DCIT, Udupi v. M/s ICDS Limited, Manipal

ITA 29/BANG/2008 | 2001-2002
Pronouncement Date: 24-02-2012 | Result: Partly Allowed

Appeal Details

RSA Number 2921114 RSA 2008
Bench Bangalore
Appeal Number ITA 29/BANG/2008
Duration Of Justice 4 year(s) 1 month(s) 13 day(s)
Appellant DCIT, Udupi
Respondent M/s ICDS Limited, Manipal
Appeal Type Income Tax Appeal
Pronouncement Date 24-02-2012
Appeal Filed By Department
Order Result Partly Allowed
Bench Allotted A
Tribunal Order Date 24-02-2012
Date Of Final Hearing 07-02-2012
Next Hearing Date 07-02-2012
Assessment Year 2001-2002
Appeal Filed On 11-01-2008
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BANGALORE BANGALORE BANGALORE BENCH BENCH BENCH BENCH A AA A BEFORE BEFORE BEFORE BEFORE SHRI SHRI SHRI SHRI N. N. N. N. BARAT BARAT BARAT BARATH HH HVAJA SANKAR VICE VAJA SANKAR VICE VAJA SANKAR VICE VAJA SANKAR VICE- -- -PRESIDENT PRESIDENT PRESIDENT PRESIDENT A AA AND NDND ND SHRI SHRI SHRI SHRI GEORGE GEORGE K JUDICIAL MEMBER GEORGE GEORGE K JUDICIAL MEMBER GEORGE GEORGE K JUDICIAL MEMBER GEORGE GEORGE K JUDICIAL MEMBER ITA NO.29(BANG)/2008 (ASSESSMENT YEAR: 2001-02) DEPUTY COMMISSIONER OF INCOME-TAX CIRCLE-1 UDUPI. APPELLANT VS. M/S.ICDS LTD. SYNDICATE HOUSE MANIPAL. RESPONDENT PAN : AAAC14355 H PAN : AAAC14355 H PAN : AAAC14355 H PAN : AAAC14355 H APPELLANT BY : SHRI S.K.AMBASTHA. RESPONDENT BY : SHRI S.PARTHASARATHI. DATE OF HEARING : 08-02-2012 DATE OF PRONOUNCEMENT: 24-02-2012 O R D E R O R D E R O R D E R O R D E R PER PER PER PER N. BARATHVAJA SANKAR VP N. BARATHVAJA SANKAR VP N. BARATHVAJA SANKAR VP N. BARATHVAJA SANKAR VP: :: : THIS IS AN APPEAL PREFERRED BY THE REVENUE IN THE CASE OF THE ASSESSEE-M/S.ICDS LTD. MANIPAL FOR THE ASSESSMENT YEAR 2001-02 AGAINST THE APPELLATE ORDER DATED 26-4-2004 OF THE CIT(A) MANGALORE. 2. IN THIS APPEAL THE REVENUE HAS BROUGHT BEFORE US FOUR ISSUES FOR ADJUDICATION VIZ. (I) ALLOWANCE OF DEPR ECIATION ON LEASED VEHICLES (II) ALLOWANCE OF BAD DEBTS IN RESPECT OF M/S.MPL ITA 29/BANG/2008 PAGE 2 FINANCING & LEASING (III) ALLOWANCE OF BAD DEBTS I N RESPECT OF M/S.SANDUR UDYOG P.LTD. AND (IV) ALLOWANCE OF DEDU CTION OF `4 10 46 622/- FROM BOOK PROFIT BEING THE PROVISION FOR NON- PERFORMING ASSETS. 3. LET US FIRST TAKE UP THE ISSUE RELATING TO DEPR ECIATION ON LEASED VEHICLES. THE BRIEF FACTS PERTAINING TO THI S ISSUE ARE THAT THE AO DISALLOWED THE CLAIM OF THE ASSESSEE FOR DEP RECIATION OF `38 45 485/- ON THE GROUND THAT REGISTRATION CERTIF ICATES STAND IN THE NAME OF THE LESSEE AND THEREFORE IT IS LESSEES WHO ARE THE OWNERS OF VEHICLES AND NOT THE LESSOR. THUS THE A O DID NOT ALLOW DEPRECIATION ON VEHICLES WHICH THE ASSESSEE DID NOT OWN. AGGRIEVED THE ASSESSEE MOVED THE MATTER IN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY. THE CIT(A) FOLLOWING T HE DECISION OF THIS TRIBUNAL IN ITA NO.474/BANG/1996 FOR THE ASSESSMENT YEAR 1991- 92 DIRECTED THE AO TO ALLOW DEPRECIATION OF LEASED OUT VEHICLES IN A SUM OF `38 45 485/-. THE REVENUE IS AGGRIEVED AND I S ON SECOND APPEAL BEFORE US WITH THIS ISSUE. 