HOTEL LEELAVENTURE LTD, MUMBAI V. ADDL CIT RG 8(2), MUMBAI

ITA 592/MUM/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 4098 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 2 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-04-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 24-01-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Retrospective amendment; Bad and doubtful debts
• Section: 143(3); 115JB

Judgement Text

M/S HOTEL LEELA V ENTURE LTD ITA NO. 5 92 /M UM /201 4 1 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH A , MUMBAI , , BEFORE SHRI AMIT SHUKLA , JUDICIAL MEMBER AND SHRI RAMIT KOCHAR , ACCOUNTAN T MEMBER ITA NO. : 592 /MUM/20 1 4 (ASSESSMENT YEAR: 20 1 0 - 11 ) M/S HOTEL LEELA V ENTURE LTD , THE LEELA MUMBAI SHAR, MUMBAI - 400 059, .: PAN: AAACH 3167 J VS ADDL. CIT - RG.8(2), AAYAKAR BHAVAN, 2 ND FLOOR, M K ROAD, CHURCHGAT E, MUMBAI - 400 020 (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI PRAKASH JOTWANI RESPONDENT BY : SHRI GANESH BARE /DATE OF HEARING : 2 0 - 0 1 - 201 6 / DATE OF PRONOUNCEMENT : 18 - 0 4 - 201 6 ORDER : . . : PER AMIT SHUKLA , JM : THE AFORESAID APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST IMPUGNED ORDER DATED 09.10.2012 PASSED BY CIT(A) - 17 MUMBAI, FOR THE QUANTUM OF ASSESSMENT PASS ED UNDER SECTION 143(3) FOR THE ASSESSMENT YEAR 2010 - 11, ON FOLLOWING GROUNDS: - 1 . DISALLOWANCE OF PROVISION FOR DOUBTFUL DEBTS OF RS.68,26,511/ - ( A ) THE LEARNED CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS.68,26,511/ - BEING THE PROVISION FOR DOUBTFUL DEBTS , DEBITED TO THE PROFIT AND LOSS ACCOUNT, WHILE COMPUTING BOOK PROFIT U/S 115JB OF THE INCOME TAX ACT, 1961. M/S HOTEL LEELA V ENTURE LTD ITA NO. 5 92 /M UM /201 4 2 ( B ) THE LEARNED CIT(A) ERRED IN COMPUTING THE MINIMUM ALTERNATIVE TAX, BY APPLYING CLAUSE (I) OF THE EXPLANATION (1) OF SECTION 115JB OF THE INCOME - TA X ACT, 1961, WHICH SAYS THAT THE AMOUNT SET ASIDE FOR PROVISION FOR DIMINUTION IN THE VALUE OF ANY ASSET, SHOULD BE ADDED TO THE BOOK PROFITS FOR COMPUTING THE MAT U/S 115JB. 2. BRIEF FACTS QUA THE ISSUE INVOLVED ARE THAT, ASSESSEE COMPANY HAD DEBITED A SUM OF RS.68,46,511/ - BEING PROVISION FOR DOUBTFUL DEBTS IN THE PROFIT AND LOSS ACCOUNT AFTER ASCERTAINING THE LIST OF DEBTORS WHICH WERE DOUBTFUL OF RECOVERY OR WERE NOT RECOVERABLE AT ALL. ACCORDINGLY, ASSESSEE REDUCED THE SAID AMOUNT FROM THE SUNDRY DEBTORS IN THE BALANCE SHEET. THE ASSESSEE THOUGH ADDED THE SAID AMOUNT UNDER THE NORMAL PROVISIONS OF THE ACT; HOWEVER, FOR THE PURPOSE OF BOOK PROFIT UNDER 115JB , THE SAME WAS ADDED. LD. AO ADDED THE AMOUNT OF SUCH A PROVISION FOR DOUBTFUL DEBTS OF R S. 68,46,511/ - WHILE COMPUTING THE BOOK PROFIT UNDER SECTION 115JB, RELYING UPON EXPLANATION (1) ITEM (I) WHICH WAS INSERTED BY THE FINANCE ACT, 2009 