S.C. TIWARI, AM: ORDER This appeal has been filed by Revenue on 7th Oct., 2002 against order of learned CIT(A)-XIV, New Delhi, dt. 16th July, 2002 in case of assessee in relation to assessment order under s. 143(3) for asst. yr. 1999-2000. 2. First ground in this appeal is directed against deletion of addition of Rs. 3,19,93,825 being expenses incurred on repairs and maintenance of lease hold premises. Facts of case leading to this dispute briefly are that assessee filed return declaring loss of Rs. 5,21,75,080. While computing this loss assessee claimed deduction of sum of Rs. 3,19,93,825 under head Repairs and maintenance on lease-hold premises . assessee claimed deduction of this amount relying upon judgment of Hon ble Supreme Court in case of CIT vs. Madras Auto Services (P) Ltd. (1998) 148 CTR (SC) 398 : (1998) 233 ITR 468(SC). learned AO found that in accounts of assessee expenditure had been capitalised and depreciation of Rs. 51,34,664 was reduced therefrom in "Sch. V fixed assets" appended to balance sheet as at 31st March, 1999. However, in income tax return assessee treated entire expenditure as revenue expenditure and claimed 100 per cent deduction. learned AO held that assessee was not entitled to adopt two different strategies under Companies Act and IT Act. decision relied upon by assessee was not applicable on facts of case of assessee because in books of account assessee had himself capitalised expenditure. learned AO, therefore, rejected assessee s claim of deduction amounting to Rs 3,19,93,825 and instead he allowed assessee depreciation of Rs. 36,98,709 as worked out by him at p. 2 of assessment order. 3 . During course of appeal before learned CIT(A) assessee submitted that expenditure had been incurred on lease hold premises and t h e initial period of lease was three years giving assessee no enduring benefit for expenses incurred. treatment given in books of account of t h e assessee was as per Sch. VI of Companies Act as "lease-hold improvements" and same was spread over period of three years. That did not in any way debar assessee from claiming entire expenditure under IT Act as revenue expenditure. very fact that expenditure had been incurred on lease-hold premises clearly established that expenditure had been carried out for better enjoyment of lease hold property and benefit derived was co-terminus with lease making it obvious that there could not be any enduring benefit. assessee placed reliance before learned CIT(A) on some case law and pleaded that treatment given in books of account was not binding as far as IT Act proceedings were concerned. assessee relied upon judgment of Hon ble Delhi High Court in case of CIT vs. Shriram Refrigeration Industries Ltd. (2001) 169 CTR (Del) 373 : (2002) 253 ITR 783 (Del) to support his contention that any expenditure towards extension, renovation or improvement of building on lease-hold land was of revenue nature only. assessee referred to judgment of Hon ble Supreme Court in case of L.H. Sugar Factory & Oil Mills (P) Ltd. vs. CIT (1980) 19 CTR (SC) 185 : (1980) 125 ITR 293 (SC) and argued that if expenditure was merely to facilitate business operations to be carried out more efficiently or more profitably, it would be on revenue account even though addition may endure for indefinite future. assessee submitted that for asst. yrs. 1996-97 and 1997-98 similar expenditure had been allowed by CIT(A) as revenue expenditure. 4 . learned CIT(A) held that expenditure included LAN equipment for DLF office at Rs. 1,06,72,526 which comprised of switches, hubs, routers and modems for connectivity of Dupont network in India and abroad. Similarly expenditure of Rs. 4,00,553 was on account of access control system for DLF office which comprised of sweep cards and proximity cards given to employees to enter office premises. expenditure of Rs. 29,56,590 pertained to electronic work at DLF office for connecting each employee s working place. expenditure of Rs. 18,58,189 at DLF office was nothing but heating, ventilation and air-conditioning expenses (HVAC) incurred at office premises. Similarly, sum of Rs. 7,11,446 was for HVAC works of Bombay office. expenditure of Rs. 23,14,591 related to connectivity of employees at Bombay office. expenditure of Rs. 5,17,000 was carried out for concealed wiring and roofing at Bombay office. expenditure of Rs. 9,29,673 was for LAN equipments