3.1 AT THE TIME OF HEARING THE LEARNED DEPARTMENTA L REPRESENTATIVE SUBMITTED THAT THE CIT(A) ERRED IN N OT TAKING COGNIZANCE OF THE ORDERS OF THE HONBLE KARNATAKA H IGH COURT IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 1995-96 IN ITA NO.101/2000 DATED 9-2-2007 WHEREIN THE ASSESSEES C LAIM FOR DEPRECIATION WAS NOT ALLOWED. HE ALSO SUBMITTED TH AT THE CIT(A) ERRED IN NOT CONSIDERING THE ORDERS OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEARS 1995-96 AND 1996-97 W HEREIN FOLLOWING THE ORDER OF THE HONBLE KARNATAKA HIGH C OURT DATED 9-2-2007 IN ITA NO.101/2000 THE HONBLE TRIBUNAL R EJECTED THE ITA 29/BANG/2008 PAGE 3 ASSESSEES CLAIM FOR DEPRECIATION. HE ALSO RELIED ON THE DECISION OF THE APEX COURT IN THE CASE OF ASEA BROWN BOVERY LTD. VS. INDUSTRIAL FINANCE CORPORATION OF INDIA LTD. (2006)(154 TAXMAN 512(SC). PER CONTRA LEARNED COUNSEL FOR ASSESSEE FAIRLY SUB MITTED THAT THE POINT AT ISSUE IS NOW SQUARELY COVERED AGA INST THE ASSESSEE BY THE DECISION OF THE HONBLE KARNATAKA H IGH COURT. HOWEVER HE PLACED ON RECORD SUBSEQUENT DECISIONS O F THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF THE SAME ASSESS EE AND PLEADED THAT IN THOSE ORDERS IN ORDER TO AVOID REP ETITIVE APPEALS THE HONBLE HIGH COURT HAS SET ASIDE THE IMPUGNED O RDERS AND SENT THE MATTER BACK TO THE ORIGINAL AUTHORITY TO R ECORD A FINDING OF FACT ON THE QUESTION WHETHER THE TRANSACTION WHICH IS IN DISPUTE IS A LEASE OR A FINANCIAL TRANSACTION AND THEREAFTER A PPLY THE SETTLED PRINCIPLES OF LAW TO THE SAID FACTS AND PASS A CONS IDERED ORDER IN ACCORDANCE WITH LAW. ONCE SUCH ORDER OF THE HIGH C OURT IS ITA 792/2007 DATED 5-7-2010. HENCE HE REQUESTED THAT F OLLOWING THE HIGH COURTS DIRECTION AS ABOVE THIS ISSUE MAY BE RESTORED TO THE FILE OF THE AO WITH SIMILAR DIRECTIONS. 3.2 WE HAVE HEARD RIVAL SUBMISSIONS AND CONSIDERED THE FACTS AND MATERIAL ON RECORD. WE FIND THAT THE HON BLE HIGH COURT IN ITA NO.792/2007 HAS RESTORED THE ISSUE BACK TO T HE AO WITH THE FOLLOWING DIRECTION: 4. IN THIS VIEW OF THE MATTER WE SET ASIDE THE IMPUGNED ORDERS AND SEND THE MATTER BACK TO THE ORIGINAL AUTHORITY TO RECORD A FINDING OF FACT ON T HE QUESTION WHETHER THE TRANSACTION WHICH IS IN DISPUT E IS A LEASE OR A FINANCIAL TRANSACTION AND THEREAFTER APP LY THE ITA 29/BANG/2008 PAGE 4 SETTLED PRINCIPLES OF LAW TO THE SAID FACTS AND PAS S A CONSIDERED ORDER IN ACCORDANCE WITH LAW. HENCE WE DEEM IT FIT AND PROPER TO RESTORE THIS IS SUE TO THE FILE OF THE AO TO FOLLOW THE DIRECTIONS OF THE HONBLE HIGH COURT OF KARNATAKA. 