Court rules that retrospective amendment to Section 115JB permitting add-back of diminution in asset value; lease rent provision found unascertained
Meetu Kumari | Dec 1, 2025 |
High Court: Provisions for Diminution in Investments & Lease Rent Are Liable for MAT Add-Back
Aspinwall & Company Ltd. challenged the order of the Income Tax Appellate Tribunal upholding additions made while computing Minimum Alternate Tax (MAT) for AY 2006-07. During assessment under Section 143(3), the Assessing Officer invoked Section 115JB and added back provisions relating to diminution in the value of investments, lease rent, and doubtful debts.
While the assessee carried the matter in appeal, both the CIT(A) and the Tribunal upheld the treatment, prompting the present appeal under Section 260A on questions of law relating to provisions (i) and (ii) alone.
Issue Raised: Whether provisions for diminution in value of investments and lease rent could be added back to book profits under Section 115JB for AY 2006-07, in light of a retrospective amendment and the nature of the liabilities.
HC’s Ruling: The High Court held that the amendment introducing the clause (i) to Explanation 1 of Section 115JB, which specifically mandates the add-back of provision for diminution in the value of assets, was expressly made retrospective from 01.04.2001. Since AY 2006-07 falls within that window, the Court found no merit in the argument that the amendment imposed a new liability incapable of retrospective effect. The Court distinguished the precedents cited by the assessee on the ground that those cases involved amendments without retrospective operation or issues not applicable to MAT provisions. The Court noted that an assessee cannot challenge the constitutionality of retrospective legislation in a statutory appeal.
The court held that the liability could not be treated as an ascertained one for AY 2006-07. The Government’s demand at the time was for Rs. 1.59 crore, but the assessee made a provision only for Rs. 61 lakh; the amount was ultimately crystallized only in 2013. The liability lacked the certainty required to escape the add-back under clause (c) of Explanation 1. The Court dismissed the appeal against the assessee and in favor of the revenue.
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