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2013 (9) TMI 678 - AT - Income TaxMAT - Computation of book profit u/s 115JB of the Income Tax Act – provision for diminution in the value of asset - Provision for bad debts for computation of book profit – Held that:- Reliance has been placed upon the identical case ITO v. TCFC Finance Ltd.[ 2011 (3) TMI 26 - ITAT MUMBAI], which squarely covers the issue in hand - Explanation 1 to section 115JB(2) in no uncertain terms states that any amount set aside as provision for diminution in the value of asset debited to the profit and loss account is to be added to the amount of net profit for the purpose of computing the book profit - Section 115JB has to be considered as code in itself. This section is a special provision for payment of tax by certain companies and opens with non obstante clause thereby excluding any other provisions of this Act in the matter of determination of payment of tax by certain companies - Amount set aside as provision for diminution in the value of any asset, appears on the debit side of the profit and loss account, which implies that the amount of net profit as per the profit and loss account is after the amount of such provisions, then such amount will be added back to the net profit for computing 'book profit' as per Explanation 1 to section 115JB(2) - There is no other requirement in the language of the section for the addition or non-addition of the amount of provision for diminution in the value of any asset to the amount of net profit as shown in the profit and loss account, depending on the way in which such provision has been shown in the balance-sheet - As the relevant condition have been fully satisfied in the instant case in terms of the assessee debiting the provision for diminution in the value of investment to its profit and loss account, the same was required to be added for determining book profit – Decided against the Assessee. The Legislature has employed the expression 'provision for diminution in the value of any asset' in clause (i) to Explanation 1 to section 115JB(2). The expression 'diminution in the value of any asset' has not been defined in this section. In common parlance the word 'diminution' indicates the state of reduction. The meaning of the word 'diminution' in the value of any asset has to be construed as reduction from its original value which may still be a positive value or nil. If the reduced value happens to be cipher, the diminution will be the original value of the asset itself. There is not even a remotest hint in the language of clause (i) of Explanation 1 to section 115JB that some value of the asset must remain after diminution, as a pre-condition for adding it to the net profit. Explanation 1 contemplates the adding back of the provision for diminution in the value of any asset to the amount of net profit. Once provision is made for diminution in the value of any asset, the same has to be added for computing book profit, regardless of the fact whether or not there is any balance value of asset - As Explanation 1 to section 115JB(2) deals with the computation of book profit and specifically provides that the net profit as shown in the profit and loss account for the relevant previous year has to be increased, inter alia, by the amount of provision for diminution in the value of any asset, the amount of provision for diminution in the value of any asset debited to the profit and loss account before the determination of net profit has necessarily to be added. - Decided against the assessee.
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