WITH RETROSPECTIVE EFFECT FROM 01.04.2001. ACCORDINGLY, THE SAID AMOUNT WAS ADDED TO THE NET PROFIT FOR THE P URPOSE OF COMPUTING THE BOOK PROFIT UNDER SECTION 115JB. 3. BEFORE THE CIT(A), DETAILED SUBMISSIONS WERE MADE BY THE ASSESSEE AS TO WHY SUCH PROVISION CANNOT BE ADDED TO THE BOOK PROFIT AND ALSO RELIED UPON THE DECISION OF KARNATAKA HIGH COURT IN THE CAS E OF YOKOGAWA INDIA LTD VS CIT, REPORTED IN [2012] 17 TAXMANN.COM 15 AND BOMBAY HIGH COURT CIT VS. ECHJAY FORGINGS PVT LTD, REPORTED IN [2001] 251 ITR 15 . THE ASSESSEES SUBMISSIONS IN THIS REGARD HAS BEEN INCORPORATED BY THE CIT(A) AT PAGES 6 IN PARA 3.2. 1. 4. THE LD. CIT(A), AFTER ANALYZING THE DECISION OF HONBLE BOMBAY HIGH COURT IN CIT VS . ECHJAY FORGINGS PVT . LTD . ( SUPRA ) NOTED THAT, IN THIS CASE THE MATTER WAS EXAMINED UNDER CLAUSE (C) OF THE EXPLANATION 1 TO SECTION 115J WHICH PROVIDES THAT UNLESS A M/S HOTEL LEELA V ENTURE LTD ITA NO. 5 92 /M UM /201 4 3 PROVISION IS MADE FOR ASCERTAINED LIABILITIES, THE PROVISION MADE HAS TO BE INCLUDED IN THE BOOK PROFIT. IN THE CASE BEFORE THE HIGH COURT IT WAS UNDISPUTED FACT THAT THE LIABILITY WAS AN ASCERTAINED LIABILITY , WHEREAS HERE THE DOUBTFUL DEBTS ARE UNASCER TAINED LIABILITY. REGARDING KARNATAKA HIGH COURT DECISION IN THE CASE OF YOKOGAWA INDIA LTD ( SUPRA ) HE NOTED THAT THOUGH IN THAT CASE IT WAS HELD THAT A DEBT IS AN AMOUNT RECEIVABLE BY THE ASSESSEE AND NOT ANY LIABILITY PAYABLE BY THE ASSESSEE THEREFORE, A NY PROVISION MADE TOWARDS NON RECOVERABILITY OF THE DEBT CANNOT BE SAID TO BE A PROVISION FOR ASCERTAINED LIABILITY . H ENCE, IT WAS HELD THAT ITEM (C) OF THE EXPLANATION 115J IS NOT ATTRACTED ON THE FACT OF TH AT CASE. THE LD. CIT(A) ANALYS I S ON THE AFORESAI D TWO DECISIONS (AS RELIED UPON BY THE ASSESSEE ) HA S BEEN DEALT ELABORATELY IN PARA 3.1.1 & 3.2.2 OF THE APPELLATE ORDER. THEREAFTER, THE LD. CIT(A) NOTED THAT, IN WAKE OF THE AMENDMENT BROUGHT BY THE FINANCE ACT, 2009 BY WHICH CLAUSE ( I ) HAS BEEN INSERTED WITH RETROSPECTIVE EFFECT , SUCH A PROVISION NEEDS TO BE ADDED BACK . BY VIRTUE OF THIS AMENDMENT, NOW THE AMOUNT OR AMOUNTS SET ASIDE AS A PROVISION FOR DIMINUTION IN THE IN THE VALUE OF ANY ASSET, HAS BEEN SPECIFICALLY PROVIDED IN THE EXPLANATION , THEREFO RE , CLAUSE (C) IS NOT REQUIRED TO BE LOOKED INTO . HE ALSO RELIED UPON THE DECISION OF DELHI HIGH COURT DECISION IN THE CASE OF CIT VS . ILPEA PARAMOUNT PVT . LTD, [2011] 336 ITR 54 (DEL) WHEREIN, THE HONBLE HIGH COURT WITH REGARD TO PROVISION OF DOUBTFUL DE BTS HAD DECIDED THE SIMILAR ISSUE IN FAOVUR OF THE REVENUE ON THE GROUND THAT, NOW BY VIRTUE OF CLAUSE (G) OR (I) HERE , SUCH A AMOUNT NEEDS TO BE ADDED BACK WHILE COMPUTING THE BOOK PROFIT. THE CONCEPT OF PROVISION FOR DIMINUTION OF ANY VALUE OF ASSET WAS HELD TO BE APPLICABLE FOR THE PROVISION FOR DOUBTFUL