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2014 (9) TMI 54 - HC - Income TaxProvision for debts and nonperforming assets Computation of book profits u/s 115JA Held that:- While resorting to the provisions of Section 115JA on the basis that the total income of the company as computed under the Act is less than 30 per cent of its book profits, the AO has to accept the authenticity of the accounts maintained by the company in accordance with the provisions of Part II and Part III of Schedule VI to the Companies Act, 1956, which are certified by the auditors and passed by the company in its general meeting - The AO has only the power of examining whether the books of account are duly certified and whether such books have been properly maintained in accordance with the Companies Act - Item (c) of the Explanation to section 115JA is not attracted to the provision for bad and doubtful debts. The provision for bad and doubtful debts is made to cover up probable diminution in the value of the assets, i.e., a debt which is an amount receivable by the assessee - Such a provision cannot be said to be a provision for a liability, because even if the debt is not recoverable no liability can be fastened on the assessee - Any provision made towards irrecoverability of a debt cannot be said to be a provision for liability - the provision for bad and doubtful debt is made to cover up the probable diminution in the value of the asset - the assessee has made the provision for the bad debt but without written of the bad debt as per Section-36(1)(vii) of the Act - the deduction is not allowable as claimed by the assessee thus, the order of the Tribunal is set aside and the matter is remitted back to the AO Decided in favour of Revenue.
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