TMI Blog2014 (7) TMI 84X X X X Extracts X X X X X X X X Extracts X X X X ..... y, the amount of provision written back cannot equally be treated as income - If the position so stated by the assessee is correct, then, there can be no question of adding provision for doubtful debts written back to the total income - the facts are not clear, the AO is directed to verify the assessee’s contention about not claiming deduction of provision for doubtful debts in the year(s) in which such provision was created. Provision for doubtful debts – Held that:- The AO has started his computation of total income with the income assessed which tallies with the income declared by the assessee before set off of brought forward losses and unabsorbed depreciation, this indicates that the sum was also added by the assessee to its total ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... normal provisions and Rs. 6.68 crore u/s 115JB of the Act. The AO noticed that the assessee had actually debited a sum of Rs. 1.50 crore towards Provision for warranty other expenses instead of Rs. 1.12 crore which amount was initially disallowed by him. Notice u/s 154 was issued. In the order so passed, the AO computed income under the regular provisions as under:- Income assessed as per order u/s 143(3)/147/250 Rs.6,30,59,307/- Add: Warranty Other expenses Rs. 37,60,240/- Add: Provision for doubtful debts written back Rs. 53,19,000/- Add: Provision for doubtful debts Rs. 5,00,000/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome under the regular provisions of the Act. The first addition made by the AO is for a sum of Rs. 37,60,240/- representing Provision warranty and other expenses. The AO noticed that the assessee had actually debited a sum of Rs. 1.50 crore towards provision for warranty and other expenses as against a sum of Rs. 1.12 crore which was originally disallowed by him. He, therefore, made addition for the remaining sum. 6. It is observed that the original proceedings came up for adjudication before the Tribunal. Vide order dated 29.08.2012, the Tribunal in ITA No.812/Del/2011 has ordered for the deletion of addition of Rs. 1.12 crore on account of provision for warranty and other expenses by holding it to be an ascertained liability. Since t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome. If the position so stated by the assessee is correct, then, there can be no question of adding provision for doubtful debts written back to the total income. Since the facts on this score are not clear, we direct the AO to verify the assessee s contention about not claiming deduction of provision for doubtful debts in the year(s) in which such provision was created. If this contention turns out to be correct, then, there can be no warrant for including the sum of Rs. 53.19 lac in the total income of the assessee at the time of writing back of such provision. In the otherwise situation, the AO will proceed as per law. 8. The next item is provision for doubtful debts of Rs. 5 lac which has been added by the AO to the total income in p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the assessee in its computation of total income at Rs. 6.30 crore. This addition by the AO has led to the making of double addition for the equal sum. We, therefore, uphold the action of the ld. CIT(A) in deleting this addition. Computation of book profits u/s 115JB 10. The first addition made by the AO to the Book profits is a sum of Rs. 1.50 crore representing the Provision for warranty and other expenses . It is the total amount of the provision which was actually debited by the assessee to its Profit Loss Account for which the AO initially made addition of Rs. 1.12 crore. Clause (c) of Explanation 1 u/s 115JB deals with the computation of book profit. It provides that the amount of net profit shown in the Profit Loss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts as well. The AO is directed to ascertain the correct position as discussed above and then apply the same to the computation of book profits u/s 115JB as well. 12. In so far as Provision for doubtful debts amounting to Rs. 5 lac is concerned, we find that the Hon ble Supreme Court in CIT VS. HCL Comnet Systems And Services Ltd. (2008) 305 ITR 409 (SC) has held that provision for doubtful debts or for the diminution in the value of investments is not a provision for liabilities as no liability would be fastened if debt is not recovered. Hence Cl (c) of Expl. to sec. 115JA does not apply. Similarly cl.(b) is also not applicable as it is a provision and not reserve. However , it is pertinent to note that the legislature has stepped in t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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