DEBTS AND DOUBTFUL ADVANCES BY THE HONBLE SUPREME COURT IN THE CASE OF CIT VS HCL COMNET SYSTEMS & SERVICES LTD, [2008] 219 CTR (SC) 222/ 305 ITR 409. THEREAFTER, THE LD. CIT(A) ALSO RELIED UPON CERTAIN TRIBUNAL DECISIONS. M/S HOTEL LEELA V ENTURE LTD ITA NO. 5 92 /M UM /201 4 4 5. AFTER ANALYZING THE AMENDMENT AND THE DECISIONS RELIED UPON BY HIM, HE CAME TO THE CONCLUSION THAT, THE AMOUNT OF RS.68,21,511/ - ANY PROVISION FOR DOUBTFUL DEBTS IN THE P&L ACCOUNT IS NOT ALLOWABLE AS PER THE AMENDED PROVISI ON OF THE LIABILITY AND THERE IS NOT INFIRMITY IN THE ORDER OF THE AO IN ADDING THE SAME WHILE COMPUTING THE BOOK PROFIT AND UNDER SECTION 115JB. 6. THUS, ON THE FAC E OF IT, THE SAME CANNOT BE ADDED DUE TO THE ARGUMENT THAT THERE IS NO SPECIFIC CLAUSE IN EXPLANATION 1 TO SECTION 115JB WHICH DEALS SPECIFICALLY WITH THE ADDING OF THE PROVISION FOR DOUBTFUL DEBTS OR DOUBTFUL ADVANCES AND CLAUSE (I) DOES NOT DEAL WITH SUCH A PROVISION. 7. ON THE OTHER HAND, LD. DR STRONGLY RELIED UPON THE ORDER OF THE CIT(A). 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUS ED THE RELEVANT FINDING GIVEN IN THE IMPUGNED ORDER . THE ONLY ISSUE FOR CONSIDERATION BEFORE US IS THAT, WHETHER THE PROVISIONS FOR DOUBTFUL DEBTS OF RS.68,41,511/ - DEBITED TO THE PROFIT AND LOSS ACCOUNT IS REQUIRED TO BE ADDED BACK WHILE COMPUTING THE BOOK PROFIT UNDER SECTION 115JB. THE CASE OF THE REVENUE AUTHORITIES IS THAT, NOW BY VIRTUE OF INSERTION OF CLAUSE (I) IN EXPLANATION 1 TO SECTION 115JB BY THE FINANCE ACT, 2009 WITH RETROSPECTIVE EFFECT FROM 01.04.2001, SUCH A PROVISION FOR DOUBTFUL DEBTS FALLS WITHIN THE CLAUSE (I) ONLY I.E. AN AMOUNT SET ASIDE AS PROVISION FOR DIMINUTION IN THE VALUE OF ANY ASSET. THE CONTENTION OF THE REVENUE HAS MERITS BECAUSE, P RIOR TO THE AMENDMENT, THE HONB LE SUPREME COURT IN THE CASE OF CIT V. HCL COMNET SYSTEMS & SERVICES LTD ( SUPRA ) DEALING WITH THE QUESTION , WHETHER THE PROVISION FOR BAD AND DOUBTFUL DEBT CAN BE ADDED BACK TO THE NET PROFIT WHILE COMPUTING THE BOOK PROFIT UNDER SECTION 115JA , T HE HONBLE APEX COURT HELD THAT THE PROVISION FOR BAD AND DOUBTFUL DEBT CAN BE ADDED BACK TO THE NET PROFIT ONLY, IF ITEM ( C ) GETS ATTRACTED, WHICH DEALS WITH AMOUNT SET ASIDE AS M/S HOTEL LEELA V ENTURE LTD ITA NO. 5 92 /M UM /201 4 5 PROVISION MADE FOR MEETING THE LIABILITY, THAT IS, ASCERTAINED LIABILITIES. WHILE EXP LAINING THE PROVISION FOR BAD AND DOUBTFUL DEBT, THE HONBLE SUPREME COURT SPECIFICALLY HELD THAT, IT COVERS UP PROBABLE DIMINUTION IN THE VALUE OF ASSET THAT IS DEBT WHICH IS AN AMOUNT RECEIVABLE BY THE ASSESSEE. THE HONBLE DELHI HIGH COURT IN THE CASE O F CIT VS. ILPEA PARAMOUNT PVT. LTD ( SUPRA ) TAKING INTO CONSIDERATION THE SAID INTERPRETATION BY THE HONBLE SUPREME COURT AND ALSO THE NEWLY INSERTED CLAUSE (G) TO SECTION 115JA WHICH IS