1 IN HIGH COURT OF JUDICATURE AT MADRAS DATED:27.08.2014 CORAM HON'BLE MR.JUSTICE R. SUDHAKAR AND HON'BLE MR.JUSTICE G.M. AKBAR ALI T.C (A).No.1280 of 2007 M/s Chakiat Agencies Pvt Ltd 40, Rajaji Salai, 2nd Floor, Chennai-600001 Appellant vs Assistant Commissioner of Incometax, Company Circle III (1) Chennai ..... Respondent Prayer: Appeal under Sec.260A of Income Tax Act, 1961, against order of Income Tax Appellate Tribunal "A" Bench, Chennai dated 15.9.2006 passed in Income Tax Appeal No.818(Mds)/06. For Appellant : Mr.R. Venkata Narayanan for Mr.Subbaraya Aiyar For respondent : Mr.T. Ravikumar 2 JUDGMENT ( Delivered by G.M. AKBAR ALI,J.,) Appeal filed against order of Income Tax Appellate Tribunal "A" Bench, Chennai dated 15.9.2006 passed in Income Tax Appeal No.818(Mds)/06. 2. Issue relates to Assessment Year 2001-02. Assessee in this case, in its Profit and Loss Account, has claimed deduction for provision for bad and doubtful debts at Rs.45,73,924/. 3. As per Explanation (c) to Second proviso to section 115JA(2), provision for unascertained liabilities is to be added to book profit. Assessing Officer held that in terms of Explanation (c) to second proviso to section 115JA, provision for unascertained liabilities is to be added to book profit and it cannot be claimed as deduction. In so far as certain bad debts that have been claimed separately in profit and loss account as bad debts, same were written off. Since provision for bad debts does not represent any ascertained liability, in case of assessee, Assessing Officer added same to net profit as per Profit and Loss 3 Account for purpose of computing book profit in terms of Section 115JA and that order was passed based on decision of Madras High Court reported in 244 ITR 256 (Beardsell Ltd vs DCIT). 4. Assessee preferred appeal before Commissioner of Income-Tax (Appeals), who confirmed order of Assessing Officer, which reads as follows: 5.1 I have considered submissions of appellant and gone through Madras High Court decision cited by it. However, I find that besides stating that amount of Rs.45,73,924/- representing provision for doubtful debts was ascertained liability and clients were identified, it has not furnished any evidence in this regard. It is settled principle of law that judicial decisions can be applied to cases having similar facts. appellant's case is definitely covered by decision of Madras High Court in case of Indian Pistons Ltd vs DCIT (188 CTR 282) (Madras) cited above. But that decision presumes that liability relating to provision for bad and doubtful debts is ascertained. Assessing Officer has 4 categorically mentioned in assessment order that liability was not ascertained. During course of appellate proceedings, appellant has stated that liability was ascertained and hence in view of Madras High Court decision it was allowable. But it has failed to substantiate its claim that liability of Rs.45,73,924/- relating to provision for bad and doubtful debts was actually ascertained. In absence of any evidence to substantiate claim of appellant, I hold that Assessing Officer was justified in disallowing amount of Rs.45,73,924/- as unascertained liability while computing book profit u/s 115JB. appellant, therefore FAILS on this ground. 5. As against same, Assessee went on appeal before Income Tax Appellate Tribunal in ITA No.818/Mds/06 on following ground: Commissioner of Income-tax (Appeals) is not justified in confirming addition made by Assessing Authority. Your appellant has provided for specified debts which can be identified and which are doubtful of recovery at time of closing of books of accounts. 5 assessee has also made provision for fall in value of investment. provisions made were towards impairment of assets and not towards unascertained liability. assessee has also produced before Commissioner of Income-Tax (Appeals) list of debts against which provision was made . 6. Tribunal following decision of this Court in India Pistons Ltd vs DCIT (188 CTR 282) (Madras), dismissed appeal filed by Assessee. Aggrieved against same, Assessee has filed present appeal. 7. appeal was admitted on following questions of law: Whether on facts and in circumstances of case, Tribunal was right in holding that, book profits computed u/s 115 JB of Act should be increased by provision for reduction in realizable value of debts and investments which is not provision towards any liability? 8. We have heard learned counsel for appellant/assessee and learned Standing Counsel for Revenue. 6 9. learned counsel for Revenue submitted that Clause (c) of Explanation to S.115JB is applicable to facts of present case and placed reliance upon judgment of Tax Case (Appeal) No.2511 of 2006 dated 30.10.2012, wherein, similar question of law was answered in favour of Revenue which is as follows;. "4. Going by retrospective amendment, even though prior to amendment said issue was covered in favour of assessee by reason of decision reported in 330 ITR 363 - INDI RAMA SYNTHETICS LT vs CIT., Yet, amendment thus goes directly against assessee. In circumstances, we agree with decision of Delhi High COurt reported in 336 ITR 54 - Commissioner of Income Tax v ILPE PARAMOUNT P LTD. Accordingly, third question of law is also answered against assessee". 10. learned counsel for Revenue relied upon C.B.D.T Circular No.5 of 2010 dated 3rd June 2010, particularly, paragraph 40.4, to buttress his plea as above. Circular reads as follows: 7 "40.4. Applicability: amendment to section 115JA has been made applicable with retrospective effect from 1st April, 1998 and will accordingly apply in relation to assessment year 1998-99 and subsequent years. amendment to section 115JB has been made applicable with retrospective effect from 1st April, 2001 and will accordignly apply in relation to assessment year 2001-02 and subsequent years." 11. We find no error in Revenue's plea that amount claimed as deduction for provision for bad and doubtful debts should be included into book profit for purpose of determining income, as has been rightly done by Assessment Officer, which has been consistently accepted by this Court and C.B.D.T. Circular makes it clear that order passed by Original Assessing Authority is justified. 12. Judgment in Tax Case (Appeal) No.2511 of 2006 dated 30.10.2012 was followed in T.C.(A) No.353 and 356 of 2010 dated 27.2.2013 and Division Bench held in favour of Revenue. Following above two judgments, this Court by order dated 27.8.2014 in 8 T.C.A.No.1366 of 2007 answered similar question of law in favour of Revenue. 13. Accordingly, we answer question of law in favour of Revenue. 14. In result, Tax Case Appeal is dismissed and order passed by Income Tax Appellate Tribunal "A" Bench, Chennai dated 15.9.2006 in Income Tax Appeal No.818(Mds)/06 is confirmed. No costs. (R.S.J.,) (G.M.A.J.,) 27-08-2014 sr Index:no website:yes To Assistant Commissioner of Incometax, Company Circle III (1) Chennai 9 R. SUDHAKAR,J., AND G.M. AKBAR ALI,J, sr T.C.(A) No.1280 of 2007 27-08-2014 M/s Chakiat Agencies Pvt. Ltd. v. Assistant Commissioner of Income-tax, Company Circle III (1), Chennai