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2016 (5) TMI 713 - HC - Income TaxMAT - Computing income under section 115J - ITAT making addition to the book profit in respect of assessment years 1997-98 and 1998-99 respectively and directing for deletion of the said amounts while computing the book profit of the assessee for the purpose of section 115J - Held that:- Assessing Officer does not have the jurisdiction to go behind the net profit shown in the profit and loss account except to the extent provided in the Explanation to section 115J.” Once there is no dispute that the books of account were maintained in accordance with law and were duly certified, the assessing officer’s limited jurisdiction is as indicated by Their Lordships in the case of Apollo Tyres (2002 (5) TMI 5 - SUPREME Court). It was therefore not open to the assessing officer to disallow the debit entry of a sum of ₹ 120.39 crores. Therefore, the order passed by the learned Tribunal is a perfectly justified order. In that view of the matter, the first question is answered in the affirmative and in favour of the assessee. It is, however, clarified that similar disallowance was there by the assessing officer of a sum of ₹ 325.15 crores for the assessment year 1998-99 which has also been set aside by the learned Tribunal and we confirm that order. Addition on account of provision for doubtful debt on account of provision for diminution in value of investment while computing book profit of the assessee - Held that:- All the ingredients should be satisfied to attract item (c) of the Explanation to section 115JA. In our view, item (c) is not attracted. There are two types of “debt”. A debt payable by the assessee is different from a debt receivable by the assessee. A debt is payable by the assessee where the assessee has to pay the amount to others whereas the debt receivable by the assessee is an amount which the assessee has to receive from others. In the present case, the “debt” under consideration is a “debt receivable” by the assessee. The provision for bad and doubtful debt, therefore, is made to cover up the probable diminution in the value of the asset, i.e., debt which is an amount receivable by the assessee. Therefore, such a provision cannot be said to be a provision for a liability, because even if a debt is not recoverable no liability could be fastened upon the assessee. In the present case, the debt is the 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, in our view, item (c) of the Explanation is not attracted to the facts of the present case. In the circumstances, the Assessing Officer was not justified in adding back the provision for doubtful debts under clause (c) of the Explanation to section 115JA of the 1961 Act. - Decided in favour of the assessee.
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