C.I.T vs Ilpea Paramount (P) Ltd
2010 Latest Caselaw 933 Del

                THE HIGH COURT OF DELHI AT NEW DELHI

%                                           Judgment delivered on: 18.02.2010

+      ITA 1178/2008

       C.I.T                                                 ... Appellant

                                        - versus -


       ILPEA PARAMOUNT (P) LTD                               ... Respondent

Advocates who appeared in this case:-

For the Appellant : Ms P. L. Bansal with Ms Anshul Sharma For the Respondent : Ms Poonam Ahuja with Ms Mahima Agrawal

CORAM:

HON'BLE MR JUSTICE BADAR DURREZ AHMED HON'BLE MR JUSTICE SIDDHARTH MRIDUL

1. Whether Reporters of local papers may be allowed to see the judgment?

2. To be referred to the Reporter or not?

3. Whether the judgment should be reported in Digest?

BADAR DURREZ AHMED, J (ORAL)

1. We have heard the counsel for the parties. This appeal is directed

against the Tribunal's order dated 11.01.2008 in ITA No. 2340/Del/2003

relating to the assessment year 2000-2001. The following substantial

question of law arises for our consideration:-

(a) Whether the Income Tax Appellate Tribunal was correct in law in deleting the addition made by the Assessing Officer by including provision for doubtful debts, provision for doubtful advances and provision for gratuity made by the assessee to the book profit while making computation u/s 115JA of the Act?

2. The above question is a composite question and includes three

elements:-

        (i)      provision for doubtful debts;

       (ii)     provision for doubtful advances; and

       (iii) provision for gratuity

3. Insofar as the provision for gratuity is concerned, the issue stands

decided against the revenue and in favour of the assessee by virtue of a

decision of this Court in CIT v. Hewlett Packard India: 314 ITR 55 (Del).

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

introduced in Section 115JA of the said Act. By virtue of Finance (No.2)

Act, 2009, clause (g) has been inserted in the Explanation contained in

Section 115JA (2). By virtue of the said amendment, the amount or amounts

set aside as provision for diminution in the value of any asset, is specifically

mentioned. The Supreme Court in the case of CIT v. HCL Comnet Systems

& Services: 305 ITR 409 held that provision for doubtful debts and doubtful

advances did not fall within clause (c) of the said Explanation inasmuch 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 01.04.1998, the provision for doubtful debts and the provision

for doubtful advances, which are nothing but provision for diminution in the

value of asset, are specifically covered under clause (g) of the said

Explanation. Consequently, the question insofar as it relates to provision for

doubtful debts and provision for doubtful advances, requires to be answered

in favour of the revenue and against the assessee. It is so answered.

The appeal stands disposed of accordingly.

BADAR DURREZ AHMED, J

SIDDHARTH MRIDUL, J FEBRUARY 18, 2010 SR