Cochin international Airport Ltd, Cochin V. DCIT, Ernakulam

ITA 245/COCH/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 61439 (ITAT-COCHIN)
• Duration Of Justice: 5 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-04-2012
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 08-03-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 24-11-2011
• Court: TRIBUNAL
• Department Lawyers: T J VINCENT
• Assessee Lawyers: R RAJASEKHARAN
• Keywords: Depreciation; Principle of natural justice; Retrospective amendment; Bad and doubtful debts
• Section: 115JB; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE S/SHRI N.R.S.GANESAN, JM AND B.R.BASKAR AN, AM I.T.A NO. 245/COCH/2010 ASSESSMENT YEAR : 2005-06 COCHIN INTERNATIONAL AIRPORT LTD., 35, 4 TH FLOOR, GCDA COMMERICAL COMPLEX, MARINE DRIVE, KOCHI-682 031. [PAN: AAACC 9658B] VS. THE DY. COMMISSIONER OF INCOME- TAX, CIRCLE-1(1), ERNAKULAM. (ASSESSEE-APPELLANT) (REVENUE- RESPONDENT) ASSESSEE BY SHRI R.RAJASEKHARAN, CA REVENUE BY SHRI T.J. VINCENT, SR. DR DATE OF HEARING 08/03/2012 DATE OF PRONOUNCEMENT 27/04/2012 O R D E R PER B.R.BASKARAN, ACCOUNTANT MEMBER: THE APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 04-03-2010 PASSED BY LD CIT, KOCHI U/S 263 OF THE ACT AND IT R ELATES TO THE ASSESSMENT YEAR 2005- 06. THE ASSESSEE IS CHALLENGING THE VALIDITY OF TH E SAID REVISION ORDER. 2. AT THE TIME OF HEARING, THE LD COUNSEL FOR THE A SSESSEE DID NOT PRESS THE GROUNDS NUMBERED AS (2) AND (3) AND IN CONFIRMATION OF THE SAME, HE MADE NECESSARY ENDORSEMENT IN THE GROUNDS OF APPEAL BY AFFIXING HI S SIGNATURE. ACCORDINGLY THEY ARE DISMISSED AS WITHDRAWN. THE GROUND NO.1 IS GENERAL IN NATURE. THIS LEAVES US WITH ONLY ONE GROUND VIZ., WHETHER THE LD CIT IS JUSTIFI ED IN DIRECTING THE AO TO ADD THE PROVISION FOR DOUBTFUL DEBT TO THE BOOK PROFITS C OMPUTED U/S 115JB OF THE ACT. I.T.A. NO.245/COCH/2010 2 3. THE FACTS RELATING TO THE SAID ISSUE ARE STA TED IN BRIEF. THE LD CIT NOTICED THAT THE ASSESSEE HAS CREATED A PROVISION FOR DOUBTFUL DEBTS TO THE TUNE OF RS.84,18,720/-. BUT THE SAME WAS NOT ADDED TO THE NET PROFIT WHILE COMP UTING THE BOOK PROFIT U/S 115JB OF THE ACT. IT IS ALSO PERTINENT TO NOTE THAT THE AO ALSO DID NOT NOTICE/EXAMINE THE SAME. THE LD CIT TOOK THE VIEW THAT THE ABOVE SAID PROVISION HAS BEEN MADE TOWARDS UNASCERTAINED LIABILITY AND HENCE THE SAME IS LIABL E TO BE ADDED TO THE BOOK PROFITS. ACCORDINGLY HE SET ASIDE THE ASSESSMENT ORDER WITH THE DIRECTION TO RE-DO THE ASSESSMENT IN THE LIGHT