at Bombay office and Rs. 3,26,130 for access control system of Bombay office. Besides, interior work carried out at Bombay amounted to Rs. 54,81,444 and at DLF office it amounted to Rs. 1,26,57,696. That expenditure was on fittings and fixtures and partitions so as to separate each person s work place in open office environment. sum of Rs. 21,67,987 was spent on work in that relation carried out by M/s Blow Plast. learned CIT(A) held that entire expenditure had been incurred to facilitate assessee to utilise lease-hold premises more profitably and efficiently for enhancing profitability and productivity of assessee and as such it was revenue expenditure, as held by Hon ble Supreme Court in case of L.H. Sugar Factory & Oil Mills (P) Ltd. s case (supra). It was immaterial that assessee treated same in its books of account differently, in view of Sch. VI of Companies Act. For that purpose learned CIT(A) referred to judgments in Kedarnath Jute Mfg. Co. Ltd. vs. CIT (1971) 82 ITR 3 63 (SC) and Addl. CIT vs. Buckau Wolf New India Engg. Works Ltd. (1985) 46 CTR (Bom) 200 : (1986) 157 ITR 751 (Bom). On this basis learned CIT(A) directed that entire expenditure should be treated as revenue expenditure and allowed to assessee as deduction under s. 37(1) of Act. He directed learned AO to withdraw depreciation as allowed. Still aggrieved, revenue is in appeal before us. 5 . During course of hearing before us learned Departmental Representative argued that assessee had incurred huge expenditure on premises after being satisfied that premises, though lease hold, were likely to remain with assessee for sufficiently long period. It was prevalent practice for commercial premises to be leased out for period of three years each time but lease being renewed from time to time. Hence argument of assessee that advantage was for period of three years only was not of much consequence. There was no merit in second contention of learned CIT(A) that expenditure had been incurred to carry out more efficiently and more profitably business operations of assessee. All expenditure whether revenue or capital was incurred to facilitate business operations to be carried out more efficiently or more profitably. This aspect was not what distinguished revenue expenditure from capital expenditure it had to be present in both revenue as well as capital expenditure. learned CIT(A), therefore, misdirected himself in that respect. expenditure was of large amounts and brought into existence new asset that was part of fixed assets. That was reason assessee had himself designated assets thus created as "fixed assets" and shown it in Sch. V to balance sheet. 6. learned counsel for assessee argued that Department had not gone in appeal for asst. yrs. 1996-97 and 1997-98. There was no dispute that expenditure had been incurred in relation to premises that were lease hold. Any expenditure incurred in respect of lease hold premises had to be i n nature of things revenue expenditure only. learned Authorised Representative of assessee submitted that there was no basis to hold that these premises were likely to be with assessee for indefinite period. He referred to lease agreement dt. 9th Jan., 1998 with M/s DLF commercial developers and agreement dt. 21st Nov., 1997 with M/s High Rise Properties (P) Ltd, and stated that both Delhi premises as well as Bombay premises were available to assessee on lease for period of 9 years only. assessee did not have right of renewal after expiry of period of nine years. 7 . During course of hearing before us learned Authorised Representative of assessee strongly placed reliance on judgments in B and Plantations & Industries Ltd. vs. CIT (2000) 242 ITR 22 (Gau);Shriram Refrigeration Industries Ltd. s case (supra); CIT vs. Hede Consultancy (P) Ltd. (2003) 180 CTR (Bom) 70 : (2002) 258 ITR 380 (Bom) and CIT vs. Hari Vignesh Motors (P) Ltd. (2006) 282 ITR 338 (Mad). As to treatment given in books of account, learned Authorised Representative of assessee submitted that in Sch. V to balance sheet, what was described as depreciation was in fact spread over of entire expenditure for period of three years. That was done because no part of expenditure could be retrieved once assessee vacated leased premises. As far as internal wiring was concerned that expenditure was not retrievable. Expenditure for installation of LAN system was also having regard to area and lay out of leasehold premises. That mainly included of wires and switches and expenditure on wires and switches could hardly be called capital expenditure. 