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TMI Blog2013 (7) TMI 192X X X X Extracts X X X X X X X X Extracts X X X X ..... grounds, agitating three issues, which we shall take up in seriatim. Besides, the assessee has raised an additional ground, which pertains to the adjustment of the book profit u/s.115JB in respect of the expenditure disallowed by applying section 14A of the Act. The same raising a legal issue, with the relevant facts on record and undisputed, it was contented that the same may be admitted. 3. The first issue, per ground no. 1, is in respect of disallowance of interest in the sum of Rs.8,59,101/- u/s.14A of the Act, since confirmed by the ld. CIT(A). The same was not pressed at the time of hearing, and is accordingly dismissed as not pressed. We decide accordingly. 4. The issue arising per ground nos. 2 & 3 relates to whether the amount s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as there is thereby a substitution of the source of financing of the business purpose for which the said liability was assumed, therewith. The said interest would stand to be debited to the profit and loss account (P & L A/c) or the operating statement of the enterprises for the relevant period, as well as deducible u/s.36(1)(iii) in the computation of the income for the relevant assessment year u/s.28 of the Act. The only exception would be where the capital asset being acquired thereby is under construction or otherwise in the process of being initialized, so that it is not put to use. The interest, under such circumstances, would stand to be capitalized as a part of the cost of acquisition of the relevant asset in the assessee's accounts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re met in a timely manner (out of the fund so created), and there are no defaults by the depositee-companies, as where the company invests its profits on expansion or in business or otherwise dissipates them, as by way of dividends, so that the liquid funds are not available for discharge of the loan liability at the relevant time, i.e., the time of redemption, but at hand through the sale/realization of the liquid securities. This can thus also be considered as a measure to protect investor's confidence as well as to promote investment climate and corporate discipline. The set aside of profits is, therefore, only a sinking fund to fund (meet) a capital liability (out of the profits), the rationale of which stands discussed herein above. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the said set aside of the profits is only an appropriation of profits, and would not amount to a provision, so as to qualify for deduction in the computation of the profit of the assessee company. The issue, in fact, is not if it is a 'provision' (against an ascertained liability) or a 'reserve' per se, but whether it could be considered as deductible in computing the profit of the enterprise. On the contrary, as afore-stated, the said accounting treatment, i.e., the set aside of profit, ensures capitalization of the profits, so that the debenture funds forming part of the capital structure, the same (capital) is no depleted on the redemption of the liability representing the said source of funds. In short, the liability, for the dischar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r. The hon'ble apex court in Central Provinces Manganese Ore Co. Ltd. v. CIT (1986) 160 ITR 961 (SC) has clarified that levy of interest can be appealed against only where the assessee denies his liability thereto, i.e., the applicability of the provision itself. Further, in CIT v. Anjum Ghaswala (2001) 252 ITR 1 (SC), it was clarified by it that interest under sections 234A/234B/234C is mandatory in nature. Interest u/s. 234D, which provision came on the statute later, would also fall in the same category. The assessee, however, admittedly only seeks consequential relief, which is automatic; the interest liability u/ss. 234A/234B/234D, being with reference to the assessed income, would stand to be computed afresh on every revision in incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 1 provides for the reduction of the net profit as per the P&L a/c by, similarly, any income to which the provisions of, inter alia, sec. 10 are applicable. As exempt income is to be reduced in computing the book profit, any expenditure relatable to the same is likewise to be added back. Both the adjustments are, understandably and undoubtedly, only in respect of sums credited or debited, as the case may be, in the accounts of the company. Now, the Revenue having estimated the expenditure in relation to the dividend income, claimed exempt u/s. 10(34), at Rs. 8.59 lacs, which amount the assessee does not dispute, the same amount has been added back by it under cl.(f), while at the same time deducting the dividend income (Rs. 256.38 lacs) ..... X X X X Extracts X X X X X X X X Extracts X X X X
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