ITR 55 (Guj.FB) submitted that adjustment of provision for bad and doubtful debts if reduced from the loans and/or the debtors from the assets side of the balance sheet, the explanation to sec.115JA(2) of the Act, is not applicable. He further submitted that the assessee has reduced provision for bad and doubtful debts from the sundry debto....
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....s an asset. Therefore, as per Clause (g), if any amount is set aside as provision for debts, then same needs to be added back to book profit computed u/s.115JAA of the Act, and this view is support by the decision of the Hon'ble High Court of Madras in the case of EID Parry (India) Ltd. v. ACIT, where it has been clearly held that provision for doubtful debts was provision for diminution in the value of the assets, and thus, same could not be excluded while computing book profit u/s.115JAA of the Act. The relevant findings of the Hon'ble High Court are as under: 5. We have heard Mr.M.P.Senthil Kumar, learned Counsel for the appellant assessee and Mr.T.Ravikumar, learned Senior Standing Counsel for the respondents Revenue. 6. We proceed to decide the various issues in seriatim as indicated in the above Tabulated Statement. The first question of law is whether the reopening of the assessment for the Assessment Year 1997-98 was justified and whether the Tribunal was right in law upholding the jurisdiction by observing that no opinion was formed, even though no fresh material was available with the Assessing Officer for re-opening the assessment? This issue is no long....
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....hase tax on cane subsidy or the wealth tax was not paid by the assessee but only a provision was made. It is submitted that in all the Appeals, the First Appellate Authority as well as the Tribunal have concurrently held that no scientific method has been adopted by the assessee for making the provision. Further, by referring to the relevant provisions of The Sugarcane [Control] Order, 1966, more particularly, order No.5-A (1), (3), (4), (7) and (9) submitted that the liability arises only after Notification was issued by the Central Government and therefore, no provision can be made. Further, by referring to the Assessment Order, it is submitted that there is a gross discrepancy in the provision made as substantial amount of money, which was provided for in the previous year were returned back in the subsequent year, which clearly shows that no scientific method has been adopted. 13. So far as the wealth tax is concerned, it is submitted by Mr.T.Ravikumar, learned Senior Standing Counsel that the wealth tax liability accrues as on 31st March of every year and nothing prevented the assessee from effecting payment under adhoc method and the Assessing Officer, the Commission....
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....e wealth tax is concerned, the decision relied on by the assessee in the case of Shree Sajjan Mills Ltd supra was rightly distinguished by the authorities below and the Tribunal has held in the said case that the amount on wealth tax, which was paid should not be added to the net profit. However, in the case of assessee before us, he has made only a provision for the wealth tax liability and that too was an adhoc amount, which stands crystalized as on 31st March of the relevant year. Therefore, we fully agree with the view taken by the Tribunal in the affirming orders passed by the Assessing Officer and the Commissioner of Income Tax. Accordingly, the substantial questions of law nos.2, 3 and 4 are answered against the assessee. 18. So far as the substantial question of law no.5 is concerned, with regard to the provision of liability, this arises in two of the Assessment Years, namely, 1997-98 [T.C.A.No. 1411 of 2008] and 1998-99 [T.C.A.No.1412 of 2008]. This issue came up for consideration in the assessee's own case in T.C.A.No.2511 of 2006 dated 30.10.2012 [M/s.EID Parry (India) Limited vs. The Asst. Commissioner of Income Tax] wherein, the Division Bench of this Cou....