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TMI Blog2014 (1) TMI 853X X X X Extracts X X X X X X X X Extracts X X X X ..... reciating the fact that Explanation 1(c) of section 115JB expressly stipulates such disallowance; 3. The appellant pays that the order of the CIT(A) on the above ground be set aside and that of the AO be restored." 2. The assessee is engaged in the business of running and maintaining hotel and restaurants. The assessee filed the return of income declaring total income at Rs. 9,18,26,156/-. The AO assessed the total income of the assessee under the normal provisions of Act at Rs. NIL after setting off of brought forward losses of earlier years of Rs.9,47,87,284/-. However, under the provisions MAT, the AO computed the book profit at Rs. 8,96,58,273/-. Since tax paid on the income computed under the provisions of MAT i.e. u/s 115JB of the Income-tax Act, 1961 (the Act) is higher than the tax paid under the normal provisions of Act, the AO computed the income of the assessee u/s 115JB of the Act as the assessee's income and accordingly computed the tax. It is relevant to state that while computing book profit, the AO made an addition of Rs.75 Lakhs as under : "Add : Provisions for doubtful loans and Advances" . Being aggrieved, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... planation (1) to Sub-Section (2) of Section 115JB of the Act with retrospective effect from 1.4.2001 and accordingly the provisions for doubtful debts and provision for doubtful advances have to be added by computing the book profit. The ld. DR also referred the decision of Mumbai Bench "C" of the Tribunal in the case of Asstt. CIT v. Essar Steel Ltd in ITA NOs. 850/A/2002,3228/M/2005, 3229/M/2005 and 4214/A/2003 dated 4.4.2012 and submitted that the similar issue has been decided in favour of the Revenue. That the Tribunal has held that the provisions made for doubtful debts and debited to the profit and loss accounts have to be added in the profit for arriving the book profit u/s 115JA/115JB of the Act. She further submitted that the ld. CIT(A) has not given any finding in the order except relying on the earlier decision of the Mumbai Bench of the Tribunal dated 12.2.2010 in assessee's own case for Assessment Year 2003-04 to direct the AO not to make adjustment to the said provision of Rs.75 Lakhs made by the assessee to compute book profit. 5. On the other hand, the ld. AR submitted that the same issue in the assessee's own case has been considered by the Mumbai Bench of the Tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to Rs.15,57,553/-. 27. The CIT(A) also confirmed the action of AO. 28. It was submitted before the Tribunal by the ld. AR of the assessee that the decision of the lower authorities is contrary to the decision of Supreme Court in the case of Apollo Tyres (255 ITR 273). It was further submitted that these provisions were on account of ascertained liability. Therefore, the computation of income u/s 115JB was not justified. It was also submitted that even no query was raised by the AO in this regard. 29. On the other hand, the ld. DR placed reliance on the orders of the AO and CIT(A). 30 After considering the submissions, we find that the assessee deserves to succeed in respect of this ground also. Neither any query was raised by the AO before computing the income u/s 115JB. The provisions for gratuity and for leave encashment are on the basis of ascertained liability as explained by the ld. AR of the assessee. Therefore, the computation of income u/s 115JB was not justified. This is also contrary to the decision of the Hon'ble Supreme Court in the case of Apollo Tyres (supra). In view of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t to state that the decision of the Hon'ble Apex Court in the case of CIT v. HCL Comnet Systems & Services Ltd. [2008]305 ITR 409(SC) was overruled wherein, Their Lordships of the Hon'ble Apex Court have held that provisions made for bad and doubtful debts are not for meeting liability; that provision for doubtful debts and doubtful advances did not fall within clause (c ) of the said Explanation (1) inasmuch as they amounted to provision in respect of diminution in the value of asset. Any provision made towards irrecoverability of a debt cannot be said to be a provision for liability. Hence provision for bad and doubtful debts could not be added back under clause (c) of Explanation (1) to Sub-section (2) of Section 115JA of the Act. 10. During the course of hearing, ld. AR submitted that amendment made by the Finance (No.2) Act, 2009 was considered by the Hon'ble Karnataka High Court in the case of Yokogawa India Ltd. (supra) and held that even after amendment no addition to book profit of the provision made for bad and doubtful debts could be made for MAT. We observe that the Hon'ble Karnataka High Court in the case of Yokogawa India Ltd. (supra) considered the issue in the ligh ..... X X X X Extracts X X X X X X X X Extracts X X X X
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