OF DISCUSSIONS MADE IN THE REVISION ORDER PASSED BY HIM. THE ASSESSEE IS AGGRIEVED BY THE ORDER OF LD CIT AND HE NCE IS IN APPEAL BEFORE US. 4. THE LD CIT HAS CONSIDERED THE PROVISION FOR DOUBTFUL DEBTS AS UNASCERTAINED LIABILITY. IT IS PERTINENT TO NOTE THAT THE FINANC E (NO.2) ACT, 2009 HAS INSERTED CLAUSE (I) AFTER CLAUSE (H) TO EXPLANATION 1 TO SEC. 115JB WITH RETROSPECTIVE EFFECT FROM 1.4.2001. ACCORDING TO THE SAID CLAUSE (I), THE AMOUNT OR AMO UNTS SET ASIDE AS PROVISION FOR DIMINUTION IN THE VALUE OF ANY ASSET IS REQUIRED TO BE ADDED TO THE NET PROFIT IN ORDER TO ARRIVE AT THE BOOK PROFIT U/S 115JB OF THE ACT. IT MAY BE NOTED THAT IN THE ACCOUNTING PARLANCE, THE PROVISION FOR DOUBTFUL DEB TS IS A PROVISION MADE FOR DIMINUTION OF THE VALUE OF ASSET. 5. IN THE GROUNDS RAISED BEFORE US, THE ASSESSE E HAS CONTENDED THAT THE PROVISION FOR DOUBTFUL DEBTS IS NEITHER IN THE NATURE OF UNASCERT AINED LIABILITY NOR A PROVISION TOWARDS DIMINUTION IN THE VALUE OF ASSETS. THE LD A.R ALSO ADVANCED HIS ARGUMENTS IN THE CONTEXT OF DIMINUTION IN THE VALUE OF ASSETS. HE NCE WE PROCEED TO DISPOSE OF THIS GROUND IN THE ABOVE SAID CONTEXT ONLY. 6. DURING THE YEAR UNDER CONSIDERATION, THE ASS ESSEE HAS CREATED A PROVISION FOR DOUBTFUL DEBTS AND DEBITED THE SAME TO THE PROFIT A ND LOSS ACCOUNT. IN THE BALANCE SHEET THE ACCUMULATED BALANCE OF PROVISION FOR DOU BTFUL DEBTS WAS REDUCED FROM THE SUNDRY DEBTORS ACCOUNT IN THE ASSETS SIDE OF THE BALANCE SHEET. IT MAY BE NOTED THAT THE PROVISION SO CREATED CAN EITHER BE SHOWN UNDER THE GROUPING CURRENT LIABILITIES AND PROVISIONS IN THE LIABILITIES SIDE OF BALANCE SH EET OR IT CAN BE REDUCED FROM THE I.T.A. NO.245/COCH/2010 3 CONCERNED ASSET ACCOUNT IN THE ASSETS SIDE OF BAL ANCE SHEET. SINCE THE ASSESSEE IS A LIMITED COMPANY, IT IS GOVERNED BY THE COMPANIES AC T. ACCORDING TO THE COMPANIES ACT, THE BALANCE SHEET OF A LIMITED COMPANY IS REQU IRED TO DRAWN UP IN ACCORDANCE WITH SCHEDULE VI OF THE SAID ACT. ACCORDING TO SCHEDULE VI, THE PROVISION FOR BAD AND DOUBTFUL DEBTS IS REQUIRED TO BE DEDUCTED FROM THE SUNDRY DEBTORS A/C IN THE ASSETS SIDE OF THE BALANCE SHEET. THUS, BY FOLLOWING SCHE DULE VI OF THE COMPANIES ACT, THE ASSESSEE HAS REDUCED THE PROVISION FOR DOUBTFUL DE BTS FROM THE SUNDRY DEBTORS A/C. 7. BY PLACING RELIANCE ON THE DECISION OF HON BLE SUPREME COURT IN THE CASE OF VIJAYA BANK VS. CIT (2010)(323 ITR 166), THE LD A.R CONTENDED THAT SUCH REDUCTION OF PROVISION FOR DOUBTFUL DEBTS FROM THE SUNDRY DEB TORS A/C AMOUNTS TO