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TMI Blog2023 (2) TMI 562X X X X Extracts X X X X X X X X Extracts X X X X ..... 22.12.2016, passed under Section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as 'the Act'). 2. The Appellant has raised following grounds of appeal: "1. The Hon'ble Commissioner of Income Tax, Appeal-3, Mumbai had erred in law and in facts by confirming the disallowance of Debenture Redemption Reserve amounting to Rs. 11,00,00,000/- while computing Book Profit u/s 115JB of the Income-tax Act, 1961 disregarding the fact that the said DRR is ascertained liability." 3. When the appeal was taken up for hearing, none appeared for the Appellant. A perusal of order-sheet showed that none has been appearing for the Appellant for last several hearings despite notice. A perusal of material on record showed that the Appellant had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Rs.11,00,00,000/- from the calculation of Book Profit u/s. 115JA is not tenable, therefore, the same is ignored. The book profit u/s. 115JB is therefore re-computed accordingly." 5. Being aggrieved, the Appellant filed appeal before CIT(A) which was dismissed vide order dated 26.03.2018. Therefore, the Appellant is before us in the present appeal. 6. On perusal of the written submissions, dated 19.01.2022, the submissions of the Appellant can be summarized as follows. Debenture Redemption Reserve is a provision for ascertained liability and not reserve. Therefore, Debenture Redemption Reserve of INR 11 Crores, should not have been added back for the computation of Book Profits under Section 115JB of the Act. Since the same does not fal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the "net profit" as per Profit and Loss Account since section 115JB Explanation 1defines "book profit" to mean "the net profit as shown in the profit and loss account". It is to this figure only that prescribed adjustments and no other are permissible. It is clear from the details culled out from the audited accounts mentioned above that the net profit is Rs1263.82 lakhs. To this the provisions for tax has to be added. The items listed for deduction does not include "transfer to debenture reserves. 12. The appellant in its computation of income has considered the net profit as Rs. 1519.86 lakhs (which is profit before tax) from which it has reduced Debenture Redemption Reserve of Rs. 1100 lakhs. This is not as per the literal reading of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion Reserve and rightly so as the same is in the nature of appropriation of profits. We note that as per the provisions of Section 71(4) of the Companies Act, 2013 the debenture redemption reserve is to be created out of the free profits of available for payment of dividends. It is for this reason that Debenture Redemption Reserve is not debited to the audited Profit and Loss Account to arrive at the Net Profits. 10. The Appellant had computed Book Profits under Section 115JB of the Act as under: Particular Amount (INR) Book Profits as per Companies Act (Profit & Loss A/c) 15,19,86,406 Less: Deduction from Book Profits Income Exempt under Section 11 or 12 6,79,71,950/- Debenture Redemption Reserve 11,00,00,000/- Book P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ture of a provision, the action of the Appellant was contrary to the law laid down by the Hon'ble Supreme Court whereas the orders passed by the authorities below are in conformity with the aforesaid judgment of the Hon'ble Supreme Court. Thus, we do not find any infirmity in the order passed by the CIT(A) which deserves to be upheld on this ground alone though the CIT(A) has given further reasoning in support of his decision to confirm the order passed by the Assessing Officer. 12. Before parting we would like to observe that the CIT(A) had, in effect, observed that the Debenture Redemption Reserve, though created for ascertained liability, does not pertain to a trading liability having impact on the determination of profits of the Appell ..... X X X X Extracts X X X X X X X X Extracts X X X X
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