8 . In his rejoinder, learned Departmental Representative argued that expenditure was not in nature of repair and maintenance. It was expenditure incurred on setting up of office premises in first year of lease. 9 . We have carefully considered rival submissions. In impugned order learned CIT(A) has proceeded on basis that his predecessor CIT(A) by his orders dt. 1st Feb., 2000 and 15th Dec., 2000 for asst. yrs. 1996- 97 and 1997-98 had allowed similar claims of assessee. During course of hearing before us also learned counsel for assessee argued that revenue had not gone in appeal for asst. yrs. 1996-97 and 1997-98 and for sake of consistency same position should obtain in case of assessee for asst. yr. 1999-2000. There is no force in these contentions. In instant case we are concerned with expenditure incurred by assessee on premises leased from M/s High Rise Properties Ltd. on 21st Nov., 1997 and from M/s DLF commercial developers on 9th Jan., 1998. These premises, therefore, were not in picture at all for asst. yrs. 1996-97 and 1997-98 where nature and scale of expenditure allowed by learned CIT(A) is altogether different. Secondly, during course of proceedings before authorities below as well as before us learned counsel for assessee argued that premises in question had been taken on lease for period of three years only and, therefore, there was no long-term benefit. From agreements placed before us it transpired that assessee had assured right of renewal up to 9 years and there was nothing in agreements that lease could not be continued even thereafter. 10. At outset we may state that there is not much help to case of assessee from judgments in cases of B&A Plantations and Industries (supra) and Madras Auto Services (P) Ltd. (supra) because those judgments have been delivered in relation to assessment years prior to insertion of Expln. 1 of s. 32(1). We may also state here that arguments of assessee that considerable part of expenditure was embedded in office premises not belonging to assessee has to be treated of not much consequence because of Expln 1 to s. 32(1). purport and objective of Expln. 1 to s. 32(1) is to deal with precisely such argument that expenditure is irretrievably on leased premises. mandate of provision is that to determine nature of expenditure it should be viewed as if assessee is owner of premises. This aspect is quite clear by judgment of Hon ble Delhi High Court in case of Rajdev Singh & Co. vs. CIT (1990) 181 ITR 38 (Del). In that judgment Hon ble Delhi High Court have distinguished their earlier judgment in case of Instalment Supply (P) Ltd. vs. CIT (1984) 149 ITR 457 (Del) because of insertion of provisions of s. 32(1 A) that are now finding place by way of Expln 1 to s. 32(1). There is, thus, no doubt that for purpose of determination of nature of expenditure incurred by assessee, fact that premises are leasehold must be ignored and it should be assumed that premises belonged to assessee. As to judgment of Hon ble Madras High Court in case of Hari Vignesh Motors (P) Ltd. (supra), learned counsel for Revenue conceded that issue was covered by judgment of Hon ble Supreme Court in case of Madras Auto Services (P) Ltd. (supra), without noticing provisions of Expln. 1 to s. 32(1) and impact of amendment on applicability of judgment in case of Madras Auto Services (P) Ltd. (supra). Similarly in case of Hede Consultancy (P) Ltd. (supra), judgment in case of Madras Auto Services (P) Ltd. (supra) had been applied without noticing provisions of Expln. 1 to s. 32(1) or its predecessor s. 32(1A). At any rate, ratio of judgment of Hon ble Delhi High Court in case of Rajdev Singh & Co. (supra) is quite clear and, therefore, various decisions relied upon by learned counsel for assessee in this behalf are not of much assistance to assessee. Fact of matter is that for purpose of determination of nature of expenditure under consideration before us, fact that premises are lease hold must be ignored and it should be assumed that premises belonged to assessee. 