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2019 (10) TMI 352 - ITAT MUMBAIAddition u/s 36(1)(viii) - creation and maintenance of special reserve - HELD THAT:- Reserves are created as an appropriation out of Profit & Loss Account and the terms Profit & Loss Account & General reserves as mentioned in the proviso could not be equated with each other, in the manner, as suggested by Ld. AR by relying upon the letter of Department of Company Affairs. The said circular, in our considered opinion, would have limited applicability in the context of which it has been issued and designed to apply in certain specific situation only. The expression used in the proviso are quite clear which mandates the inclusion of only the general reserves and nothing else. As per doctrine of literal interpretation, when the wordings in the statute are clear, the same has to be given the full effect. Therefore, we are unable to accept the arguments raised by Ld. AR, in this regard. Our view is duly supported by the cited decision of the Tribunal rendered on identical set of facts and circumstances. The coordinate bench has confirmed the stand of learned first appellate authority in excluding the balances in Share premium account, Profit & Loss Account and special Reserve account while computing the general reserves. Nothing on record would suggest any change in facts or as to how the said ruling is not applicable to the facts of the case. Addition u/s 36(1)(viii) - year of assessment - HELD THAT:- The assessee could transfer / withdraw amounts to / from special reserve, from time to time, as per its own decision & convenience. The limit placed by proviso to Section 36(1)(viii) was to be seen with reference to indices standing in assessee’s financial statements at year-end and the disallowance was to be worked out as per the proviso to Section 36(1)(viii) for each year separately. During the year, the assessee could transfer / withdraw any amounts from / to special reserve. Therefore, there is no force in the argument of double taxation as urged by Ld. AR before us. In our opinion, the disallowance was to be worked out for each year separately keeping in view the closing balances standing in relevant accounts in the financial statements. This ground is decided against the assessee. Computations u/s 43D read with Rule 6EB - whether in the matter of revenue recognition, NHB guidelines would prevail over express provisions of Rule 6EB or the income has to be recognized strictly as per Rule 6EB ? - HELD THAT:- We are unable to accept the assertion that NHB guidelines would bring automatic corresponding change in Rule 6EB since, in our considered opinion, the discretion was left to the rule making authority to follow or not follow the NHB guidelines as and when they were revised since the substantive provisions uses the expression having regard to which would show the intention of legislature was to leave the discretion to the rule making authority. The said interpretation is in line with the decision of Hon’ble Supreme Court in Rajesh Kumar V/s DCIT [2006 (11) TMI 135 - SUPREME COURT] interpreting the expression “having regard to”. Finally, keeping in view the facts and circumstances and respectfully following the decision of co-ordinate bench rendered in GIC Housing Finance Ltd. V/s ADIT [2011 (2) TMI 40 - ITAT, MUMBAI] we concur with the stand of Ld. first appellate authority in confirming the addition made by Ld. AO. At the same time, it is also true that some of the income may have been recognized by the assessee in subsequent years upon receipt of the same and the same would have been offered to tax in those years. However, upon perusal of quantum assessment order, we find that such income remained unquantified and therefore, no relief could be granted to the assessee, on this account. We are also not convinced with other arguments of Ld. AR that the deduction should be allowed as bad debts since the same would be governed by the requirements of Section 36(1)(vii)
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