ACTUAL WRITING OFF OF THE DEBT. HE FURTHER SUBMITTED THAT IF THE PROVISION FOR DOUBTFUL DEBTS IS CONSIDERED AS ACTUAL WRITING OFF OF DEBTS, I.E., AS SET ACCOUNT, THEN THERE IS NO REQUIREMENT OF TREATING THE SAME AS PROVISION FOR DIMINUTION IN THE VALUE OF ASSET . IN THAT CASE, THERE IS NO NECESSITY TO ADD BACK THE AM OUNT DEBITED TO THE PROFIT AND LOSS ACCOUNT TOWARDS PROVISION FOR DOUBTFUL DEBTS WHI LE COMPUTING BOOK PROFIT AS PER CLAUSE (I) OF EXPLANATION 1 TO SEC. 115JB. THE LD A .R ALSO DREW OUR ATTENTION TO THE DECISION DATED 29-08-2011 RENDERED BY HONBLE KARNA TAKA HIGH COURT IN THE CASE OF CIT VS. M/S YOKOGAWA INDIA LTD IN ITA NO.1062 OF 2008, WHEREIN THE HIGH COURT HAS HELD THAT THE EXPLANATION TO SEC. 115JB IS NOT ATTRACTED IF THE BAD DEBT OR DOUBTFUL DEBT IS REDUCED FROM THE LOANS AND ADVANCES OR THE DEBTORS FROM THE ASSET SIDE OF THE BALANCE SHEET. ACCORDINGLY, THE LD A.R CONTENDED THAT THE VIEW ENTERTAINED BY THE LD CIT IS UNSUSTAINABLE IN LAW AND HENCE THE REVISION PROCEED ING INITIATED BY HIM U/S 263 IS NOT VALID. 8. ON THE OTHER HAND, THE LD D.R STRONGLY PLACE D HER RELIANCE ON THE ORDER PASSED BY LD CIT. 9. WE HAVE HEARD THE RIVAL CONTENTIONS AND CARE FULLY PERUSED THE RECORD. THE SCOPE OF REVISION PROCEEDINGS INITIATED UNDER SECTION 263 OF THE ACT WAS CONSIDERED BY HON'BLE BOMBAY HIGH COURT, IN THE CASE OF GRASIM INDUSTRIES LTD. V CIT (321 ITR 92) BY TAKING I.T.A. NO.245/COCH/2010 4 INTO ACCOUNT THE LAW LAID DOWN BY THE HON'BLE SUPRE ME COURT. THE RELEVANT OBSERVATIONS ARE EXTRACTED BELOW: SECTION 263 OF THE INCOME-TAX ACT, 1961 EMPOWERS TH E COMMISSIONER TO CALL FOR AND EXAMINE THE RECORD OF ANY PROCEEDINGS UNDER THE ACT AND, IF HE CONSIDERS THAT ANY ORDER PASSED THEREIN, BY THE ASS ESSING OFFICER IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INT ERESTS OF THE REVENUE, TO PASS AN ORDER UPON HEARING THE ASSESSEE AND AFTER A N ENQUIRY AS IS NECESSARY, ENHANCING OR MODIFYING THE ASSESSMENT OR CANCELLING THE ASSESSMENT AND DIRECTING A FRESH ASSESSMENT. THE KE Y WORDS THAT ARE USED BY SECTION 263 ARE THAT THE ORDER MUST BE CONSIDERE D BY THE COMMISSIONER TO BE ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE. THIS PROVISION HAS BEEN INTERPRETED BY THE SUPREME COURT IN SEVERAL JUDGMENTS TO WHICH IT IS NOW NECESSARY TO TURN. IN MALABAR INDUSTRIAL CO. LTD. V. CIT [2000] 243 ITR 83, THE SUPREME COURT HELD THAT THE PROVISION CANNOT BE INVOKED TO CORRECT EACH AND EVERY TYPE OF MISTAKE OR ERROR COMMITTED BY THE ASSESSING OFFICER AND IT IS