11. We also must state that there is not much force in contention of assessee that expenditure has been incurred for optimum utilization of available space and to run assessee s business operations more efficiently. That argument could hold good if expenditure was not in relation to fixed capital asset. In case before us expenditure is predominantly related to what is by virtue of provisions of Expln. 1 to s. 32(1), fixed capital asset of assessee and indeed so described in accounts of assessee. This distinction is quite clearly demarcated by Hon ble Supreme Court in case of Empire Jute Co. Ltd. vs. CIT (1980) 17 CTR (SC) 113 : (1980) 124 ITR 1 (SC) at p. 10 in following words : "There may be cases where expenditure, even if incurred for obtaining advantage of enduring benefit, may, nonetheless, be on revenue account and t h e test of enduring benefit may break down. It is not every advantage of enduring nature acquired by assessee that brings case within principle laid down in this test. What is material to consider is nature of advantage in commercial sense and it is only where advantage is in capital field that expenditure would be disallowable on application of this test. If advantage consists merely in facilitating assessee s trading operations or enabling management and conduct of assessee s business to be carried on more efficiently or more profitably while leaving fixed capital untouched expenditure would be on revenue account, even though advantage may endure for indefinite future." (Emphasis, italicised in print, supplied). Once expenditure is at root of fixed capital asset, pertinent question to ask is whether expenditure is on maintenance, repairs or restoration of asset already in existence or expenditure is with objective to enhance or value add to that asset. In instant case expenditure has been incurred in very first year of acquisition of premises. expenditure has been incurred by assessee so as to make premises more posh and impressive befitting business profile of assessee company. expenditure has been incurred with view to bring fresh advantage that is not already there. Such expenditure would be expenditure in nature of capital expenditure, as held by Hon ble Bombay High Court in case of New Shorrock Spg. & Mfg. Co. Ltd. vs. CIT (1956) 30 ITR 338 (Bom). In that judgment Hon ble High Court, inter alia, observed as under : "The simple test that must be constantly borne in mind is that as result of expenditure which is claimed as expenditure for repairs what is really being done is to preserve and maintain already existing asset. object of expenditure is not to bring new asset into existence, nor is its object obtaining of new or fresh advantage. This can be only definition of repairs because it is only by reason of this definition of repairs that expenditure is revenue expenditure. If amount spent was for purpose of bringing into existence new asset or obtaining new advantage, then obviously such expenditure would not be expenditure of revenue nature but it would be capital expenditure, and it is clear that deduction which legislature has permitted under s. 10(2)(v) is deduction where expenditure is revenue expenditure and not capital expenditure." We may point out here that aforesaid judgment of Hon ble Bombay High Court as well as extract therefrom as above quoted, have received seal of approval of Hon ble apex Court in case of Ballimal Naval Kishore vs. (1997) 138 CTR (Bom) 284 : CIT (1997) 224 ITR 414 (Bom). 12. As to judgment of Hon ble Supreme Court in case of L.H. Sugar Factory & Oil Mills (supra) and judgment of Hon ble Delhi High Court in case of Shriram Refrigeration Industries Ltd. (supra), we find that none of two judgments affect legal position as discussed at length by us in paras 10 and 11 above. In case of L.H. Sugar Factory & Oil Mills (supra), assessee was manufacturing sugar in factory situated in Pilibhit district of Uttar Pradesh. assessee contributed sum of Rs. 50,000 towards construction of road in that area to meet his obligation under sugarcane development scheme. assessee s claim of deduction was denied by revenue on ground that it facilitated running of assessee s motor vehicles for transportation of sugarcane that was long-term advantage and, therefore, expenditure was of capital nature. On these facts Hon ble Supreme Court held that expenditure was of revenue nature in following words : "Now it is clear on facts of present case that by spending amount of Rs. 50,000, assessee did not acquire any asset of enduring nature. roads which were constructed around factory with