April 2021
Item (c) of the Explanation to section 115JB – Reduction of provision of doubtful debts written-back from book profit allowed, even when in the year when provision was made and the tax was paid under normal provisions of the Act, while computing book profit, the same was not added to book profit
By Jagdish D. Shah | Jagdish T. Punjabi
Chartered Accountants
2. BOB Financial Solutions Ltd. vs. DCIT (Mumbai) Mahavir Singh (V.P.) and Manoj Kumar Aggarwal (A.M.) I.T.A. No. 1207/Mum/2019 A.Y.: 2014-15 Date of order: 15th March, 2021 Counsel for Assessee / Revenue: Kishor C. Dalal / Rahul Raman
Item (c) of the Explanation to section 115JB – Reduction of provision of doubtful debts written-back from book profit allowed, even when in the year when provision was made and the tax was paid under normal provisions of the Act, while computing book profit, the same was not added to book profit
FACTS
While computing book profits u/s 115JB, the assessee reduced ‘provision of card receivables written-back’ amounting to Rs. 19.30 crores. According to the A.O., the provision made for card receivable, in earlier years, was not added back to compute book profits, hence, the same cannot be reduced from book profit in the current year. The assessee explained that in the earlier years the same was disallowed while computing total income under the normal provisions of the Act. In those years, the assessee had business losses and, therefore, as advised by its consultant, the book profit was shown as ‘Nil’ without making any adjustment as required u/s 115JB as it had no impact on his tax liability. However, the A.O. disallowed the said reduction of Rs. 19.30 crores from the book profit. The CIT(A), on appeal, confirmed the A.O.’s order.
HELD
The Tribunal noted that a similar issue had arisen before it in the assessee’s own case in A.Y. 2012-13 (ITA No. 4485 & 4297/Mum/2017 order dated 7th May, 2019) which was decided in favour of the assessee. In the said case also, the assessee had book losses and even after adding back the said write-offs, the resultant figure would have still been a negative figure and the assessee would not have any liability to pay tax u/s 115JB. Following the same, the Tribunal held that the assessee was entitled for deduction of write-back while computing book profit u/s 115JB.