4. NOW LET US TURN TO THE SECOND ISSUE RELATING T O ALLOWANCE OF BAD DEBT IN A SUM OF `3 81 99 362/-. THE BRIEF F ACTS ARE THAT IN RESPECT OF M/S.MPL FINANCE & LEASING CO. LTD. [HER EINAFTER REFERRED TO AS MPL] THE ASSESSEE WAS CHARGING IN TEREST AT 15% ON OUTSTANDING AMOUNTS DUE ON ACCOUNT OF TRANSFER OF CERTAIN ASSETS TO MPL IN A DEAL OF DEMERGER RATIFIED BY THE HIGH COURT OF KARNATAKA BY ORDER DATED 9-4-1999 IN PETITION NOS.7 0 & 71/1999. AS ON 31-3-2001 THE AMOUNT DUE TO THE ASSESSEE FRO M MPL WAS `42 71 09 481/-. AS PER MEMORANDUM OF AGREEMENT EN TERED INTO BETWEEN MPL AND THE ASSESSEE INTEREST CHARGED AT 1 5% FOR THE PERIOD FROM 1-7-1999 TO 30-6-2011 WAS REWORKED OUT AT 3% AND THEREFORE EXCESS INTEREST OF `3 81 99 362/- WAS CLA IMED AS BAD DEBT BY THE ASSESSEE. THE AO DISALLOWED THE CLAIM OF THE ASSESSEE SINCE THE DEBT HAD NOT BECOME BAD ACCORDI NG TO HIM. ACCORDING TO THE AO REVERSAL OF INTEREST RELATING TO THE PERIOD FROM 1-7-1999 TO 31-3-2000 COULD NOT BE ALLOWED AS DEDUC TION FROM THE INCOME OF THE CURRENT YEAR. SHE OPINED THAT THE AS SESSEE CANNOT BE ALLOWED TO REDUCE THE CURRENT YEARS INCOME ON A CCOUNT OF REDUCTION OF ITS INCOME IN THE EARLIER YEAR DUE TO ITS ACT OF WAIVER OF INTEREST. THUS THE AO DISALLOWED THE BAD DEBT C LAIM OF ITA 29/BANG/2008 PAGE 5 `3 81 99 362/-. AGGRIEVED THE ASSESSEE MOVED THE MATTER IN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY [CIT(A) ]. 4.1 THE CIT(A) FOLLOWING THE TRIBUNAL ORDER DATED 19-2-2007 IN ASSESSEES OWN CASE SPECIAL BENCH DECISION OF T HE MUMBAI TRIBUNAL IN THE CASE OF DCIT VS. OMAN INTERNATIONAL BANK (100 ITD 285) AND THE BOARDS CIRCULAR NO.551 DATED 23-1-199 0 (183 ITR (ST.) 7) AND VARIOUS OTHER DECISIONS ALLOWED THE C LAIM OF THE ASSESSEE. AGGRIEVED THE REVENUE IS ON APPEAL WITH THIS ISSUE. 4.2 AT THE TIME OF HEARING LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED AS UNDER: THE CIT(A) ERRE D IN ALLOWING THE ASSESSEES CLAIM FOR BAD DEBT OF `3 81 99 362/- . THE CIT(A) ERRED IN CONSIDERING REVERSAL OF INTEREST AS BAD DE BT. HE SHOULD HAVE APPRECIATED THAT REDUCTION OF INTEREST FROM 15 % TO 3% DOES NOT AMOUNT TO WRITING OFF OF BAD DEBT. THE CIT(A) DID NOT APPRECIATE THAT THE ASSESSEE HAS ONLY REVERSED THE EARLIER YEARS INCOME ON ACCOUNT OF REDUCTION IN RATE OF INTEREST AND REDUCED CURRENT YEARS INCOME AND AS SUCH REVERSAL OF INTER EST DOES NOT FALL WITHIN THE PURVIEW OF SEC.37(1)(VII) READ WITH SEC. 36(2). HE ALSO RELIED ON THE DECISION