The court confirmed retrospective application of amended provisions of Section 115JB, upholding assessment add-backs for financial liabilities.

JUDGMENT

Harisankar V. Menon, J This appeal under Section 260A of the Income Tax Act , 1961 (hereinafter referred to as the ‘Act’ for short), at the instance of the assessee, seeks to challenge the order dated 19.05.2020 in I.T.A.No.61/COCH/2015 of the Income Tax Appellate Tribunal, Cochin Bench with respect to the assessment year 2006-07 relevant to the financial year 2005-06.

2. The appellant-assessee’s return of income was processed under Section 143 (3) of the Act, invoking the provisions of Section 115JB of the Act providing for Minimum Alternate Tax (MAT) computation, thereby adding back: - i. provision for diminution in the value of investment -Rs.1,45,18,200/-

ii. provision for lease rent Rs.61,00,000/-

iii. provision for doubtful debts Rs.36,55,248/-

The appeal against the afore MAT computation before the first appellate authority being unsuccessful, a second appeal was instituted before the Tribunal. The appellate Tribunal has also confirmed the assessment as above, on account of which the appellant-assessee is in appeal before this Court, with respect to the add-back as against Serial Nos.(i) and (ii) alone.

3. The following questions of law arise for consideration in this appeal: -

i. Ought not the Appellate Tribunal have held that the provision for reduction in the face value of investment (shares) cannot be added back under Section 115JB of the Act, in the absence of a statutory provision authorising the same, as on the first day of the assessment year?

ii. Ought not the Appellate Tribunal have followed the dictum laid down in CIT v. Vatika Township , reported in (2014) 367 ITR 466 (SC) and held that the Section 115JB (2)(i) inserted in the year 2009, creates a new liability upon the appellant-assessee, and therefore, can only operate prospectively?

iii. Ought not the Appellate Tribunal have held that the appellant, while finalizing the books of account for the financial year 2005-06, which ended on 31.03.2006, was right in not adding back the provision for diminution in the value of investment, for the reason of it being an ascertained liability?

iv. Ought not the Appellate Tribunal have held that the provision for lease rent is an ascertained liability, for the reason that it was created based on the demand notice issued by the Tahsildar, Taluk Office, Kochi, pursuant to the revision of lease rent?

v. Ought not the Appellate Tribunal have held that the liability of the revised rent, for which provision was created, represents a liability in praesenti, though it will be discharged on a future date?

vi. Whether the Appellate Tribunal is justified in holding that the provision for lease rent is to be allowed only in the year of crystallization of the expenditure, and not in the year of booking the same in the accounts, in the matter of an assessee who follows mercantile system of accounting?

vii. Is not the finding of fact by the Appellate Tribunal erroneous and perverse.

4. Heard Sri.Raja Kannan, the learned counsel for the appellant-assessee, and Sri.Jose Joseph, the learned Standing Counsel for the respondent revenue.

5. The first issue arising for consideration in this appeal is as regards the ‘provision for diminution in the value of investment’ being added back for the purpose of MAT computation. The contention of Sri.Raja Kannan is essentially to the effect that during the financial year 2005-06 (assessment year 2006-07), insofar as there was no provision in the statute providing for such an add-back, the completion of assessment was without any justification. According to him, insofar as the books of accounts were finalised on 31.03.2006, it is the statutory provision that existed as on that date, which requires to be considered. Accordin