ON LY WHEN AN ORDER IS ERRONEOUS THAT THE SECTION WILL BE ATTRACTED. THE SUPREME COURT HELD THAT AN INCORRECT ASSUMPTION OF FACT OR AN INCORRECT APP LICATION OF LAW, WILL SATISFY THE REQUIREMENT OF THE ORDER BEING ERRONEOUS. AN ORDER PASSED IN VIOLATION OF THE PRINCIPLES OF NATURAL JUSTICE OR WITHOUT APP LICATION OF MIND, WOULD BE AN ORDER FALLING IN THAT CATEGORY. THE EXPRESSION PREJUDICIAL TO THE INTERESTS OF THE REVENUE, THE SUPREME COURT HELD, IT IS OF W IDE IMPORT AND IS NOT CONFINED TO A LOSS OF TAX. WHAT IS PREJUDICIAL TO T HE INTEREST OF THE REVENUE IS EXPLAINED IN THE JUDGMENT OF THE SUPREME COURT (HEA DNOTE) : THE PHRASE PREJUDICIAL TO THE INTERESTS OF THE RE VENUE HAS TO BE READ IN CONJUNCTION WITH AN ERRONEOUS ORDER PASSED BY THE A SSESSING OFFICER. EVERY LOSS OF REVENUE AS A CONSEQUENCE OF AN ORDER OF THE ASSESSING OFFICER, CANNOT BE TREATED AS PREJUDICIAL TO THE INTERESTS O F THE REVENUE, FOR EXAMPLE, WHEN AN INCOME-TAX OFFICER ADOPTED ONE OF THE COURSES PERMISSIBLE IN LAW AND IT HAS RESULTED IN LOSS OF REVENUE, OR WHERE TWO VIEWS ARE POSSIBLE AND THE INCOME-TAX OFFICER HAS TAKEN ONE VIEW WITH WHICH THE COMMISSIONER DOES NOT AGREE, IT CANNOT BE TREATED AS AN ERRONEOUS ORDER PREJUDICIAL TO THE INTERESTS OF T HE REVENUE UNLESS THE VIEW TAKEN BY THE INCOME-TAX OFFICER IS UNSUSTAINABLE IN LAW. THE PRINCIPLE WHICH HAS BEEN LAID DOWN IN MALABAR I NDUSTRIAL CO. LTD. [2000] 243 ITR 83 (SC) HAS BEEN FOLLOWED AND EXPLAI NED IN A SUBSEQUENT JUDGMENT OF THE SUPREME COURT IN CIT V. MAX INDIA L TD. [2007] 295 ITR 282. 10. IN THE INSTANT CASE, THE AO DID NOT EXAMINE THE APPLICABILITY OF PROVISIONS OF SEC. 115JB IN RESPECT OF THE AMOUNT DEBITED TO THE PROFI T AND LOSS ACCOUNT UNDER THE HEAD I.T.A. NO.245/COCH/2010 5 PROVISION FOR DOUBTFUL DEBTS. IN THE PROFIT AND LOSS ACCOUNT, IT IS GROUPED UNDER THE HEAD ADMINISTRATIVE AND OTHER EXPENSES. THE CONT ENTION OF THE ASSESSEE IS THAT THOUGH THE AO DID NOT EXAMINE THE SAME, YET THE VIE W ENTERTAINED BY THE LD CIT IS NOT SUSTAINABLE IN LAW. FOR THIS PROPOSITION HE HAS PL ACED STRONG RELIANCE ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF VIJAYA BANK, S UPRA. HE HAS ALSO DRAWN SUPPORT FROM THE DECISION OF HONBLE KARNATAKA HIGH COURT I N THE CASE OF M/S YOKOGAWA INDIA LTD, SUPRA. 