JOINT CIT (OSD)-CC-7(4), Mumbai V. M/S WELLKNOWN POLYSTER LTD., Mumbai

ITA 4081/MUM/2019

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 4972 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-04-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Assessment Year: 2015-2016
• Appeal Filed On: 06-06-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Set aside
• Section: 142(1); 115JB; 201; 143(2); 13; 22; 20

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA , AM AND SHRI AMARJIT SINGH, JM / I .T.A. NO. 4081 /MUM/201 9 ( / ASSESSMENT YEAR: 20 15 - 16 ) JOINT COMMISSIONER OF INCOME TAX (OSD) - CC - 7(4) ROOM NO.659, AAYKAR BHAVAN, M. K. ROAD, MUMBAI - 400020 . / VS. M/S. WELLKNOWN POLYSTER LTD. 18 TH FLOOR, NIRMAL BUILDING, NARIMAN POINT, MUMABI - 400021. ./ ./ PAN/GIR NO. : AAACW1018K ( / APPELLANT ) .. ( / RESPONDENT ) / DATE OF HEARING: 16 / 02 /20 2 1 /DATE OF PRONOUNCEMENT: 07 /04 / 20 21 / O R D E R PER AMAR JIT SINGH, JM: THE REVENUE HAS FILED THE PRESENT APPEAL AGAINST THE ORDER DATED 13 . 03 .201 9 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS) - 49 MUMBAI [HEREINAFTE R REFERRED TO AS THE CIT(A)] RELEVANT TO THE A.Y. 20 15 - 1 6 . 2 . THE REVENUE HAS RAISED THE F OLLOWING GROUNDS: - ' 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION OF DISALLOWANCE OF REDUCTION ON ACCOUNT OF PROVISION MADE FOR REDEMPTION OF PREFERENCE SHARES OF RS.41,04,51,435/ - WH ILE COMPUTING THE BOOK PROFIT U/S 115JB OF THE ACT, AS THE ASSESSEE NEVER CREDITED THE AMOUNT OF RESERVES TO THE PROFIT AND LOSS ACCOUNT AND REVENU E BY : SHRI T. S. KHALSA (D R) ASSESSEE BY: SHRI GAURAV KABRA (AR) ITA NO. 4081 /M/201 9 A.Y.20 15 - 16 2 THEREAFTER REDUCE THE RESERVE FOR RS.41,04,51,435/ - USED FOR REDEMPTION OF PREFERENCE SHARES FROM NET PROFIT . ' 3 . THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FILED ITS RETURN OF INCOME ON 30 . 11 .201 5 DECLARIN G A TOTAL INCOME TO THE TUNE OF RS. 1,26,87,75,440 / - . T HE CASE OF THE ASSESSEE WAS REOPENED. NOTICES U/S 143(2) & 142(1) OF THE ACT WERE ISSUED AND SERVED UPON THE ASSESSEE. THE ASSESSEE IS IN THE BUSINESS OF MANUFACTURING OF POLYESTERS YARN. THE ASSESSEE CREDITED THE PROVISION FOR REDEMPTION OF PREFERENCE SHARE IN SUM OF RS. 41,04,51,435/ - . THE SAME WAS NOT FOUND REVENUE IN NATURE, THEREFORE, THE AO DISALLO WED THE PROVISION FOR PREFERENCE SHARE REDEMPTION RESERVE IN SUM OF RS. 41,04,51,435/ - AND ADDED TO THE INCOME OF THE ASSESSEE AND ALSO ASSESSED IN VIEW OF THE PROVISION OF SECTION 115JB OF THE ACT. THE TOTAL INCOME OF THE ASSESSEE WAS ASSESSED IN SUM OF RS . 1,26,84,80,240/ - . THE BOOK PROFIT WAS ASSES SED IN SUM OF RS.225,83,93,090/ - U/S 115JB OF THE ACT. FEELING A GGRIEVED, THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(APPEALS) WHO ALLOWED THE CLAIM OF THE ASSESSEE BUT THE REVENUE WAS NOT SATISFIED, THEREFORE, T HE R EVENUE HAS FILED THE PRESENT APPEAL BEFORE US. ISSUE NO . 1 4. UNDER THIS ISSUE THE REVENUE HAS CHALLENGED THE AL LOWANCE OF THE CLAIM OF THE PROVISION MADE FOR REDEMPTION OF PREFERENCE SHARES OF RS.41,04,51,435/ - WHILE COMPUTING THE BOOK PROFIT U/S 115J B OF THE ACT. THE LD. REPRESENTATIVE OF THE REVENUE HAS ARGUED THAT THE SAID PROVISION WAS WRONGLY ALLOWED, THEREFORE, THE FINDING OF THE CIT(A) IS NOT JUSTIFIABLE, HENCE, IS LIABLE TO BE SET ASIDE. HOWEVER, ON THE OTHER HAND, THE LD. REPRESENTATIVE OF THE ASSESSEE HAS STRONGLY RELIED UPON THE ORDER PASSED BY ITA NO. 4081 /M/201 9 A.Y.20 15 - 16 3 THE CIT(A) IN QUESTION. BEFORE GOING FURTHER, WE DEEM IT NECESSARY TO ADVERT THE FINDING OF THE CIT(A) ON RECORD.: - 7.2 THE SUBMISSIONS OF THE LEARNED COUNSEL HAVE BEEN CAREFULLY CONSIDERED. THIS