TMI Blog2016 (5) TMI 713X X X X Extracts X X X X X X X X Extracts X X X X ..... It is, however, clarified that similar disallowance was there by the assessing officer of a sum of ₹ 325.15 crores for the assessment year 1998-99 which has also been set aside by the learned Tribunal and we confirm that order. Addition on account of provision for doubtful debt on account of provision for diminution in value of investment while computing book profit of the assessee - Held that:- All the ingredients should be satisfied to attract item (c) of the Explanation to section 115JA. In our view, item (c) is not attracted. There are two types of “debt”. A debt payable by the assessee is different from a debt receivable by the assessee. A debt is payable by the assessee where the assessee has to pay the amount to others whereas the debt receivable by the assessee is an amount which the assessee has to receive from others. In the present case, the “debt” under consideration is a “debt receivable” by the assessee. The provision for bad and doubtful debt, therefore, is made to cover up the probable diminution in the value of the asset, i.e., debt which is an amount receivable by the assessee. Therefore, such a provision cannot be said to be a provision for a liability, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The assessee has been collecting processing charges from the certificate holders from the financial year 1989-90. The Reserve Bank of India objected to such collection of funds on account of processing charges. The assessee challenged the direction of the Reserve Bank of India. The Apex Court directed the Reserve Bank of India to consider the assessee s submission. Pursuant to the aforesaid order of the Apex Court, after reconsidering the matter the Reserve Bank of India directed that the processing charges already collected in excess of the prescribed rates should be credited to the accounts of the certificate holders. Such direction was issued on March 22, 1996. On the basis thereof, the assessee claimed deduction of a sum of ₹ 613.21 crores in the assessment year 1996-97. The break up of the aforesaid sum of ₹ 613.21 crores is as follows: Assessment year Excess amount of collection of processing charges 1993-94 Rs.105.98 crore 1994-95 Rs.202.25 crore 1995-96 Rs.304.98 crore Total Rs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in assessment year 1996-97 with the computation of book profit in assessment year 1997-98. It is settled law that the computation of total income for the purpose of Income Tax Act and the computation of book profit for the purpose of section 115JA are two separate and distinct computations. As per section 115JA, the A.O. has to make these two computations separately. First he has to compute the total income as per the provisions of the Income Tax Act. Thereafter, he has to compute the book profit as per section 115JA and work out 30% thereof. Now 30% of the book profit and the total income as computed as per the provisions of Income Tax Act is to be compared and whichever of them is higher shall be deemed to be total income of the assessee of the relevant assessment year. The deduction of ₹ 613.21 crores was claimed by the assessee in assessment year 1996-97 while computing its total income as per provisions of I.T. Act. However, the same was not divided in the books of account or P/L Account. Thus, it was not claimed from the book of profit of financial year 1995-96 relevant to assessment year 1996-97. The claim of deduction from total income of ₹ 613.21 crores in ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 115JA are two different channels. They flow simultaneously until taxable income of the assessee in the normal computation exceeds 30% of the book profit. So long as the taxable income of the assessee does not exceed 30% of the book profit, the normal computation is of no use nor is of any consequence as far as taxation is concerned because taxation in all those cases shall take place on the basis of deemed income. It is a fact that the assessee has debited a sum of ₹ 120.39 crores to his books of accounts only in the assessment year 1997-98 and that debit entry is on account of an ascertained liability based on an order of the Reserve Bank of India. Therefore, with regard to justifiability of that debit entry, there was never any doubt. The Apex Court has, in the case of Apollo Tyres, reported in (2002) 255 ITR 273, held as follows: Therefore, we are of the opinion, the Assessing Officer while computing the income under section 115J has only the power of examining whether the books of account are certified by the authorities under the Companies Act as having been properly maintained in accordance with the Companies Act. The Assessing Officer thereafter ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dded back to the net profit only if item (c) stands attracted. Item (c) deals with amount(s) set aside as provision made for meeting liabilities, other than ascertained liabilities. The assessee s case would, therefore, fall within the ambit of item (c) only if the amount is set aside as provision; the provision is made for meeting a liability; and the provision should be for other than an ascertained liability, i.e., it should be for an unascertained liability. In other words, all the ingredients should be satisfied to attract item (c) of the Explanation to section 115JA. In our view, item (c) is not attracted. There are two types of debt . A debt payable by the assessee is different from a debt receivable by the assessee. A debt is payable by the assessee where the assessee has to pay the amount to others whereas the debt receivable by the assessee is an amount which the assessee has to receive from others. In the present case, the debt under consideration is a debt receivable by the assessee. The provision for bad and doubtful debt, therefore, is made to cover up the probable diminution in the value of the asset, i.e., debt which is an amount receivable by the assessee. The ..... X X X X Extracts X X X X X X X X Extracts X X X X
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