11. WE NOTICE THAT THE DECISION OF HONBLE SUPR EME COURT IN THE CASE OF VIJAYA BANK WAS RENDERED IN THE CONTEXT OF THE PROVISIONS OF SE C.36(1)(VII) OF THE INCOME TAX ACT. AFTER APRIL 1, 1989, THE ASSESSEE HAS TO ACTUALLY W RITE OFF THE DEBT AS BAD IN HIS BOOKS OF ACCOUNT IN ORDER TO CLAIM DEDUCTION OF BAD DEBTS U/ S 36(1)(VII) OF THE ACT. THE QUESTION THAT WAS RAISED BEFORE THE HONBLE APEX COURT IN TH E CONTEXT OF SEC. 36(1)(VII) OF THE INCOME TAX ACT WAS WHETHER THE REDUCTION OF PROVI SION FOR BAD AND DOUBTFUL DEBTS AMOUNT FROM THE SUNDRY DEBTORS ACCOUNT IN THE ASS ET SIDE OF THE BALANCE SHEET WOULD AMOUNT TO ACTUAL WRITE OFF OR NOT?. IN THAT CASE, THE ASSESSEE THEREIN HAD REDUCED THE PROVISION FOR BAD DEBTS FROM THE SUNDRY DEBTORS A/C IN THE ASSET SIDE OF THE BALANCE SHEET., I.E. IT DID NOT ACTUALLY REDUCE THE INDIVID UAL DEBTORS ACCOUNT, BUT INSTEAD REDUCED THE PROVISION FOR BAD DEBTS SO CREATED, FROM THE AGGREGATE BALANCE OF THE SUNDRY DEBTORS ACCOUNT. 12. BEFORE US, THE ASSESSEE IS CONTENDING THAT THE RATIO OF THE HONBLE SUPREME COURT RENDERED IN THE CONTEXT OF SEC. 36(1)(VII) OF THE ACT EQUALLY APPLIES TO SEC. 115JB ALSO. IN THIS REGARD, WE MAY GAINFULLY REFER TO TH E PRINCIPLES WITH REGARD TO PRECEDENTS DISCUSSED BY THE HONBLE SUPREME COURT IN THE CASE OF GOODYEAR INDIA LTD VS. STATE OF HARYANA REPORTED IN 188 ITR 402. THE FOLLOWING OBSERVATIONS MADE BY THE HONBLE APEX COURT AT PAGE 424 ARE VERY MUCH PERTIN ENT:- MR.TEWATIA DREW OUR ATTENTION TO THE OBSERVATIONS OF THIS COURT IN KANDASWAMIS ASE (1975) 36 STC 191 TO PROVE THAT THE OBSERVATION S IN MALABAR FRUIT PRODUCTS CO. VS. SALES TAX OFFICER (1972) 30 STC 537, WHERE THESE QUESTIONS WERE DECIDED BY JUSTICE POTI OF THE KERALA HIGH COURT WH O SPELT OUT THAT THE TAXING EVENT WAS NOT THE EVENT OF DESPATCH BUT THE EVENT O F PURCHASE/SALE OF GOODS. IT I.T.A. NO.245/COCH/2010 6 HAS, HOWEVER, TO BE BORNE IN MIND THAT THE QUESTION S INVOLVED IN MALABAR FRUIT PRODUCTS (1972) 30 STC 537 (KER) AND KANDASWAMIS (1975) 36 STC 191 (SC) CASES WERE NOT CONCERNED WITH THE ACTUAL ARGUMENT W ITH WHICH WE ARE CONCERNED IN THE INSTANT MATTER. IT IS WELL SETTLED THAT A PRECEDENT IS AN AUTHORITY ONLY FOR WHAT IT ACTUALLY DECIDES AND NOT FOR WHAT MAY REMOTELY OR EVEN LOGICALLY FOLLOW FROM IT. SEE QUIN N V LEATHEM (1901) AC 495 (HL) AND STATE OF ORISSA V. SUDHANSU SEKHAR MISRA (1968) 2 SCR 154. THEREFORE, THE RATIO OF THE SAID DECISION CANNOT BE PROPERLY APPLIED IN CONSTRUCTING THE PROVISIONS OF SECTION 9(1)(B) IN T HIS CASE TO DETERMINE WHAT IS THE TAXABLE EVENT. THE DECISION IN THE CASE OF VIJAYA BANK, SUPRA, WAS RENDERED BY HONBLE SUPREME COURT UNDER SEC. 36(1)(VII) OF THE INCOME TAX ACT. THE L IMITED ISSUE DECIDED THEREIN WAS WHETHER THE METHODOLOGY ADOPTED