OF THE MADRAS HIGH COURT IN THE CASE OF SOUTH INDIA SURGICAL CO. VS. ACIT (2006) (287 ITR 62) WHEREIN IT WAS HELD THAT THERE MUST BE AN HONEST JUDGMENT AND NOT CONVENIENT JUDGMENT IN WRITING OFF BAD DEBT. PER CONTRA LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE VERY SAME SUBMISSIONS MADE BEFORE THE CIT(A) AND SU PPORTED THE REASONING OF THE CIT(A). HE ALSO RELIED ON THE FOL LOWING DECISIONS: I) CIT VS. BRILLIANT TUTORIALS P. LTD.( 2007)(292 ITR 399)(MAD) ITA 29/BANG/2008 PAGE 6 II) CIT VS. MORGAN SECURITIES & CREDITS P. LTD. (2007))(292 ITR 339(DEL) AND III) CIT VS. AUTOMETERS LTD. (2007) 292 ITR 345)(DEL). 4.3 WE HAVE HEARD RIVAL SUBMISSIONS AND CONSIDERED THE FACTS AND MATERIAL ON RECORD. AFTER THE AMENDMENT MADE TO SEC.36(1)(VII) IN OUR OPINION ONCE THE ASSESSEE W RITES OFF AN AMOUNT AS BAD DEBT IN ITS BOOKS OF ACCOUNT THE REV ENUE AUTHORITIES CANNOT RAISE FURTHER QUESTIONS AS TO WH ETHER THE DEBT HAS REALLY BECOME BAD OR NOT. IN CIRCULAR NO.551 D ATED 23-1-1990 AT PAGE 37 AGAINST POINTS 6.6 AND 6.7 IT IS STATED AS UNDER: 6.6. THE OLD PROVISIONS OF CLAUSE (VII) OF SU B-SECTION (1) READ WITH SUB-SECTION (2) OF THE SECTION LAID D OWN CONDITIONS NECESSARY FOR ALLOWABILITY OF BAD DEBTS. IT WAS PROVIDED THAT THE DEBT MUST BE ESTABLISHED TO HAVE BECOME BAD IN THE PREVIOUS YEAR. THIS LED TO ENORM OUS LITIGATION ON THE QUESTION OF ALLOWABILITY OF BAD D EBT IN A PARTICULAR YEAR BECAUSE THE BAD DEBT WAS NOT NECESSARILY ALLOWED BY THE ASSESSING OFFICER IN THE YEAR IN WHICH THE SAME HAD BEEN WRITTEN OFF ON THE GROUN D THAT THE DEBT WAS NOT ESTABLISHED TO HAVE BECOME BA D IN THAT YEAR. IN ORDER TO ELIMINATE THE DISPUTES I N THE MATTER OF DETERMINING THE YEAR IN WHICH A BAD DEBT CAN BE ALLOWED AND ALSO TO RATIONALIZE THE PROVISIONS THE AMENDING ACT 1987 HAS AMENDED CLAUSE (VII) OF SUB - SECTION (1) AND CLAUSE (I) OF SUB-SECTION (2) OF TH E SECTION TO PROVIDE THAT THE CLAIM FOR BAD DEBT WILL BE ALLOWED IN THE YEAR IN WHICH SUCH A BAD DEBT HAS BE EN WRITTEN OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE. 6.7 CLAUSES (III) AND (IV) OF SUB-SECTION (2) OF THE SECTION PROVIDED FOR ALLOWING DEDUCTION FOR A BAD D EBT IN AN EARLIER OR LATER PREVIOUS YEAR IF THE INCOME-TA X OFFICER WAS SATISFIED THAT THE DEBT DID NOT BECOME BAD IN THE YEAR IN WHICH IT WAS WRITTEN OFF BY THE ASSE SSEE. THESE CLAUSES HAVE BECOME REDUNDANT AS THE BAD DEBTS ARE NOW BEING STRAIGHTAWAY ALLOWED IN THE YEA R OF WRITE OFF. THE AMENDING ACT 1987 HAS THEREFORE AMENDED THESE CLAUSES TO WITHDRAW THEM AFTER THE ASSESSMENT YEAR 1988-89. ITA 29/BANG/2008 PAGE 7 FROM THE ABOVE IT COULD BE SEEN THAT BAD DEBTS ARE NOW BEING STRAIGHT AWAY TO BE ALLOWED IN THE YEAR OF WRITE OF F FROM THE ASSESSMENT YEAR 1988-89. THE DECISIONS RELIED ON B Y THE CIT(A) ALSO SUPPORT THIS VIEW. AS SUCH WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) IN DIRECTING THE AO TO ALLOW TH IS BAD DEBT IN A SUM OF `3 81 99 362/-. HENCE WE UPHOLD THE ORDER OF THE CIT(A) ON THIS ISSUE. 