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2021 (2) TMI 1038 - HC - Income TaxMAT Computation - Reduction of the amount credited to the profit and loss account on the account of reversal of provision for bad and doubtful debts under Section 115JB - whether Tribunal in law failed to appreciate that the appellant had added back the provision for bad and doubtful debts for certain years and hence ought to have granted the deduction in respect of reversal of provision for bad and doubtful debts at least to that extent, on the facts and circumstances of the case? - HELD THAT:- As decided in M/S. KARNATAKA STATE INDUSTRIAL AND INFRASTRUCTURE DEVELOPMENT CORPORATION LTD [2021 (1) TMI 413 - KARNATAKA HIGH COURT] provisions for bad and doubtful debts cannot be added under Explanation to Section 115JB. From perusal of para 40.2 of Circular dated 03.06.2010, it is evident that clause (i) in Explanation after Section 115JB(2) has been inserted so as to provide that if any provision for diminution in the value of any asset has been debited to the profit and loss account, it shall be added to the net profit as shown in the profit and loss account for the purpose of computation of book profit. It is well settled in law that law does not contemplate or require the performance of an impossible act. See LIFE INSURANCE CORPORATION OF INDIA VERSUS COMMISSIONER OF INCOME-TAX [1996 (2) TMI 5 - SUPREME COURT]. Even if the provision for doubtful debt is added back to the net profits, the resultant book profit is still negative and even though the assessee was prevented from adding back the provision for bad and doubtful debts to the net profit due to reasons beyond its control, it has at the first opportunity demonstrated to the authorities that book profits are still negative on adding back the provision for bad and doubtful debts and therefore, no adverse inference could have been drawn against the assessee. It is also pertinent to note that the assessee had added the provision for bad and doubtful debts for Assessment Years 1998-99 to 2000-01. Decided in favour of the assessee.
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