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2016 (6) TMI 300 - ITAT MUMBAI

2016 (6) TMI 300 - ITAT MUMBAI - TMI - Addition of “Provision for doubtful debts” to the Book profit u/s 115JB - MAT computation - Held that:- It is in the knowledge of every one that the accounts are prepared under the Companies Act in accordance with the Principles of Accounting by following various accounting standards and practices. Under the accounting terminologies “Provision for doubtful debts” and “writing of bad debts” has got distinct meaning. Both the terms stand on different footing .....

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that the decision rendered by nonjurisdictional High Court has got persuasive value only. Accordingly, we are of the view that the Ld CIT(A) was justified in confirming the addition of “Provision for doubtful debts” to the Book profit - Decided against assessee

Chargeability of interest u/s 234B of the Act on the addition so made by Ld CIT(A) on the basis of subsequent amendment - Held that:- The various decisions relied upon by the assessee expresses the view that the assessee should .....

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Decided in favour of assessee - I.T.A. No. 5247/Mum/2014 - Dated:- 3-6-2016 - Shri B. R. Baskaran (AM) And Ramlal Negi (JM) For the Assessee : Shri Arvind Sonde For the Department : Shri A.K. Srivastava ORDER Per B. R. Baskaran, AM The appeal filed by the assessee is directed against the order dated 14.7.2014 passed by learned CIT(A)-24, Mumbai and it relates to A.Y. 2005-06. 2. The assessee is aggrieved by the decision of learned CIT(A) in passing the rectification order in pursuance of applica .....

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the assessee to the book profit computed u/s. 115JB of the Act. The Learned CIT(A), however, deleted the same by following the decision rendered by Hon'ble Supreme Court in the case of HCL Comet System & Services Ltd. (Civil Appeal No. 5800 of 2008 dated 23.9.2008). 4. Subsequently Finance (No.2) Act of 2009 amended Explanation 1 to section 115JB with retrospective effect from 1.4.2001 by inserting clause (i). The above said clause provided that the amount or amounts set aside as provis .....

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ly learned CIT(A) passed a rectification order on 27.3.2014 confirming the addition of Provision for doubtful debts made by the Assessing Officer to the book profit computed u/s 115JB of the Act. In the rectification order, certain observations made by learned CIT(A) were found to be contrary to the facts available and hence the assessee also moved a rectification petition before learned CIT(A). Accordingly, learned CIT(A) passed another order u/s. 154 of the Act on 14.7.2014, wherein he rectifi .....

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order dated 27.3.2014 passed by Ld CIT(A) is barred by limitation, since he has passed the order after expiry of four years from the date of passing of original order. It was submitted that the original order was passed by Ld CIT(A) on 31.10.2008 and hence the first rectification order passed on 27.3.14 was after expiry of four years and hence it is barred by limitation. He further submitted that the Revenue should have filed appeal before the Tribunal, if they felt aggrieved by the order passed .....

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Ld CIT(A) cannot be considered to have become time barred, since the petition has been filed within the time. He further submitted that the assessee himself has moved a petition u/s 154 of the Act without protesting the first rectification order as barred by limitation. 7. We heard the parties on this legal issue. Admittedly, the AO has moved the application within four years from the date of original order. Hence we find merit in the contentions of the revenue that the AO cannot be found fault .....

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m, the revenue should have filed appeal before the Tribunal, when they felt aggrieved by the order passed by Ld CIT(A) in respect of addition of Provision for doubtful debts to the book profit. However, we notice that there was no occasion for the revenue to file appeal in the ITAT, since the Ld CIT(A) has passed the order on the impugned issue by following the decision rendered by Hon ble Supreme Court. The AO has moved the petition on the basis of subsequent amendment brought into sec. 115JB b .....

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of Hon ble Supreme Court, which was prevailing the field. 10. The Ld D.R, on the contrary, strongly supported the action of Ld CIT(A). He submitted that the subsequent amendment brought into the Act with retrospective effect constitutes mistake apparent from record and hence the Ld CIT(A) was justified in passing the impugned rectification orders. He submitted that this question is no longer a debatable in view of the following decisions:- (a) J.M. Bhatia, AAC Vs. J.M. Shah (1985)(159 ITR 474)(S .....

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s legal issue. We notice that the decision rendered by Hon ble Supreme Court in the case of J.M. Bhatia, AAC Vs. J.M.Shah (supra) answers this question. The head notes of the above said case reads as under:- Section 35(7) of the Wealth Tax Act, 1957 - Rectification of mistakes apparent from record- For assessment year 1969-70, AAC by his order dated 26-6-1970 allowed exemption to assessee qua jewellery and ornaments under section 591)(viii) holding that they were intended for personal use- neith .....

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apparent on the face of the record which entitled AAC to rectify his predecessor s order - Whether AAC s rectification order having passed within four year period of limitation under section 35, AAC s order dated 26.6.1970 could not be said to have become final - Held Yes_ Whether, therefore, AAC was justified in rectifying earlier order and it was unnecessary to consider whether a debatable question was involved as held by High Court - Held, on facts, Yes. Identical views have been taken in th .....

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e basis of the decision rendered by Hon ble Supreme court, we do not find it necessary to consider other case laws relied upon by the assessee on this issue. 13. On merits, the Ld A.R submitted that the amount relating to Provision for doubtful debts debited to the Profit and Loss account has been deducted from the Sundry debtors balance in the Balance sheet. By placing reliance on the decision rendered by Hon ble Supreme Court in the case of Vijaya Bank (323 ITR 166), the Ld A.R submitted that .....

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the case of CIT Vs. Yokogawa India Ltd (2012)(204 Taxman 305)(Kar) and CIT Vs. M/s Kriloskar Systems Ltd (ITA No.188/2013 dated 28-10-2013). 14. We heard Ld D.R on this issue and perused the record. We notice that the Hon ble Supreme Court, in the case of Vijaya Bank (supra) has considered the issue whether the accounting treatment given by the assessee would comply with the condition prescribed in sec. 36(1)(vii) of the Act that the debts claimed as bad should have been written in the books as .....

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h the Principles of Accounting by following various accounting standards and practices. Under the accounting terminologies Provision for doubtful debts and writing of bad debts has got distinct meaning. Both the terms stand on different footing and the accounting world also understand their meaning differently. Accordingly, in our considered view, the meaning of the above said expressions should be understood and applied in the same manner while computing book profit u/s 115JB of the Act. Accord .....

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