5. LET US NOW TURN TO THE THIRD ISSUE RELATING TO BAD DEBT IN RESPECT OF M/S.SANDUR UDYOG P.LTD. [HEREINAFTER REF ERRED TO AS SUP] IN A SUM OF ` 20 00 000/-. THE BRIEF FACTS AS CULLED OUT FROM RECORDS ON THIS ISSUE ARE THAT THE AO DISALLO WED THE CLAIM OF THE ASSESSEE IN RESPECT OF WRITE OFF OF ` 20 00 000/- CLAIMED AS BAD DEBT BECAUSE SUP DESPITE REPEATED REMINDERS DID NOT PROVIDE FORM 16A. SUP HAD DEBITED `20 LAKH S AS TDS BUT NO CERTIFICATE WAS PROVIDED BY THE CONCERNED TO THE ASSESSEE. HENCE THE ASSESSEE CLAIMED ` 20 00 000/- AS BAD DEBT. HOWEVER THE AO HELD THAT IF THERE WAS DEFAULT ON T HE PART OF SUP IN FURNISHING TAX DEDUCTION CERTIFICATE IT COU LD NOT BE SAID THAT THIS IS A DEBT WHICH HAS BECOME BAD AND T HEREFORE THE CLAIM OF THE ASSESSEE FOR BAD DEBT WAS DISALLOW ED IN A SUM OF ` 20 00 000/-. AGGRIEVED BY THIS THE ASSESSEE MOVED THE MATTER IN APPEAL BEFORE THE FIRST APPELLATE AUT HORITY. 5.1 BEFORE THE CIT(A) THE ASSESSEE CONTENDED THAT IT WA S NOT JUSTIFIED IN LAW TO DISALLOW THE CLAIM OF BAD D EBT AMOUNTING TO `20 LAKHS IN RESPECT OF TDS MADE BY SUP ON THE GROU ND THAT NO EVIDENCE HAD BEEN PRODUCED REGARDING FULL DETAILS O F TRANSACTIONS ITA 29/BANG/2008 PAGE 8 AND REGARDING STEPS TAKEN BY THE ASSESSEE FOR RECOV ERY OF THE SAID AMOUNT. IT WAS PLEADED THAT THE ASSESSEE AS A SHR EWD BUSINESSMAN THOUGHT IT FIT NOT TO WASTE GOOD MONEY AND GO AFTER THE RECOVERY OF BAD MONEY. THE CIT(A) FOR THE REAS ONS NARRATED FOR ALLOWING BAD DEBT OF `3 81 99 362/- IN RESPECT OF MPL ALLOWED THE CLAIM OF THE ASSESSEE. THE REVENUE IS AGGRIEVED AND IS ON APPEAL BEFORE US ON THIS ISSUE. 5.2 AT THE TIME OF HEARING LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE CIT(A) ERRED IN C ONSIDERING NON- CLAIM OF TDS BY THE ASSESSEE ON ACCOUNT OF NON RECE IPT OF TDS CERTIFICATE AMOUNTED TO BAD DEBT. HE ERRED IN NOT APPRECIATING THAT THE ASSESSEE HAS NOT TAKEN STEPS FOR OBTAINING TDS CERTIFICATE FROM SUP AND THE CLAIM OF TDS DOES NOT FALL WITHIN THE PURVIEW OF BAD DEBT WITHIN SEC.37(1)(VII) R.W.S. 36(2). HE FA ILED TO APPRECIATE THE OBSERVATIONS OF THE MADRAS HIGH COURT IN THE CA SE OF SOUTH INDIA SURGICAL CO. VS. ACIT (2006) 287 ITR 62 WHEREIN THE HIGH COURT HAS HELD THAT THERE MUST BE AN HONEST JUDGMEN T AND NOT CONVENIENT JUDGMENT IN WRITING OFF BAD DEBTS. PER CONTRA LEARNED COUNSEL FOR THE ASSESSEE SUPPO RTED THE ORDER OF THE CIT(A) AND REITERATED THE CONTENTS OF THE SAME AS HIS SUBMISSIONS. 