2017 (6) TMI 1391 - AT - Income Tax

Book profits computation u/s115JB - debenture redemption reserve - whether it is not a reserve within the meaning of explanation 1(b) of the section 115JB? - HELD THAT - In our considered opinion, having regard to the judgment of Raymond Ltd. ( 2012 (4) TMI 127 - BOMBAY HIGH COURT as well as the decision JSW Energy ( 2013 (7) TMI 192 - ITAT MUMBAI the impugned issue is no longer res integra. In the case of JSW Energy (supra), the Tribunal was considering the deductibility of the amount set apart as Debenture Redemption Reserve for the purposes of computing the book profits u/s 115JB of the Act. After detailed discussion, it has been held that adjustment of the amount of Debenture Redemption Reserve made while computing the book profits u/s 115JB of the Act is permissible and is within the purview of the law. The decision of CIT(A) is in consonance with the aforesaid legal position and even before us, no contrary decision has been brought out by the Revenue and as a consequence, we hereby affirm the decision of CIT(A) on this aspect. Thus, the Revenue fails in its appeal.

Summary

Issues:
1. Interpretation of the term "reserve" under section 115JB of the Income Tax Act, 1961.

Analysis:
The appeal before the Appellate Tribunal ITAT Mumbai involved a dispute regarding the computation of book profits for tax liability under section 115JB of the Income Tax Act, 1961. The core issue revolved around whether the Debenture Redemption Reserve created by the assessee should be considered a reserve or an ascertained liability. The Assessing Officer contended that the amount was a reserve, while the assessee argued it was a liability. The CIT(A) upheld the assessee's position, citing judgments from the Hon'ble Bombay High Court and the Hon'ble Supreme Court. The Revenue, dissatisfied with this decision, brought the matter before the Tribunal for resolution.

During the proceedings, the CIT-DR representing the Revenue reiterated the Assessing Officer's stance that the amount in question should be treated as a reserve. Conversely, the assessee's representative supported the CIT(A)'s decision, highlighting a Tribunal judgment on a similar issue. After considering the arguments, the Tribunal referred to the judgments of the Hon'ble Bombay High Court and its own previous decision on a comparable matter. The Tribunal concluded that the adjustment of the Debenture Redemption Reserve while computing book profits under section 115JB was permissible under the law. As no contradictory decision was presented by the Revenue, the Tribunal affirmed the CIT(A)'s decision, thereby dismissing the Revenue's appeal.

In essence, the Tribunal's decision clarified the treatment of the Debenture Redemption Reserve for calculating book profits under section 115JB of the Income Tax Act, emphasizing that the amount set aside for this reserve could be adjusted in the computation. This ruling aligned with established legal interpretations and previous judgments, ultimately resulting in the dismissal of the Revenue's appeal.