BY THE ASSESSEE WOU LD SATISFY THE CONDITION OF ACTUAL WRITE OFF, PRESCRIBED UNDER SEC.36(1)(VII ) OF THE ACT. THE APEX COURT HELD THAT THE METHODOLOGY ADOPTED BY THE ASSESSEE THEREIN AMO UNTS TO ACTUAL WRITE OFF OF DEBT WHICH HAS BECOME BAD. IN THE INSTANT CASE, WE ARE CONCERNED WITH THE PROVISIONS OF SEC. 115JB OF THE ACT. IN VIEW OF THE PARTICULAR P RINCIPLES OF INTERPRETATION DISCUSSED ABOVE, WE ARE OF THE VIEW THAT IT IS NOT PERMISSIBL E TO LOGICALLY EXTEND THE RATIO OF THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF VI JAY BANK, SUPRA FOR THE PURPOSE OF INTERPRETING SEC. 115JB OF THE ACT. IF WE SO EXTEN D, IT MAY NOT WORK IN THE INSTANT CASE. WE SHALL EXPLAIN THE REASONS IN THE ENSUING PARAGRA PHS. 13. UNDER THE PROVISIONS OF SEC. 115JB OF THE AC T, THE ASSESSEE IS REQUIRED TO PREPARE THE PROFIT AND LOSS ACCOUNT FOR THE PURPOSES OF SEC . 115JB IN ACCORDANCE WITH THE PROVISIONS OF PARTS II AND III OF SCHEDULE VI TO TH E COMPANIES ACT, 1956. WHEN THE PROFIT AND LOSS ACCOUNT IS PREPARED IN ACC ORDANCE WITH THE COMPANIES ACT, IN OUR VIEW, THE MEANING OF THE TERMS AMOUNT OR AMOUN TS SET ASIDE AS PROVISION FOR DIMINUTION IN THE VALUE OF ANY ASSET HAS TO BE UND ERSTOOD ONLY IN ACCORDANCE WITH THE COMPANIES ACT. THE TERM PROVISION HAS BEEN DEFIN ED IN PART III TO SCHEDULE VI AS UNDER:- 7. (1) FOR THE PURPOSES OF PARTS I AND II OF THIS SCHEDULE, UNLESS THE CONTEXT OTHERWISE REQUIRES:- I.T.A. NO.245/COCH/2010 7 (A) THE EXPRESSION PROVISION SHALL, SUBJECT TO SU B-CLAUSE (2) OF THIS CLAUSE, MEAN ANY AMOUNT WRITTEN OFF OR RETAINED BY WAY OF PROVIDING FOR DEPRECIATION, RENEWALS OR DIMINUTION IN VALUE OF ASSETS , OR RETAINED BY WAY OF PROVIDING FOR ANY KNOWN LIABILITY OF WHIC H THE AMOUNT CANNOT BE DETERMINED WITH SUBSTANTIAL ACCURACY THUS, IT MAY BE NOTED THAT, ACCORDING TO THE DEFINI TION OF THE TERM PROVISION GIVEN IN SCHEDULE VI OF THE COMPANIES ACT, EVEN THE AMOUNT WRITTEN OFF IS TREATED AS PROVISION. HENCE THE CONTENTION OF THE ASSESSEE THAT THE ACTUAL WRITING OFF CHANGES THE CHARACTER OF PROVISION DOES NOT HOLD GOOD UND ER THE COMPANIES ACT. SINCE THE PROFIT AND LOSS ACCOUNT IS PREPARED U/S 115JB OF TH E ACT IN ACCORDANCE WITH SCHEDULE VI OF THE COMPANIES ACT, THE PROVISION CREATED FOR DOUBTFUL DEBTS DEBITED TO THE PROFIT AND LOSS ACCOUNT SHALL REMAIN AS PROVISION ONLY E VEN IF IT IS REDUCED FROM THE SUNDRY DEBTORS A/C IN THE ASSET SIDE OF THE BALANCE SHEET . 