5.3 WE HAVE HEARD RIVAL SUBMISSIONS CONSIDERED TH E FACTS AND MATERIALS ON RECORD. IN OUR CONSIDERED OPINION BOTH THE LOWER AUTHORITIES HAVE NOT DISCUSSED ANYTHING ABOUT WHETH ER THE ASSESSEE HAD CORRESPONDED WITH SUP FOR GETTING TDS CERTIFICATES AND WHETHER THE SUP HAS PAID THE AMOUNT TO THE GOVE RNMENT ETC. IN SUCH FACTS AND CIRCUMSTANCES WE DEEM IT FIT AND PROPER TO ITA 29/BANG/2008 PAGE 9 RESTORE THIS ISSUE BACK TO THE FILE OF THE AO WITH A DIRECTION TO LOOK INTO THE FACTUAL ASPECTS OF THE CORRESPONDENCE BETW EEN THE ASSESSEE AND SUP AND THEN DECIDE THE ISSUE ACCORDIN G TO LAW OF COURSE AFTER GIVING EFFECTIVE OPPORTUNITY OF HEARIN G TO THE ASSESSEE. THE ASSESSEE SHALL ALSO PRODUCE THE NECE SSARY DETAILS REGARDING CORRESPONDENCE BETWEEN IT AND SUP IN RESP ECT OF TDS MATTER AND CO-OPERATE WITH THE AO FOR DECIDING THE ISSUE. THUS THIS ISSUE IS RESTORED BACK TO THE FILE OF THE AO W ITH THE ABOVE DIRECTION. 6. NOW LET US TURN TO THE ULTIMATE ISSUE RELATING TO ALLOWING PROVISION FOR NON-PERFORMING ASSETS FROM BOOK PROFI TS. THE ASSESSEE CLAIMED THAT PROVISION FOR NON-PERFORMING ASSETS AMOUNTING TO `4 10 46 622/- DEBITED TO P&L ACCOUNT WAS MADE IN ACCORDANCE WITH GUIDELINES ISSUED BY THE RESERVE BA NK OF INDIA AND AS SUCH THE NAME ITSELF SUGGESTS THAT THIS IS N EITHER CREATION OF RESERVE NOR PROVISION FOR CONTINGENT LIABILITY A ND AS SUCH DOES NOT FALL EITHER UNDER ITEM (B) OR (C) OF EXPLANATIO N TO SEC.115JB(2) OF THE IT ACT. THE AO HOWEVER DID NOT ALLOW THE CLAIM OF THE ASSESSEE WHILE COMPUTING MAT INCOME. AGGRIEVED TH E ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE FIRST APPEL LATE AUTHORITY WHO FOLLOWING THE ORDER OF THE TRIBUNAL IN ITA NOS .703 & 782(BANG)/2000 DATED 29-6-2001 FOR THE ASSESSMENT Y EAR 1997- 98 ALLOWED THE CLAIM OF THE ASSESSEE. NOW THE RE VENUE IS AGGRIEVED AND IS IN APPEAL BEFORE US. 6.1 THE RELEVANT GROUNDS READ AS UNDER: ITA 29/BANG/2008 PAGE 10 5.1 THE LEARNED CIT(A) HAS ERRED IN ALLOWING DEDUCTION OF `4 10 46 622/- FROM BOOK PROFIT BEING THE PROVISION FOR NON-PERFORMING ASSETS FOLLOWING THE ORDER OF ITAT BANGALORE C BENCH IN ITA NO.703 & 782/BANG/00 DT.29-06-01 IN ASSESSEES OWN CASE AND FAILED TO APPRECIATE THE FACT THAT THIS ORDER H AS NOT BEEN ACCEPTED BY THE DEPARTMENT AND DIRECT APPEAL TO HIGH COURT HAS BEEN FILED. 5.2 THE LEARNED CIT(A) FAILED TO CONSIDER THAT EXPLANATION BELOW SECOND PROVISO TO SECTION 115JB PERMITS FOR DEDUCTION OF PROVISIONS MADE FOR ASCERTAINED LIABILITIES IN COMPUTING THE BOOK PROFI T. 5.3 THE LEARNED CIT(A) FAILED TO APPRECIATE THAT NEITHE R RBI GUIDELINES NOR SEC.43D ARE APPLICABLE IN COMPUTING INCOME UNDER CHAPTER XIIB OF THE IT ACT 1961. 