Appeal by the Revenue under Section 260A of the Income Tax Act posing for our answer the following substantial question of law:-

Whether the Tribunal was correct in holding that the provisions for non performing assets/doubtful debts/advances made by the assessee cannot be added back to the book profits of the Company as per explanation to Section 115JA of the Income Tax Act. 1961 (for short hereinafter referred to as ‘the Act’) for the purpose of computing income under Section 115JA of the Act.

2. Brief facts leading to the appeal are as under:-

Assessee is a company incorporated under the provisions of the Indian Companies Act, 1956 with limited liability.

3. Assessment year is 1999-2000. Dispute relates to the computation of book profits of the assessee for the previous year relevant to the assessment year, required to be arrived at, in terms of the provisions of Section 115JA of the Income Tax, 1961 (hereinafter referred to as ‘the Act’).

4. This section has enabled the Revenue to levy tax on a minimum, total income of a Company, equal to 30% of the book profits as computed in terms of the provisions of Section 115JA of the Act, irrespective of the actual total income otherwise that the company could arrive at in the normal course and offer it to tax.

5. Purpose of the present appeal is, as to whether certain amounts which had been set apart or provided for, by way of amounts required to meet possible future write off as bad and doubtful debts of the company, is an amount which is covered by clause (c) of the explanation to Sub Section 1 of Section 115JA of the Act.

6. While it was the version of the assessee that it is not, one such amount which is within the scope of clause (c) of the explanation, the Revenue thought otherwise and was of the view that the amount is very much an amount which is covered by clause (c) and therefore, added back this amount to the amount otherwise arrived at by the assessee as it’s book profits and which had already been computed in terms of the procedure envisaged under the provisions of paras 2 and 3 of Schedule 6 to the Companies Act 1956.

7. By the method as suggested by the Revenue, the actual quantum of book profits for the purpose of Section 115JA of the Act would go up by this precise amount and the tax liability of the assessee also would go up proportionately.

8. While the Assessing Officer did not agree with the stand of the assessee that it is not an amount covered by clause (c) of the explanation in the appeal by the assessee, the Commission (Appeals) reversed the trend and opined that the assessee was right in contending that the amount was not covered by clause(c). In the further appeal to the Income Tax Appellate Tribunal, the Tribunal also have affirmed the view taken by the Commissioner of Appeals, the Revenue is in further appeal before us.

9. While submission of Smt.Vani, learned counsel appearing for the assessee is that the matter is squarely covered by the judgment of the Supreme Court in the case of COMMISSIONER OF INCOME TAX – VS – HCL COMNET SYSTEMS & SERVICES LTD, reported in 305 ITR 409 of the year 2008 and the matter possibly could have been disposed of following and applying the law as declared by the Supreme Court to this case, the Revenue having sought for some accommodation, in contemplation of some future developments and as it has happened, the matter having not seen any progress in this regard, the present stand of the Revenue is, that the answer to the question is squarely covered by the intervening legislative development by the Finance (No.2) Act, 2009, in which the Parliament though it fit to introduce a further clause to the explanation viz. clause (g) as under:-

The amount or amounts set aside as provision for diminution in the value of any asset and such amendment having now been given retrospective operation with effect from 1.4.1998, the question is taken beyond the scope of any debate and even though the judgment of the Supreme Court poss