CIT Vs. YASHASWI LEASING AND FINANCE LTD

JUDGEMENT

(1.) These two appeals are preferred by the revenue challenging the order passed by the Tribunal which has granted the benefit of not adding back the doubtful investments and doubtful advances for computing book profits under Section 115JA of the Income Tax Act, 1961. Though the notice was duly published in the newspaper, the respondents have not entered appearance.

(2.) These two appeals relate to the assessment years 1998-99 and 1999-2000.

(3.) The assessee M/s. Yashaswi Leasing & Finance Ltd., is in the business of hire purchase and leasing. They filed a return of income declaring the total income as nil. The case was reopened under Section 147. After recording the reasons, a notice under Section 148(2) was issued. The assessee's representative produced the books of account and other document. On examination or the same, it was found that the assessee while computing the income under Section 115JB (MAT) had not added back the provisions for non-performing assets of Rs. 1,45,88,826/-. The assessee was asked to explain his conduct. The assessee replied that in the computation of income under only those provisions are added back where liabilities are unascertained but not in the case of liability which are ascertained. Therefore, they distinguished their action in not adding back the provisions while computing the income under Section 115JA as per law. Secondly, all financial companies must make a provision for NPA as per the RBI Guidelines. Thirdly, the quantum of amount provided is fixed by the RBI Guidelines. Lastly, the assessee had to ensure the certain percentage of loan provided every year Rejecting the aforesaid assessee's contentions, the Assessing Authority held that the assessee has not calculated the income under Section 115JB as per Statute and therefore, assessment was completed by adding back the provision for NPA of Rs. 1,45,88,826/- and the total income was computed. Aggrieved by the said order, the assessee preferred an appeal to the Commissioner of Appeals. The Commissioner of Appeals held that the assessee being a non-banking financial institution has created the provision for non-performing assets in accordance with RBI Guidelines. This provision is created not against any liabilities but for depreciation of assets and the adjustment on book profits was not warranted. In view of the law declared in the various judgment referred to in the order, the addition was deleted and the appeal came to be allowed. Aggrieved by the said order, the revenue preferred art appeal before the Tribunal. The Tribunal after referring to the various judgments and following the judgment of its bench in the earlier case, held that the Assessing Officer was not justified in adding back the provision for doubtful debts, doubtful investment and doubtful advances for computing book profit under Section 115JB and dismissed the appeal. It is against this order, the present appeals are filed.