IS A RECURRING ISSUE IN THE ASSESSEE'S OWN CASE FOR PRECEDING AND SUCCEEDING AYS WHICH HAS BEEN DECIDED BY THE HONBLE ITAT. THE HONBLE ITAT IN THE APPELLANT'S OWN CASE FOR AYS 2012 - 13 TO 2014 - 15 VIDE ORDER DATED 13.06.2018 HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. THE HONBLE ITAT HELD AS UNDER: '19. IN FACT, ANOTHER ASPECT WHICH WAS BEFORE THE HONBLE DELHI HIGH COURT WAS IN RELATION TO THE TRANSFER OF AN AMOUNT TO DEBT REDEMPTION RESERVE FOR WHICH ALSO IT NEGATED THE STAND OF THE ASSESSEE AND HELD I T TO BE A RESERVE FALLING WITHIN THE SCOPE OF CLAUSE (B) OF EXPLANATION - I TO SEC. 1 1JB OF THE ACT. IN COMING TO SUCH A DECISION, IN PARAS 22 AND 23, THE HONBLE HIGH COURT SPECIFICALLY NOTED THAT THE ASSESSEE THEREIN HAD FAILED TO EXPLAIN THE NATURE AND C HARACTER OF THE DEBT AND WENT ON TO HOLD THAT IN THE ABSENCE OF SUCH EXPLANATION, THE SAID SUM WOULD NOT BE LIABLE TO BE ACCEPTED AS AN ASCERTAINED LIABILITY IN TERMS OF CLAUSE (C) OF EXPLANATION - I TO SEC. II5JB OF THE ACT. IN FACT, IN THE CASE BEFORE US, AND WHICH HAS ALSO BEEN NOTED IN DETAIL BY OUR CO - ORDINATE BENCH IN THE EARLIER YEAR, THE PROVISION IS FOR PREMIUM PAYABLE ON REDEMPTION OF PREFERENCE SHARES AND THE ADDITIONAL PREMIUM/RETURN PAYABLE ON SUCH REDEMPTION. THERE IS A COMPLETE EXPLANATION WHIC H REFLECTS THE NATURE AND CHARACTER OF THE PROVISION AND IT CLEARLY UNDERLINES THE OBLIGATION OR THE LIABILITY TO PAY OVER AND ABOVE THE FACE VALUE OF THE PREFERENCE SHARES AT THE TIME OF REDEMPTION. THEREFORE, IN OUR VIEW, NO FAULT CAN BE FOUND WITH THE C ONCLUSION THAT THE IMPUGNED PROVISION WAS INDEED AN 'ASCERTAINED LIABILITY OF THE NATURE REFERRED TO IN CLAUSE (C) OF EXPLANATION - I TO SEC. I 15J8 OF THE ACT. WE MAY ALSO ADD HERE THAT THERE IS NOTHING TO DISTRACT FROM APPLYING THE RATIO OF THE JUDGMENT OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF RAYMOND LTD. (SUPRA) TO CONCLUDE THAT THE IMPUGNED AMOUNT IS TO BE UNDERSTOOD AS A KNOWN LIABILITY AND NOT AS A RESERVE. 23. IN THE RESULT, WE HEREBY ALLOW THE STAND OF THE ASSESSEE FOLLOWING THE PRECEDENT IN A SSESSEE OWN CASE DATED 22.11.2016 (SUPRA).' ITA NO. 4081 /M/201 9 A.Y.20 15 - 16 4 7.3 IN VIEW OF THE ABOVE, AS THE SAME ISSUE ON IDENTICAL SET OF FACTS HAS BEEN DECIDED BY THE HONBLE ITAT IN THE APPELLANTS OWN CASE IN ITS FAVOUR, THESE GROUNDS OF APPEAL ARE ALLOWED. 5 . ON APPRAISAL OF THE ABOVE MENTIONED FINDING, WE NOTICED THAT THE CLAIM OF THE ASSESSEE WAS ALLOWED ON THE BASIS OF THE DECISION OF HONBLE ITAT IN THE ASSESSEES OWN CASE FOR THE A.Y.2012 - 13 TO 201 4 - 15 VIDE ORDER DATED 13.06.2018 . THE RELEVANT FINDING HAS BEEN REPRODUCED BY T HE CIT(A) IN HIS ORDER, THEREFORE, THERE IS NO NEED TO REPEAT THE SAME. THERE IS NOTHING ON RECORD TO WHICH IT CAN BE ASSUMED THAT THE SAID ORDER HAS BEEN SET ASIDE/VARIED/CHANGED. SINCE THE ISSUE HAS FULLY COVERED IN FAVOUR OF THE ASSESSEE IN HIS OWN CASE FOR THE A.Y.2012 - 13 TO 2014 - 15 VIDE ORDER DATED 13.06.2018 , THEREFORE, WE ARE OF THE VIEW THAT THE FINDING OF THE CIT(A) IS QUITE JUSTIFIABLE WHICH IS NOT LIABLE TO BE INTERFERE WITH AT THIS APPELLATE STAGE. ACCORDINGLY, WE DECIDE THIS ISSUE IN FAVOUR OF THE ASSESSEE AGAINST THE REVENUE. 6 . IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS HEREBY D ISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 07 / 04 / 202 1 SD/ - SD/ - ( SHAMIM YAHYA ) (AMARJIT SINGH) / ACCOUNTANT MEMBER /JUDICIAL MEMBER MUMBAI; DATED : 07 / 04 / 2021 VIJAY PAL SINGH ( SR. P.S. ) ITA NO. 4081 /M/201 9 A.Y.20 15 - 16 5 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE. / BY ORDER, //TRUE COPY// / /(DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI