The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) held that in the year under consideration when the provision for doubtful debt has been written back, the assessee is entitled for making claim of the same.
The assessee, a public limited company, was during the year under consideration engaged in the business of manufacturing of ‘asbestos cement sheets’ and ‘accessories and ‘pre-engineered’ building products. For the year under consideration, the assessee filed return of income on 27.02.2014 declaring total loss of Rs.58,70,89,863/- under the normal provisions of the Income-tax Act, 1961 whereas book loss of Rs.40,32,90,378/- was shown as per the provisions of section 115JB of the Act.
The assessee further revised its return of income on 30.03.2016 declaring total loss of Rs.57,35,23,520/- under the normal provisions and book loss at Rs.40,71,78,204/-. The return of income filed by the assessee was selected for scrutiny and the statutory notices under the Income Tax Act were issued and complied with.
In the assessment order passed under Section 143(3) of the Income Tax Act dated 30.12.2016, the Assessing Officer made additions to the income under the normal provisions of the Act as well as book profit/loss under Section 115JB of the Income Tax Act.
Aggrieved, the assessee filed appeal before the CIT(A) wherein got part relief in the impugned order dated 22.10.2019. Aggrieved by the relief allowed to the assessee, the Revenue appealed before the tribunal.
After hearing both the parties the tribunal was of the opinion that what is relevant for the purpose of section 115JB of the income Tax Act is book profit prepared in accordance with the provisions of the Company Act, 2013 as mentioned in section 115JB(2) as increased by the items mentioned in Explanation (a) to(k). How the entries have been made in Balance sheet, may be relevant for deciding the issue under section 36(1)(vii) of the Act and if there is finding on that issue that provision for bad and doubtful debt is no longer an unascertained liability, then no addition could be made under section 115JB of the Act.
The two-member bench consisting of Aby T Varkey (Judicial member) and Om Prakash Kant (Accountant member) held that unless there is such a finding under regular provisions of section 36(1)(vii) of the Income Tax Act, the provision for doubtful debt being also in the nature of diminution in value of asset, it also attracts explanation (i) of the section 115JB of the Income Tax Act. Therefore, under the facts and circumstances, the tribunal upheld the finding of CIT(A).
Thus, the grounds of appeal of the assessee was dismissed accordingly.
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