14. THE LD A.R HAS ALSO TAKEN SUPPORT OF THE HON BLE KARNATAKA HIGH COURT IN THE CASE OF M/S YOKOGAWA INDIA LTD, SUPRA. WE HAVE GONE THR OUGH THE SAID DECISION AND WE NOTICE THAT THE ATTENTION OF THE HONBLE KARNATAKA HIGH COURT WAS NOT BROUGHT TO THE REQUIREMENT OF PREPARING THE PROFIT AND LOSS ACCOUN T AS PER SCHEDULE VI OF THE COMPANIES ACT. IN ANY CASE, THE DECISION OF NON-JU RISDICTIONAL HIGH COURT SHALL HAVE ONLY PERSUASIVE VALUE. THE LEGAL POSITION IN THIS REGARD WAS WELL DISCUSSED BY MUMBAI SPECIAL BENCH IN THE CASE OF MAHINDRA AND MAHINDRA LTD. VS. DCIT REPORTED IN (2009) 313 ITR (AT) 263 AND THE RELEVANT OBSERVATIONS ARE EXTRACTED BELOW:- ......IN SUCH A SITUATION TO ARGUE THAT A PARTICUL AR HIGH COURT JUDGMENT OF THE NON-JURISDICTIONAL HIGH COURT IS BINDING IS BINDING ON THE TRIBUNAL IS NOT ACCEPTABLE. THE HONBLE BOMBAY HIGH COURT IN THANA ELECTRICITY SUPPLY LIMITED (1994) 206 ITR 727 HAS DISCUSSED THE BINDING NATURE OF THE JUDICIAL PRECEDENTS. THE POSITION HAS BEEN SUMMARIZED IN PARAGRAPH 17 OF THE CASE BY LAYING DOWN THAT THE LAW DECLARED BY THE SUPREME COURT IS BINDI NG ON ALL THE COURTS IN INDIA. THE DECISION OF THE HIGH COURT IS BINDING ON THE SU BORDINATE COURTS AND THE AUTHORITIES OR THE TRIBUNALS UNDER ITS SUPERINTENDE NCE THROUGHOUT THE TERRITORIES IN RELATION TO WHICH IT EXERCISE ITS JURISDICTION. IT HAS FURTHER BEEN HELD THAT THE DECISION OF THE HIGH COURT DOES NOT EXTEND BEYOND I TS TERRITORIAL JURISDICTION. THE I.T.A. NO.245/COCH/2010 8 RELEVANT DISCUSSION ON THE BINDING NATURE OR OTHERW ISE OF THE JUDGMENT OF A NON- JURISDICTIONAL HIGH COURT HAS BEEN MADE IN PARAGRAP H (D) AS UNDER (PAGE 738 OF 206 ITR): (D) THE DECISION OF ONE HIGH COURT IS NEITHER BIND ING PRECEDENT FOR ANOTHER HIGH COURT NOR FOR COURTS OR TRIBUNALS OUTS IDE ITS OWN TERRITORIAL JURISDICTION. IT IS WELL-SETTLED THAT THE DECISION OF A HIGH COURT WILL HAVE THE FORCE OF BINDING PRECEDENT ONLY IN THE STATE OR TERRITORIES ON WHICH THE COURT HAS JURISDICTION. IN OTHER STATES OR OUTSIDE THE TERRITORIAL JURISDICTION OF THAT HIGH COURT IT MAY, AT BEST, HAVE ONLY A PER SUASIVE EFFECT. BY NO AMOUNT OF STRETCHING OF THE DOCTRINE OF STARE DECIS IS CAN JUDGMENTS OF ONE HIGH COURT BE GIVEN THE STATUS OF A BINDING PRECEDE NT SO FAR AS OTHER HIGH COURTS OR COURTS OR TRIBUNALS WITHIN THEIR TERRITOR IAL JURISDICTION ARE CONCERNED. ANY SUCH ATTEMPT WILL GO COUNTER TO THE VERY DOCTRINE OF STARE DECISIS AND ALSO THE VARIOUS DECISIONS OF THE SUPRE ME COURT WHICH HAVE INTERPRETED THE SCOPE AND AMBIT THEREOF. THE FACT THAT THERE IS ONLY ONE DECISION OF ANY ONE HIGH COURT ON A PARTICULAR