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2018 (6) TMI 1751 - AT - Income TaxDetermining the tax liability in terms of Sec. 115JB - MAT computation - disallowance of reduction on account of the provision made for premium on redemption of preference shares while computing the book profits u/s 115JB - As per the CIT(A) the redeemable Preference shares in question were not in the nature of debt and therefore any liability thereof could not be considered to be an ascertained liability - HELD THAT - There is a complete explanation which reflects the nature and character of the Provision and it clearly underlines the obligation or the liability to pay over and above the face value of the Preference shares at the time of redemption. Therefore in our view no fault can be found with the conclusion that the impugned Provision was indeed an ascertained liability of the nature referred to in clause (c) of Explanation-1 to Sec. 115JB of the Act. We may also add here that there is nothing to distract from applying the ratio of the judgment of the Hon ble Bombay High Court in the case of Raymond Ltd. 2012 (4) TMI 127 - BOMBAY HIGH COURT to conclude that the impugned amount is to be understood as a known liability and not as a Reserve In our considered opinion it is a well-settled proposition of law that in order to address a legal point what is of relevance is the applicable legal position as emerging from the statutory provisions and the attendant jurisprudence and not merely the stand taken by the parties at a particular point of time. Thus we are not going into the efficacy of the contradiction that is sought to be pointed out by the ld. CIT-DR as in our view the same is not germane to decide the controversy before us. Another aspect which has been emphasised by the ld. CIT-DR is that the adjustment sought to be made by the assessee is not in terms of the prescription in Explanation-1 to Sec. 115JB of the Act. We have already examined the said plea and in the context of our aforesaid discussion find that the claim of assessee of the impugned Provision being in the nature of an ascertained liability is justified on facts as well as on point of law. In any case this aspect of the matter has also been examined in detail by our coordinate Bench in the earlier year with which we concur. Thus we conclude by holding that the impugned Provision is in the nature of an ascertained liability and in terms of clause (c) of Explanation-1 to Sec. 115JB of the Act book profit for the purpose of Sec. 115JB of the Act has to be determined net-off of such Provision. Especially where it has been rendered in assessee s own case and under identical set of facts. At this stage we may hasten to add that we are in complete concurrence with the observations of our co-ordinate Bench in the case of Shri Homi K. Bhabha 2011 (9) TMI 104 - ITAT MUMBAI that to follow an earlier precedent of the co-ordinate Bench or to make a reference to a larger Bench is dependent on the satisfaction of the Bench about the correctness or otherwise of the precedent and not the view of the aggrieved party. As we have indicated earlier even after examining the pleas set-up by the ld. CIT-DR we find ourselves unable to disagree with the precedent rendered in assessee s own case. We find no justifiable reasons for recommending constitution of a Special Bench. Needless to say at this juncture the aggrieved party is not left without remedy inasmuch as the statute provides for appeal to the Hon ble High Court against the order. Therefore the said view of the Department is also negated. Assessment u/s 153A - CIT(A) deleting the additions made in the assessment order passed u/s.153A r.w.s. 143(3) of the Act on issues not based on any incriminating material found during the course of search - HELD THAT - Pertinently on the date of search i.e. 23.05.2013 the assessment for Assessment Year 2008-09 was not pending and therefore in view of the second proviso to Sec. 153A(1) of the Act such assessment did not abate. Clearly in such a situation the additions that are permissible in an assessment u/s 153A of the Act are only those which are based on incriminating material found in the course of search relating to such additions. Assessing Officer is denuded from making additions on matters which have attained finality in the original assessment without there being any incriminating material found in the course of search. The aforesaid proposition is fully supported by the judgment of the Hon ble Bombay High Court in the case of Continental Warehousing Corporation (Nhava Sheva Ltd) 2015 (5) TMI 656 - BOMBAY HIGH COURT The fact-situation brought out by the CIT(A) is clearly borne out of record inasmuch as a perusal of the assessment order itself reveals that qua the aforesaid additions there is no reference to any incriminating material found in the course of search. Therefore we find no reasons to interfere with the factual findings arrived at by the CIT(A) and in that background no fault can be found with the CIT(A) for having applied the ratio of the judgment of the Hon ble Bombay High Court in the case of Continental Warehousing Corporation (Nhava Sheva Ltd) (supra) in order to delete the aforesaid additions. Thus on facts as well as on point of law we find no reasons to interfere with the decision of the CIT(A) which we hereby affirm.
Issues Involved
1. Disallowance of provision for premium on redemption of preference shares while computing book profits under Section 115JB of the Income Tax Act. 2. Treatment of interest income from Fixed Deposit Receipts (FDR) for deduction under Section 80IB of the Income Tax Act. 3. Scope and ambit of assessment under Section 153A read with Section 143(3) of the Income Tax Act, particularly regarding additions based on incriminating material found during the course of search. Detailed Analysis 1. Disallowance of Provision for Premium on Redemption of Preference Shares The primary issue in the assessee's appeals for Assessment Years 2012-13, 2013-14, and 2014-15 was the disallowance of the provision made for premium on redemption of preference shares while computing book profits under Section 115JB of the Income Tax Act. The assessee argued that the provision for premium on redemption of preference shares and the 3% annual return were ascertained liabilities and should be deductible while computing book profit under Section 115JB. The Assessing Officer disallowed the sum, reasoning that the redemption of preference shares amounted to a reduction of capital, not a revenue expenditure, and thus could not be considered an ascertained liability. The CIT(A) upheld the disallowance, stating that the provision was a reserve, not an ascertained liability, and hence not deductible from the book profit. The Tribunal referred to its earlier decision in the assessee's own case and a sister concern, where a similar issue was decided in favor of the assessee. The Tribunal reiterated that the provision for premium on redemption of preference shares, as per Section 80 of the Companies Act, 1956, was a charge against the profits of the company and thus an ascertained liability. Consequently, the Tribunal allowed the assessee's claim, directing that the provision be reduced from the book profit under Section 115JB. 2. Treatment of Interest Income from FDR for Deduction under Section 80IB The second issue raised by the assessee pertained to the treatment of interest income from FDRs, which the Assessing Officer treated as income not derived from the business and thus not eligible for deduction under Section 80IB. However, this ground was not pressed by the assessee during the hearing and was dismissed as not pressed. 3. Scope and Ambit of Assessment under Section 153A read with Section 143(3) The Revenue's appeals for Assessment Years 2008-09, 2009-10, and 2010-11 involved the scope and ambit of assessment under Section 153A read with Section 143(3), particularly regarding additions based on incriminating material found during the course of search. The CIT(A) deleted several additions made by the Assessing Officer, holding that they were not based on any incriminating material found during the search. The CIT(A) relied on the judgment of the Hon'ble Bombay High Court in the case of Continental Warehousing Corporation (Nhava Sheva Ltd), which held that in assessments under Section 153A, where the original assessment does not abate, additions can only be made based on incriminating material found during the search. The Tribunal upheld the CIT(A)'s decision, affirming that the additions made by the Assessing Officer were not based on any incriminating material found during the search and thus were beyond the scope of assessment under Section 153A. The Tribunal also noted that the Revenue's argument, based on the pending SLP before the Hon'ble Supreme Court against the judgment of the Hon'ble Bombay High Court, did not detract from the applicability of the judgment in the present case. Conclusion The Tribunal allowed the assessee's appeals for the disallowance of the provision for premium on redemption of preference shares and dismissed the Revenue's appeals regarding the scope of assessment under Section 153A, thereby affirming the CIT(A)'s deletion of additions not based on incriminating material found during the search. The assessee's claim regarding the treatment of interest income from FDRs was dismissed as not pressed.
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