help of amount of Rs. 50,000 contributed by assessee belonged to Government of Uttar Pradesh and not to assessee. Moreover, it was only part of cost of construction of these roads that was contributed by assessee, since under sugarcane development scheme, one-third of cost of construction was to be borne by Central Government, one-third by State Government and only remaining one-third was to be divided between sugarcane factories and sugarcane growers. These roads were undoubtedly advantageous to business of assessee as they facilitated transport of sugarcane to factory and outflow of manufactured sugar from factory to market centres. There can be no doubt that construction of these roads facilitated business operations of assessee and enabled management and conduct of assessee s business to be carried on more efficiently and profitably. It is no doubt true that advantage secured for business of assessee was of long duration inasmuch as it would last so long as roads continued to be in motorable condition, but it was not advantage in capital field, because no tangible or intangible asset was acquired by assessee nor was there any addition to or expansion of profit making apparatus of assessee." (Underlined, italicised in print, by us) Here again argument that prevailed was that road in question belonged to State Government and not to assessee and, therefore, insofar as assessee was concerned, no tangible or intangible asset was acquired by assessee. Expenditure in that case, qua that assessee, was not in capital field; whereas in case of assessee before us expenditure is predominantly in capital field. As to judgment of Hon ble Delhi High Court in case of Shriram Refrigeration Industries Ltd. (supra), following expenditure incurred by assessee was treated by revenue to be expenditure of capital nature : Rs. (1) Cable work/telephone points 29,962 (2) Wooden partitions 85,591 (3) Wall tiles and toilets 3,252 (4) Furniture upholstry and curtain 10,361 (5) Sanitary fitting works 6,000 (6) Wall pelmets/apaintiage 13,326 1,48,492 On assessee s appeal Tribunal held that entire expenditure was of revenue nature because same had been incurred on rented premises. On revenue s appeal Hon ble Delhi High Court held as under : "We find that Tribunal has not addressed itself as to applicability of s. 32(1A) even though that was main challenge. It is more so in case of wooden partitions. In that view of matter we feel it would be appropriate for Tribunal to rehear appeal only to limited extent of applicability of s. 32(1A) to claim relatable to wooden partitions. So far as other expenses are concerned, we do not find any infirmity in conclusions of Tribunal to warrant any interference." 13. It is thus seen that in case of Shriram Refrigeration Industries Ltd. (supra)also Hon ble Delhi High Court have taken note of change in legal position after promulgation of provisions of s. 32(1 A), now Expln 1 to s. 32(1). Moreover in that case Hon ble Delhi High Court have held that expenditure incurred on wooden partition was possibly expenditure of capital nature. other expenses were in nature of repairs only and, therefore, we find that judgment of Hon ble Delhi High Court in case of Shriram Refrigeration Industries Ltd. (supra) relied upon by assessee is against assessee. 1 4 . In instant case expenditure incurred by assessee and depreciation allowed by AO is as under : Sl. Description Amount Rate Depreciation No. of expenditure Lan (1) Equipment-DLF 106,72,526 25% 4,18,131 office Access (2) 4,00,553 25% 1,00,138 Control System Electrical (3) 29,56,590 10% 2,95,659 Work, Delhi HVAC (4) 18,58,189 10% 1,85,820 Work, Delhi HVAC (5) 7,11,416 10% 71,141 Work, Bombay Electric (6) 23,14,591 10% 2,31,459 Work, Bombay Roof (7) 5,17,000 10% 51,700 Insulation Lan (8) Equipment- 9,29,673 25% 2,32,418 Bombay Access (9) 3,26,130 25% 81,532 Control System Interior (10) 54,81,444 10% 5,48,144 Work, Bombay Interior (11) 1,26,57,696 10% 12,65,769 Work, Delhi Fittings & (12) 21,67,987 10% 2,16,798 Fixtures 3,19,93,825 36,98,709 15. We find that expenditure has been incurred as part of overall enhancement and improvement of available premises with view to acquire fresh benefit or advantage. For that purpose assessee has incurred expenditure of Rs. 1,26,57,696 byway of interior work at Delhi and of Rs. 54,81,444 by way of interior work at Bombay. Besides expenditure of Rs. 