DCIT CIR 4(3)(2), MUMBAI vs. WELLKNOWN SYNHETICS P. LTD, MUMBAI

PER PAWAN SINGH, JUDICIAL MEMBER;

1. “On the facts and in circumstances of the case and in Law, the Ld. CIT(A) has erred in directing to AO to delete the addition made of Rs. 14,110/- u/s. 2(24)(x) r.w.s. 36(1)(va).” 2. “On the facts and in circumstances of the case and in Law, the Ld. CIT(A) has erred in deleting an addition of Rs. 7,48,43,856/- on account of Premium on Preference Share Redemption Reserve to the Book Profit u/s. 115JB,”.

raised by Revenue are covered in favour of assessee and against the Revenue. Ground No.1 which relates to addition under section 2(24(x) r.w.s. 36(1)(va) is covered by the decision of jurisdictional High Court in case of CIT vs. Hindustan Organics Chemicals Ltd. ITA No. 399 of 2012 dated 11.07.2014. The ld. AR further submits that contribution of ESI and PF has been paid before due date of filing of return of income. The ld. DR for the Revenue after going through the order of ld. CIT(A) conceded that ground no.1 of the appeal is covered in favour of assessee and against the Revenue.

4. We have considered the submission of both the parties and have gone through the orders of authorities below. The Hon’ble jurisdictional High Court in case of Hindustan Organics Chemicals Ltd. (supra) held that when the assessee company made payment of employees contribution 2 ITA No. 3124 Mum 2017-M/s Wellknown Synthetics Pvt. Ltd. towards provident fund, assessee's claim could not be disallowed on account of delayed payment in view of amendment to section 43B. We have noted that ld. CIT(A) granted the relief to the assessee by following the decision of jurisdictional High Court, therefore, we do not find any reason to interfere with the finding of ld. CIT(A). Hence, ground no.1 of the appeal is dismissed.

5. Ground No.2 relates to deleting an addition of Rs. 7,48,43,856/- on account of Premium on Preference Share Redemption Reserve to the Book Profit u/s. 115JB. The ld. AR of the assessee submits that this ground of appeal is also covered in favour of assessee by the decision of Tribunal in assessee’s own case for AY 2010-11 in ITA No. 2691 & 2692/Mum/2015 dated 22.11.2016. The ld. AR submits that the ld. CIT(A) allowed the relief to the assessee by following the decision of Tribunal. On going through the order of ld. CIT(A) and the order of Tribunal in assessee’s own case for AY 2010-11 in ITA No. 2691 & 2692/Mum/2015 dated 22.11.2016, the ld. DR accepted the contention of ld. AR of the assessee. 6. We have considered the submission of ld. representative of parties and have gone through the orders of authorities below. We have noted that the assessee has raised similar ground of appeal in appeal for AY. 2010-11.

The Tribunal in & 2692/Mum/2015 dated 22.11.2016 passed the following order: Mum 2017-M/s Wellknown Synthetics Pvt. Ltd.

"15. We have considered this aspect of the argument also. But, we do not find force in his contention of Ld. DR. It is well settled law that under the income tax law, taxability of an amount or otherwise is determined on the basis of intrinsic nature of a transaction and not necessarily on the basis of its nomenclature or the manner in which same is reflected in its accounts by an assessee. As discussed in detail above, the impugned amount has been debited in the Profit & Loss account of the assessee because of mandate of law. As discussed above in detail, section 80 of the Companies Act, 1956, stipulate that premium payable on the redemption on preference shares is to be provided for out of the 'profits' of the company or out of Company's Security Premium account. Thus, if this amount is not provided for from the security premium account, then, it has to be compulsorily provided for out of the 'profits' of the company. Under these circumstances, if this amount is debited in the P & L A/c, then it partakes the character akin to a 'charge' on the profits. Thus, the impugned amount debited in the profit and loss account is a 5815, 5814, 5852, 5853/ Mum/2016 'charge' on the profits and cannot be said to 'appropriation' out of profits. Hence in order to arrive at and compute the book profit u/s 115JB, this amount has also to be adjusted from the profits of the year which has been rightly done by the assessee. Further, if an amount is actually of the nature of a 'charge', it shall not become an item of 'appropriation', merely because it has been inadvertently shown by the assessee in its P & L A/c along with the other amounts of 'appropriation'. Thus, the AO could not have denied the benefit of this amount of 'charge' by notionally adding this amount to the amount of profits of the year for the purpose of computing book profit u/s 115JB.

Mum 2017-M/s Wellknown Synthetics Pvt. Ltd.

Order pronounced in the open court on 06/09/2018.