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2010 (11) TMI 392 - AT - Income TaxAddition - Debenture redemption reserve - whether the amount of Rs.50 lakhs transferred by the assessee from the P and L a/c to the debenture redemption reserve is to be allowed as a deduction while computing the book profit for the purpose of s. 115J of the Act - Held that the amounts set apart to redeem debentures are to be treated as an amount set apart to meet a known liability and as such, the debenture redemption reserve cannot be considered to be a reserve - Accordingly, the sum of Rs.50 lakhs as appropriated by the assessee in the P and L a/c of the relevant previous year cannot be held to be a reserve within the meaning of cl. (b) or the amount set apart to meet unascertained liabilities within the meaning of cl. (c) of the Explanation to s. 115J(1) of the Act and as such, the said amount was not to be added to the net profit as computed by the assessee to arrive at the 'book profit' for the purpose of s. 115J - Decided in favour of assessee. Adjustment on account of debenture redemption reserves - As per the the Tribunal judgment of Hon'ble Supreme Court in case of National Rayon Corporation Ltd. [1997 -TMI - 40205 - SUPREME Court], the Tribunal held that no adjustment could be made by the authorities on account of debenture redemption reserves - Decided in favour of assessee. Whether a sum appropriated by the assessee in the profit and loss account towards debenture redemption reserve, could be held to be reserve within the meaning of clause (b) be set apart unascertained liability within the meaning of clause (c) of Explanation to section 115J(1) while computing book profit u/s 115J - Held that:- the Bench had applied the decision of the Hon'ble Supreme Court in the case of National Rayon Corporation Ltd. vs. CIT [1997 -TMI - 40205 - SUPREME Court] and held that such an amount was not to be added to the net profits as computed by the assessee to arrive at the book profit for the purpose of section 115J - The learned departmental representative could not bring any Contrary decisions - Decided in favour of assessee. Penalty - Since the addition on the basis of which the present penalty has been levied by the Assessing Officer has already been deleted vide aforesaid referred to order, therefore, in view of the ratio laid down in the aforesaid case of K. C. Builders and Another vs. CIT [2004 -TMI - 6137 - SUPREME Court], the penalty is not leviable - Therefore, delete the penalty.
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