TMI Blog2011 (11) TMI 448X X X X Extracts X X X X X X X X Extracts X X X X ..... eduction of Provision for Doubtful Debts, Doubtful investments and doubtful advances while computing Book Profit u/s 115JB - Held That:- Apex court decided in case of HCL Comnet Systems & Services Ltd (2008 (9) TMI 18 - SUPREME COURT) that bad and doubtful debts can never be said to be liability and cannot be added up for computing the book profit u/s 115JA(2)(c) - decided in favor of assessee. - IT Appeal Nos. 952 & 953 of 2006 - - - Dated:- 2-11-2011 - V.G. Sabhahit and Ravi Malimath, JJ. M.V. Seshachala for the Appellant. Sriranga for the Respondent. JUDGMENT 1. These two appeals are filed by the Revenue being aggrieved by the order dt. 23.12,2005 in ITA No.315/Bang./2005 and 316/Bang./2005 respectively by Income Tax Appellate Tribunal, Bangalore (hereinafter called as 'ITAT' for short). The respondent assessee filed return for the assessment year 1999-2000 admitting the total income of Rs. Nil. However, the return indicated that Company was incorporated on 04.11.1992. It indicated profit from business/profession of Rs. 1,17,83,132/- and the exemption has been claimed on this amount also. Return was processed on 7.12.2000 resulting in nil demand. In the retu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... debts should be included for the purpose of calculating book profit under Sec. 115JB of the Act. 2. Being aggrieved by the said order passed by the Appellate Authority ITA Nos.315, 31.6 and 317/Bang./2005 were filed before the ITAT and the ITAT by order dt. 23.12.2005 held that Clause (i) and (iii) of Sec. 10A(2) had already been satisfied and it was not a case of reconstruction and it was establishment of an independent unit in the STP and wherefore, the assessee was entitled to exemption under Sec. 10A and accordingly, allowed the appeals. 3. Being aggrieved by the said order passed by the ITAT in ITA Nos.315 and 316/Bang./2005 these two appeals are filed by the Revenue. 4. I.T.A. No. 952/2006 has been admitted by order dt. 26.9.2007 and I.T.A. No. 953/2006 has been admitted on 22.10.2007 to consider the substantial questions of law framed in the appeal memo of ITA No. 952/2006 which reads as follows : 1. Whether the Tribunal was correct in holding that the assessee would be entitled to claim allowance under Sec. 10A of the Act in respect of Software Development Centre at Devaiah Court, Jayanagar, Bangalore, by ignoring the holdings of the Assessing Officer that the sam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ered in favour of the appellant. He has also submitted that the bad and doubtful debt had been rightly added to the book profit under Sec. 115JB of the Act. Therefore, the second substantial question of law may be answered in favour of the appellant. 8. Learned counsel appearing for the respondent submitted that the second substantial question of law had already been answered by the Hon'ble Supreme Court in the case of CIT v. HCL Comnet Systems Services Ltd. [2008] 305 ITR 409/174 Taxman 118 (SC), wherein the Hon'ble Supreme Court has clearly held that the bad and doubtful debts are not liability and cannot be added back for the purpose of calculating book profit under Sec. 115JA(2)(c) of the Act. Wherefore, the second substantial question of law has to be answered against the Revenue and in favour of the assessee and so far as the first substantial question of law is concerned, the ITAT which is the final authority on the question of fact having regard to the material on record that was produced before the Assessing Officer and the Appellate Authority, has rightly come to the conclusion and cogent reasons are given and following the earlier decisions of the ITAT and the High C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s maintained regarding STP unit at electronic city and Devaiah Court unit. The said finding on the question of fact is clearly supported by the material on record as the material produced by the assessee would clearly show that the STP unit was established with plant and machinery and assets purchased after 31.3.1996 only and the staff was also recruited. The plant and machinery used was less than 20% at STP unit and the earlier establishment which also continued to work with the machinery that was purchased prior to 31.3.1996. Having regard to the interpretation of the word "construction" and Sec. 10A(2)(ii) of the Act and decision of the Hon'ble Supreme Court in the case of Textile Machinery Corpn. Ltd. v. CIT [1977] 107 ITR 195, wherein it is held as follows : "As in the instant case, once then new industrial undertakings are separate and independent production units in the sense that the commodities produced or the results achieved are commercially tangible products and the undertakings can be carried on separately without complete absorption and losing their identity in the old business, they are not be treated as being formed by reconstruction of the old business." 12. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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