ANALOGOUS TO CLAUSE (I) OF SECTION 115JB, BROUGHT WITH RETROSPECTIVE EFFECT, OBSERVED AND HELD AS UNDER: - 4. THE QUESTIONS WITH REGARD TO THE PROVISION FOR DOUBTFUL DEBTS AND PROVISION FOR DOUBTFUL ADVANCES HAVE TO BE ANSWERED IN FAVOUR OF THE REVENUE AND AGAINST THE ASSESSEE BECAUSE OF THE RETROSPECTIVE AMENDMENT INTRODUCE D IN S. 115JA OF THE SAID ACT. BY VIRTUE OF FINANCE (NO. 2) ACT, 2009, C L . (G) HAS BEEN INSERTED IN THE EXPLANATION CONTAINED IN S. 1153A(2). BY VIRTUE OF THE SAID AMENDMENT, THE AMOUNT OR AMOUNTS SET ASIDE AS PROVISION FOR DIMINUTION IN THE VALUE OF ANY A SSET, IS SPECIFICALLY MENTIONED. THE SUPREME COURT IN THE CASE OF CIT VS. HCL COMNET SYSTEMS & SERVICES LTD. (2008) 219 CTR (SC) 222 : (2008) 13 DTR (SC) 105 : (2008) 305 ITR 409 (SC) HELD THAT PROVISION FOR DOUBTFUL DEBTS AND DOUBTFUL ADVANCES DID NOT FAL L WITHIN C L . (C) OF THE SAID EXPLANATION IN AS MUCH AS THEY AMOUNTED TO PROVISION IN RESPECT OF DIMINUTION IN THE VALUE OF ASSET. 5. NOW, WITH THE INTRODUCTION OF THE SAID AMENDMENT WITH RETROSPECTIVE EFFECT FROM 1ST APRIL, 1998, THE PROVISION FOR DOUBT FUL DEBTS AND THE PROVISION FOR DOUBTFUL ADVANCES, WHICH ARE NOTHING BUT PROVISIONS FOR DIMINUTION IN THE VALUE OF ASSET, ARE SPECIFICALLY COVERED UNDER C L . (G) OF THE SAID EXPLANATION. CONSEQUENTLY, THE QUESTION INSOFAR AS IT RELATES TO PROVISION FOR DOUB TFUL M/S HOTEL LEELA V ENTURE LTD ITA NO. 5 92 /M UM /201 4 6 DEBTS AND PROVISION FOR DOUBTFUL ADVANCES, REQUIRES TO BE ANSWERED IN FAVOUR OF THE REVENUE AND AGAINST THE ASSESSEE. IT IS SO ANSWERED . 9. THUS, IN THE LIGHT OF THE CLARIFICATION AND RATIO LAID DOWN BY DELHI HIGH COURT, WHICH IS DIRECTLY APPLICABLE ON THE ISSUE BEFORE HAND, WE HOLD THAT LD. CIT(A) HAS RIGHTLY ADDED BACK THE PROVISION FOR DOUBTFUL DEBTS WHILE COMPUTING THE BOOK PROFIT UNDER SECTION 115JB. SO FAR AS THE DECISIONS RELIED UPON BY THE ASSESSEE BEFORE THE CIT(A), THE SAME HAS BEEN RIGHTLY DISTINGUISHED, BECAUSE THEY DEALT WITH CLAUSE (C) OF THE EXPLANATION WITHOUT TAKING INTO CONSIDERATION THE NEWLY INSERTE D CLAUSE (I) AND CLARIFICATION OF THE HONBLE SUPREME COURT THAT PROVISION FOR DOUBTFUL DEBTS ARE IN THE NATURE OF PROVISION FOR DIMINU TION IN THE VALUE OF ASSET. THUS, GROUNDS RAISED BY THE ASSESSEE ARE DISMISSED. 10. IN THE RESULT, APPEAL OF THE ASSESSEE STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 18 TH A PRIL , 2016 . SD/ - SD/ - ( ) ( ) ( RAMIT KOCHAR ) ( AMIT SHUKLA ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATE: 18 TH APRIL , 2016 / COPY TO: - 1 ) / THE APPELLANT. 2 ) / THE RESPONDENT. 3) THE CIT (A) - 17 , MUMBAI . 4 ) THE COMMISSIONER OF INCOME TAX - 8 , MUMBAI . 5 ) , , / THE D.R. A BENCH, MUMBAI. 6 ) \ COPY TO GUARD FILE. / BY ORDER / / TRUE COPY / / / , DY. / ASSTT. REGISTRAR I.T.A.T., MUMBAI * . . *CHAVAN, SR.PS