5.4 THE LEARNED CIT(A) ALSO FAILED TO CONSIDER THAT PROVISION FOR NPA IS A PROVISION MADE TOWARDS THE ASSET AND CANNOT BE CONSIDERED AS FALLING WITHIN TH E AMBIT OF EXPLANATION (C) BELOW SECOND PROVISO TO SEC.115JB(2) SINCE THERE IS NO ASCERTAINED LIABILIT Y AGAINST THIS PROVISION. 6.2 AT THE TIME OF HEARING LEARNED DEPARTMENTAL REPRESENTATIVE REITERATED THE GROUNDS OF APPEAL AS HIS SUBMISSIONS. PER CONTRA LEARNED COUNSEL FOR THE ASSESSEE SUBMI TTED THAT THOUGH THE EARLIER ORDER OF THE TRIBUNAL IS IN ASSE SSEES FAVOUR THE ASSESSEE HAS INSTRUCTED HIM NOT TO PRESS THIS GROUN D VEHEMENTLY AND LEAVE IT TO THE DECISION OF THE TRIBUNAL 6.3 WE HAVE HEARD RIVAL SUBMISSIONS AND CONSIDERED THE FACTS AND MATERIAL ON RECORD. WE FIND THAT BY THE FINANCE ACT (NO.2) OF 2009 ITEM (I) WAS ADDED TO THE EXPLANATI ON 1 TO SECTION 115JB(2) WITH RETROSPECTIVE EFFECT FROM1-4-2001. T HE SAID CLAUSE (I) READS AS UNDER: EXPLANATION [1].FOR THE PURPOSES OF THIS SE CTION BOOK PROFIT MEANS THE NET PROFIT AS SHOWN IN THE PROFIT AND LOSS ACCOUNT FOR THE ITA 29/BANG/2008 PAGE 11 RELEVANT PREVIOUS YEAR PREPARED UNDER SUB-SE CTION (2) AS INCREASED BY (A) .. (B) . (C) .. (D) .. (E) .. (F) .. (G) (H) .. (I) THE AMOUNT OR AMOUNTS SET ASIDE AS PRO VISION FOR DIMINUTION IN THE VALUE OF ANY ASSET WE NOTE THAT THE ABOVE CLAUSE HAS BEEN INSERTED WIT H RETROSPECTIVE EFFECT FROM1-4-2001. THE ASSESSMENT YEAR UNDER CONSIDERATION BEING 2001-02 THIS AMENDMENT WOULD D IRECTLY AFFECT THE ASSESSEE. ON EARLIER OCCASION THE TRIBUNAL HA D NO OCCASION TO CONSIDER THIS AMENDMENT AS IT WAS MADE ONLY IN THE FINANCE ACT 2009. HENCE AFTER THE AMENDMENT AS NOTED ABOVE THE ASSESSEE IS NOT ENTITLED FOR THE CLAIM AND THE AO HAS RIGHTL Y COMPUTED THE MAT AMOUNT BY DEDUCTING FROM THE LOSS OF `4 10 46 6 22/- BEING PROVISION FOR NPA. AS SUCH WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF ASSESSMENT AND HENCE WE REVERSE THE ORDER OF THE FIRST APPELLATE AUTHORITY AND RESTORE THE ASSESSMENT ORDER ON THIS GROUND. 7. IN THE RESULT THE REVENUES APPEAL IS PARTLY A LLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 24 TH FEBRUARY 2012 . SD/- SD/- (GEORGE GEORGE K) (GEORGE GEORGE K) (GEORGE GEORGE K) (GEORGE GEORGE K) JUDICIAL JUDICIAL JUDICIAL JUDICIAL MEMBER MEMBER MEMBER MEMBER (N.BHARATHVAJA SANKAR) (N.BHARATHVAJA SANKAR) (N.BHARATHVAJA SANKAR) (N.BHARATHVAJA SANKAR) VICE VICE VICE VICE- -- -PRESIDENT PRESIDENT PRESIDENT PRESIDENT EKS ITA 29/BANG/2008 PAGE 12 COPY TO : COPY TO : COPY TO : COPY TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A) CONCERNED 4. CIT 5. DR ITAT BANGALORE 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR ITAT BANGALORE