5,17,000 has been incurred on roof insulation. Apart from these expenses other expenses cannot be said to be related to building premises, except that they have been installed at leased premises. expenditure is on new installation for purpose of heating and cooling of premises and for purpose of communication network and demarcation of premises among employees. expenditure is in nature of new installation and not in nature of repairs and renovation. During course of hearing before us assessee has argued that expenditure was on wires, hubs, switches, modems, etc. We do not agree. expenditure is to bring into existence sophisticated communication system to bring about connectivity of assessee s office in Delhi and Bombay with other establishments of assessee in India and abroad. expenditure is not merely on wires and cables etc. but expenditure is on installation of sophisticated network. Taking into consideration all these aspects we hold that assessee was not at all justified in treating such expenditure as part of repairs and renovation. 16. In view of discussion in foregoing paragraphs, we reverse order of learned CIT(A) and restore treatment given by AO in assessment order in relation to expenditure of Rs. 3,19,93,825. 17. Ground of appeal No. 2 is directed against disallowance of sum of Rs. 6,88,150 claimed by assessee as business expenditure, on ground that expenditure had no direct bearing on business of assessee. Facts of case leading to this ground of appeal briefly are that these amounts had been paid by assessee to such parties as Educational Institute at Savli, Baroda, India Paint Conference etc. learned AO held that this expenditure did not have nexus or business connection with assessee s business. He, therefore, disallowed assessee s claim of deduction of Rs. 6,88,150. During course of hearing before learned CIT(A), assessee submitted that expenditure mainly comprised of following : Rs. Paid to Navrachan Education (i) 1,50,000 Institute, Savli, Baroda Hiring of stall at India Paint (ii) 2,50,000 Conference Paid to CII for co-sponsoring (iii) International Conference on clean 2,00,000 technologies Membership fee for Crop Protection (iv) 50,000 Association Purchase of jerseys carrying (v) company s logo paid to American Support 24,500 Activity Association Paid to United Way for organising (vi) 10,000 Garba Festival in Baroda (vii) Donation to Sant Kabir School 12,000 learned CIT(A) considered submissions of assessee. He held that expenditure of Rs. 1,50,000 paid for building of compound wall of school and provision of chairs, tables and stationery was allowable business expenditure, in view of judgment of Hon ble Delhi High Court in case of CIT vs. Bharat Commerce & Industries Ltd. (1990) 184 ITR 90 (Del). expenditure of Rs. 2,50,000 for stall at india paint conference; Rs. 2,00,000 for sponsorship of international conference on clean technologies and Rs. 50,000 paid to crop protection association towards membership fee, all related to business of assessee and, therefore, were allowable as business expenditure. learned CIT(A) also allowed deduction of Rs. 12,000 being donation to Sant Kabir School; Rs. 10,000 for Garba festival and Rs. 12,500 for subscription to ACSA as being advertisement expenditure. 1 8 . During course of hearing before us learned Departmental Representative argued that reliance placed by learned CIT(A) on judgment of Hon ble High Court in case of Bharat Commerce & Industries Ltd. (supra) was misplaced. In that case donation had been made to school where children of employees of that company were studying. No such nexus with school at Savli was shown by assessee and, therefore, expenditure was donation simplicitor and if at all eligible for deduction under s. 80G. learned Departmental Representative argued that sponsorship of various conferences did not have direct relation with assessee s business and, therefore, expenditure was mainly in nature of donation. learned Authorised Representative of assessee pointed out that Savli was place where assessee s factory was situated and children of assessee s workers were availing of educational benefits of school to which assessee contributed Rs. 1,50,000 for building of compound wall and for provision of chairs, tables and stationery. 