TMI Blog2010 (11) TMI 392X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 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. Builde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... material available on the record. It is noticed that the addition on the basis of which penalty was levied by the Assessing Officer had been deleted vide order dated 21/09/2010 in assessee's own case in I.T.A. No.749/Luc/04 for assessment year 1999-2000 and the relevant findings have been given in paras 11 and 12 of the said order which read as under: "11. We have considered the rival submissions and carefully gone through the material available on the record. It is noticed that the identical issue has been decided by this Bench of the Tribunal in I.T.A. No.715/Luc/01 for the assessment year 98- 99 in assessee's own case vide order dated 21/04/2010 and the relevant findings have been given in para 27 and 28 of the said order which read as under: "27. After considering the rival submissions and the material on record, it is noticed that this issue stands covered by the various decisions of different Benches of the ITAT. On a similar issue, the ITAT, Calcutta 'B' Bench in the case of IOL Ltd. vs. Dy. CIT [2003] 81 TTJ (Cal) 525 (wherein one of us, AM, is signatory) has observed as under: "9. We have carefully considered the submissions of learned representatives in regar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in accordance with provisions of Parts II and III of Sch. VI to the Companies Act, 1956, subject to certain adjustments by way of P and L A/c increased in respect of certain sums as referred to in cls. (a) to (f) of the said Explanation if the said sums were debited to the P and L a/c and reduction in respect of certain sums as referred to in cls. (i) to (iii) of the said Explanation. 10.1 Adjustments, inter alia, referred to in cls. (a) to (f) of the said Explanation are: (a) ........... (b) the amounts carried to any reserves, by whatever name called; (c) the amount or amounts set aside to provision made for meeting liabilities, other than ascertained liabilities............. 10.2 It will be evident from the above that in order to compute 'book profit' as per the provision of Explanation appended below to s. 115J(1) of the Act, one has to start with the net profit as computed under the P and L a/c prepared in accordance with the provisions of Parts II and ill of Sch. VI to Companies Act i.e., the net profit after making all appropriations and thereafter, certain adjustments are to be made to such net profit as are referred to in cl. (a) to (f) and in cls. (i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the amount which in the opinion of the directors is reasonably necessary for the purpose, the excess shall be treated for the purposes of the Schedule as a reserve and not a provision." 10.6 Further, we observe that the apex Court in the case of Rayon Corpn. Ltd. (supra) has considered as to whether the debenture redemption reserve is a reserve within the meaning of the Companies Act. The issue involved in the said case was one with respect to an assessment under the provisions of Companies (Profits) Surtax Act, 1964. In our view, the Supreme Court has considered the definition of the term 'reserve' as provided under the Companies Act as the said term is not defined under the Surtax Act and, therefore, held that debenture redemption reserve is not a reserve for the purposes of Companies Act and accordingly the Surtax Act. The Supreme Court has held in the said case that any amount set apart in the accounts of the company to redeem the debentures must be treated as monies set apart to meet a known liability. The debentures will have to be shown in the company's balance sheet of the year as liability. Merely because the debentures are not redeemable during the accounting perio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the net profit while computing the book profit. In appeal, assessee submitted that the reserve was in fact a provision created for meeting an ascertained liability and therefore the same could not be added while computing the book profit CIT(A) was not satisfied. It was observed by him that there was a specific provision in the Explanation to section 115JA (2) for making addition on account of reserve created for redemption of debentures. Accordingly he upheld the addition aggrieved by which the assessee is in appeal. Before us the learned AR for the assessee submitted that this issue is covered in favour of the assessee by the decision of Kolkata Bench of the Tribunal in case IOL Ltd. (81 TTJ 525). The Learned DR on the other hand supported the orders of the authorities below. 2.11.1 We have perused the records and considered the matter carefully. The dispute raised is regarding adjustment on account of debenture redemption reserve of Rs.1880.30 lacs debited in the profit and loss account while computing the book profit under section 115JA. CIT(A) has confirmed the decision of the Assessing Officer in making the adjustment on the ground that there was specific provision in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... apply the decision of the Calcutta Bench in the case of IOL Ltd. vs. DCIT (supra) and allow this ground of the assessee." 28. Since the facts of the present case are similar to the facts involved in the aforesaid referred to cases, we, therefore, by respectfully following the decisions of the coordinate Benches of ITAT, in the aforesaid referred to cases, set aside the impugned order on this issue and decide the issue in favour of the assessee." 12. Since the facts for the year under consideration are identical to the facts involved in the preceding assessment year i.e. assessment year 98-99, we, therefore, respectfully following the aforesaid referred to earlier order dated 21/04/2010, decide this issue in favour of the assessee." 8. On a similar issue the Hon'ble Supreme Court in the case of K. C. Builders and Another vs. ACIT [2004] 265 ITR 562 has held as under: "Where the additions made in the assessment order on the basis of which penalty for concealment is levied, are deleted, there remains no basis at all for levying penalty for concealment and, therefore, in such a case no penalty can survive and the penalty is liable to be cancelled. Ordinarily, penalty ca ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
