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The Bombay High Court in their ruling in the case of CIT v. Echjay Forgings Pvt. Ltd. (251ITR15) held that the following amounts are not to be added back to the net profit shown in the profit and loss account: –

a) Wealth tax payment /provision;
b) Provision for bad and doubtful debts. Madras High Court decision in Beardsell case given in the context of an order passed u/s 143(1) (a) found inapplicable;
c) Provision for Gratuity;
d) Provision for bonus;
e) Foreign exchange fluctuations on moneys borrowed for purchase of machinery even though for normal tax such amount has to be disallowed and to be taken for the purpose of computing depreciation claim instead.

Even the Bombay High Court in an earlier judgment held that the provision for doubtful debts debited to profit and loss account is further eligible for deduction u/s 36(1) (vii). This finding is overturned by the Finance Act, 2001 in an amendment made with effect from 01.04.1989. But since the provisions of section 115J/JA/JB override section 36 it would be possible to prefer such claim in the MAT computation even after such an amendment in the Act.

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