19. We have carefully considered rival submissions. In case of Bharat Commerce & Industries Ltd. (supra), Hon ble Delhi High Court allowed deduction to that assessee of donation made to school because majority of children studying in that school were children of employees of that assessee. In instant case learned Authorised Representative of assessee has orally said so during course of hearing before us, but he has placed reliance on no material whatsoever in that behalf. We, there fore, restore this issue to file of learned AO with direction to grant assessee opportunity to establish that majority of students in that school were children of assessee s employees. Thereafter learned AO may decide this issue afresh in accordance with law. As to contributions made by assessee for sponsoring international conference on clean technologies and for hiring stall at india paint conference and for membership fee of crop protection association, these are expenses related to business being carried on by assessee and, therefore, expenditure was incurred for purposes of business of assessee. There is no reason to hold that these expenses were incurred for considerations other than business purpose of assessee.. expenditure of Rs. 12,500 for purchase of jerseys bearing assessee s logo is also expenditure in nature of advertisement and, therefore, allowable as business expenditure. We hold that learned CIT(A) erred in allowing expenditure of Rs. 10,000 paid towards Garba festival in Baroda as business expenditure. expenditure was in nature of donation. We hold accordingly. 20. Ground of appeal No. 3 is directed against disallowance of sum of Rs. 4,00,178 being provision for doubtful debts and Rs. 41,73, 107 being provision for damage in stock made by AO while computing book profit for purpose of levy of tax under s. 115JA of Act. learned AO held that these two amounts were required to be added to net profit of assessee as per P&L a/c in view of cl. (c) of Explanation appended to s. 115JA. On assessee s appeal learned CIT(A) held that provision of these amounts were ascertained liability and, therefore, cl. (c) was wrongly applied by learned AO. For that purpose he relied upon judgment of Hon ble Bombay High Court in case of CIT vs. Echjay Forgings (P) Ltd. (2001) 166 CTR (Bom) 100 : (2001) 251 ITR 15(Bom). learned CIT(A) held that assessee was engaged in business of insecticides and products had limited shelf life. provision of Rs. 41,73, 107 comprised of obsolete/useless stock. Besides, certain shortages were reported on account of leakage of stock during transportation and storage s. Therefore, these amounts related to ascertained liability. learned CIT(A) also referred to judgment of Hon ble Supreme Court in case of Apollo Tyres Ltd. vs. CIT (2002) 174 CTR (SC) 521 : (2002) 255 ITR 273 (SC) and held that if accounts of assessee were prepared in accordance with Part-II and Part-III of Sch. VI of Companies Act, AO was not empowered to disturb book profits. He, therefore, directed AO to work out assessee s book profits as shown by assessee. 2 1 . During course of hearing before us learned Departmental Representative pointed out that assessee debited provision for doubtful debts Rs. 4,00,178 and provision for damaged stock Rs. 41,73, 107 as selling, administration and other expenses after reducing amount of sundry debtors and inventory of finished goods by same amounts. assessee did not furnish any basis for these entries and, therefore, learned AO has rightly added back same as unascertained amounts while working out assessee s tax liability under s. 115JA. 22. On consideration of matter we find that AO has simply added back these amounts as they were described as provisions and in opinion of learned AO same were required to be added back as per cl. (c) of Explanation to s. 115JA(2). We find that learned AO has proceeded on entirely incorrect basis because both provisions related to assets and not any liabilities incurred by assessee. Therefore, there was no question of these amounts representing any unascertained liability. learned AO otherwise did not enquire into matter and there is no material to hold that these amounts have been arbitrarily provided for by assessee. In these circumstances, we hold that addition of these amounts to book profit is without any basis. We, therefore, decline to interfere in order of learned CIT(A) in this behalf. 23. In result, this appeal is partly allowed. *** ASSISTANT COMMISSIONER OF INCOME TAX v. E.I. DUPONT INDIA LTD.