POIN T OR THAT A NUMBER OF DIFFERENT HIGH COURTS HAVE TAKEN IDENTICAL VIEWS IN THAT REGARD IS NOT AT ALL RELEVANT FOR THAT PURPOSE. WHATSOEVER MAY BE THE C ONCLUSION, THE DECISIONS CANNOT HAVE THE FORCE OF BINDING PRECEDEN T ON OTHER HIGH COURTS OR ON ANY SUBORDINATE COURTS OR TRIBUNALS WITHIN TH EIR JURISDICTION. THAT STATUS IS RESERVED ONLY FOR THE DECISIONS OF THE SU PREME COURT WHICH ARE BINDING ON ALL COURTS IN THE COUNTRY BY VIRTUE OF A RTICLE 141 OF THE CONSTITUTION. SIMILAR POSITION HAS BEEN REITERATED AGAIN BY THE H ONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CONSOLIDATED PNUEMATIC TOOL CO. (IND IA) LIMITED V. CIT (1994) 209 ITR 727 (BOM) BY HOLDING THAT THE DECISION OF OTHER HIGH COURT IS NOT A BINDING PRECEDENT FOR COURTS, AUTHORITIES OR TRIBUNALS OUTS IDE ITS TERRITORIAL JURISDICTION. AGAIN THE HONBLE BOMBAY HIGH COURT IN GEOFFREY MAN NERS AND CO. LTD. V. CIT (1996) 221 ITR 695 HAS FOLLOWED THE EARLIER TWO AFO RE NOTED JUDGMENTS FOR HOLDING THAT THE DECISIONS OF A HIGH COURT ARE NOT BINDING PRECEDENTS EITHER FOR OTHER HIGH COURTS OR TRIBUNALS OUTSIDE THE TERRITOR IAL JURISDICTION OF THAT HIGH COURT. FROM THE ABOVE JUDGMENTS OF THE HONBLE JUR ISDICTIONAL HIGH COURT, IT IS APPARENT THAT ONLY THE JUDGMENTS RENDERED BY THE HO NBLE SUPREME COURT OR THE JURISDICTIONAL HIGH COURT ARE BINDING ON THE TRIBUN AL. THE JUDGMENTS OF THE OTHER HONBLE HIGH COURTS, THOUGH HAVE PERSUASIVE VALUE, BUT CANNOT HAVE A BINDING FORCE. 15. IN VIEW OF THE FOREGOING DISCUSSIONS, WE AR E UNABLE TO ACCEPT THE CONTENTIONS OF THE ASSESSEE THAT THE VIEW ENTERTAINED BY LD CIT(A) IS UNSUSTAINABLE IN LAW. SINCE THE AO DID NOT EXAMINE THE ISSUE OF ADDING BACK THE PR OVISION FOR DOUBTFUL DEBTS WHILE COMPUTING THE BOOK PROFIT, HIS ORDER IS RENDERED ERRONEOUS SO FAR AS IT IS PREJUDICIAL TO I.T.A. NO.245/COCH/2010 9 THE INTERESTS OF REVENUE. ACCORDINGLY, WE DO NOT FIND ANY INFIRMITY IN THE ORDER PASSED BY LD CIT(A) UNDER SECTION 263 OF THE ACT. 16. IN THE RESULT, THE APPEAL OF THE ASSESSEE I S DISMISSED. PRONOUNCED ACCORDINGLY ON 27-04-2012 SD/- SD/- (N.R.S.GANESAN) (B.R.BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: KOCHI DATED: 27TH APRIL, 2012 GJ COPY TO: 1. COCHIN INTERNATIONAL AIRPORT LTD., 35, 4 TH FLOOR,GCDA COMMERICAL COMPLEX, MARINE DRIVE, KOCHI-682 031. 2. THE DY. COMMISSIONER OF INCOME-TAX, CIRCLE-1(1), ERNAKULAM 3. THE COMMISSIONER OF INCOME-TAX, KOCHI. 4. D.R., I.T.A.T., COCHIN BENCH, COCHIN. 5. GUARD FILE. BY ORDER ( ASSISTANT REGISTRAR) I.T.A.T. COCHIN