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Income Tax Appellate Tribunal, MUMBAI BENCH “H”, MUMBAI
Before: SHRI RAJESH KUMAR & SHRI RAM LAL NEGI
Per Rajesh Kumar, Accountant Member:
The present appeal has been preferred by the Revenue against the order dated 30.09.2016 of the Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)] relevant to assessment year 2012-13.
The grounds raised
by the Revenue are as under:
1. On the facts and in the circumstances of the case and in law, Ld. CIT(A) erred in holding that the amount of Rs. 30,00,00,000/- set apart by the assesses as DRR is not a reserve within the meaning of Explanation l(b) to section 115 JB of the Act.
2. On the facts and circumstances of the case and in law, Ld. CIT(A) erred in deleting the addition of Rs. 25,00,000/- made u/s 6B of the Act even though the assessee was unable to establish the identity and creditworthiness of the lender and the genuineness of transaction.
2 M/s. Hubtown Ltd. 3. On the facts and circumstances of the case and in law, Ld. CIT(A) erred in deleting the addition of Rs.24,29,082/- on account of disallowance of interest expenditure by the AO even though the assessee failed to establish the idendity and creditworthiness of the parties from whom the loan was taken and also failed to establish the genuineness of the transactions.
4. The appellant prays that the order of Commissioner of Income-tax (Appeal) on the above ground be set aside and that of the Assessing Officer be restored. The appellant craves leave to amend or alter any grounds or add a new ground which may be necessary.”
The issue in 1st ground of appeal is against the order of Ld. CIT(A) holding that amount of Rs.30 lakhs set apart by the assessee as DRR is not within the meaning of explanation 1(c) to section 115JB of the Act.
The facts in brief are that the AO on the perusal of return of income and other details filed by the assessee observed that assessee has set apart Rs.30 crores towards the debentures and redemption reserve out of profit of the current year. The assessee was asked to justify the allowability of the said debentures redemption reserve from book profit clause © to explanation 1 to section 115JB of the Act which was replied by the assessee vide written submission dated 18.03.2014 submitting that during the year under consideration the company issued debentures of Rs.245 crore and therefore while finalizing the accounts for the year ended 31.03.2012 company has appropriated Rs.30 crores towards debentures redemption reserve out of the profit of the years. The Ld. A.R. submitted that the assessee company has credited debentures redemption reserve to the extent of Rs.30 crores under the provisions of section 117C of the Companies Act, 1956. While filing the return of income for A.Y. 2012-13 the said appropriation towards redemption reserve has been reduced from book profit
3 M/s. Hubtown Ltd. as per explanation 1 to section 115JB of the Act. The reply of the assessee did not find favour with the AO and the AO came to the conclusion that the reserve set aside is in the nature of reserve which is not covered in the definition of specified reserve and therefore squarely covered within the ambit of disallowance for the purpose of calculation of book profit under section 115JB of the Act and added back to the income of the assessee by observing that in .AY. 2010-11 and 2011-12 also the similar setting apart was added back to the profit of the assessee.
The Ld. CIT(A) allowed the appeal of the assessee by following the decision of Hon’ble Jurisdictional Bombay High Court in the case of CIT vs. Raymond Ltd [2012] 21 taxmann.com 60 (Bom.).
The Ld. A.R. at the outset, submitted that the issue is covered in favour of the assessee by the decision of the co- ordinate bench of the Tribunal in its own case in A.Y. 2011-12 vide order dated 30.06.2017 which was passed by following the decision of the Hon’ble Bombay High Court in the case of CIT vs. Raymond Ltd. (supra). The Ld. A.R. therefore prayed before the Bench that the ground raised by the Revenue may kindly be dismissed in view of the decision of the co-ordinate bench of the Tribunal.
The Ld. D.R., on the other hand, relied on the order of authorities below and grounds raised in the memorandum of appeal.
After hearing both the parties and perusing the material on record including the decision of the co-ordinate bench of the 4 M/s. Hubtown Ltd. Tribunal in assessee’s own case in ITA No.7696/M/2014 (supra), we observe that the identical issue has been decided in favour of the assessee. The operative part is reproduced as under: “6. We have carefully considered the rival submissions. In our considered opinion, having regard to the judgment of the Hon'ble Bombay High Court in the case of Raymond Ltd. (supra) as well as the decision of our coordinate Bench in the case of JSW Energy (supra), 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.”
Since the facts in the year under consideration are identical, we, therefore, respectfully following the decision of the co-ordinate bench of the Tribunal uphold the order of Ld. CIT(A) by dismissing the ground raised by the Revenue.
The issue raised in 2nd ground of appeal is against the deletion of addition of Rs.25 lakhs by Ld. CIT(A) as made by the AO under section 68 of the Act for failing to establish identity, creditworthiness of the lender and genuineness of the transaction whereas the issue in the 3rd ground is against the deletion of interest of Rs. 24,29,082/- on loans where identity, creditworthiness and genuineness not proved.
The facts in brief are that the AO observed from the balance sheet and tax audit report that assessee has taken loan from three parties as per details below: 1. Jaishwar Commercial Pvt. 25,00,000 1st Floor 60/D, Coloorola Street, Kolkata 2 Seasite Finance Limited (opening balance)
In order to ascertain the veracity of the lenders, their existence, the DDIT, Kolkata Investigation was requested to make the enquiries about these parties and creditworthiness who deputed his inspector to conduct the enquiry and to serve summons under section 131 of the Act. However, the inspector reported that none of the parties were existing on the said addresses and accordingly a show cause notice was issued to the assessee as to why these loans should not be added to the income of the assessee which was replied vide written submissions dated 27.03.2015 accompanying confirmations of account along with financials of the said lenders and requested the AO to issue notices under section 133(6) to obtain the further information. Thereafter, the AO rejecting the contention of the assessee added sum of Rs.25 lakhs being loan raised during the year as unproved and unexplained and added the same to the income of the assessee under section 68 of the Act.
After hearing both the parties and perusing the material on record, we observe that Ld. CIT(A) has called for a remand report from the AO in the appellate proceedings and during the remand proceedings the AO issued notice under section 133(6) to the loan parties and were duly replied by these parties by submitting all the necessary evidences and Ld. CIT(A) on the basis of the remand report came to the conclusion that genuineness of the loan from M/s. JCPL has already been accepted in the reassessment proceedings in 2010-11 and there is no justification for treating the loan of Rs.25 lakhs from M/s.
6 M/s. Hubtown Ltd. JCPL as unexplained in A.Y. 2012-13 the year under consideration and thus deleted the addition. Consequently the interest expenditure of Rs.24,29,082/- was also held to be allowable under section 36(1)(iii) of the Act. We are in agreement with the conclusion drawn by the Ld. CIT(A) as we do not find any infirmity or anomaly in the same and accordingly ground No.2 & 3 raised by the Revenue are dismissed.
In the result, the appeal of the Revenue is dismissed.
Order pronounced in the open court on 31.05.2019.