ACIT-3(1)(1), MUMBAI V. M/S.DEVKRIPA BUILD TECH LTD, MUMBAI

ITA 4323/MUM/2018

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 3158 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-03-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2012-2013
• Appeal Filed On: 28-06-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JYOTI LAKSHMI NAYAKLD
• Assessee Lawyers: VIRAL DOSHI LD
• Keywords: Revised return; TDS
• Section: 115JB; 40(a)(ia)

Judgement Text

ITA NO.4323/MUM/2018 M/S. DEVKRUPA BUILD TECH LTD. ASSESSMENT YEAR:2012-13 1 IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI , , BEFORE HONBLE SHRI MAHAVIR SINGH, VP AND HONBLE SHRI MANOJ KUMAR AGGARWAL, AM ./ I.T.A. NO.4323/MUM/2018 ( / ASSESSMENT YEAR: 2012-13) D CIT - 3(1)(1) ROOM NO.607, 6 TH FLOOR AAYKAR BHAVAN MUMBAI-400 020 / VS. M/S. DEVKR U PA BUILD TECH LTD. 3 RD FLOOR, FREE PRESS MARG NARIMAN POINT MUMBAI-400 021. ! ./ ./PAN/GIR NO. AACCD-5467-B ( !# /APPELLANT ) : ( $%!# / RESPONDENT ) ASSESSEE BY : SHRI VIRAL DOSHI-LD. AR REVENUE BY : MS. JYOTI LAKSHMI NAYAK-LD.DR / DATE OF HEARING : 18/02/2020 / DATE OF PRONOUNCEMENT : 12/03/2020 / O R D E R MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1.1 AFORESAID APPEAL BY ASSESSEE FOR ASSESSMENT YEA R [IN SHORT REFERRED TO AS AY] 2012-13 CONTEST THE ORDER OF L D. COMMISSIONER OF INCOME-TAX (APPEALS)-8, MUMBAI, [IN SHORT REFERRED TO AS CIT(A)], APPEAL NO. CIT(A)-8/IT-05/15-16 DATED 17/04/2018 ON FOLLOWING GROUNDS: - (I) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE, THE LD. CIT (A) WAS CORRECT IN DELETING THE DISALLOWANCE OF RS.4,32,80, 710/- MADE BY THE AO U/S.40(A)(IA) WITHOUT APPRECIATING THE FACT THAT TH E ASSESSEE HAS NOT DEDUCTED & ITA NO.4323/MUM/2018 M/S. DEVKRUPA BUILD TECH LTD. ASSESSMENT YEAR:2012-13 2 DEPOSITED TDS ON THE INTEREST PAID VIOLATING THE PR OVISIONS OF SEC 40(A)(IA) OF THE IT. ACT, 1961? (II) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT (A) WAS RIGHT IN DELETING THE ADJUSTMENT OF RS.5,25,00, 000/- MADE BY THE AO IN RELATION TO SUCH AMOUNT TRANSFERRED TO DEBENTURE REDEMPTION RESERVE (DRR) WHILE COMPUTING THE BOOK PROFIT U/S 115JB OF THE IT. ACT, EVEN THOUGH THE AMOUNT TRANSFERRED TO DRR REPRESENTS APPROPRIATION OF PROF IT AND IS NOT A CHARGE ON PROFIT & LOSS ACCOUNT QUALIFYING FOR DEDUCTION, AS HELD BY H ON'BLE DELHI HIGH COURT IN THE CASE OF SREI INFRASTRUCTURE FINANCE LTD VS ASSTT. C OMMISSIONER OF INCOME TAX (ITAX 371 & 372/2012 DATED 13/02/2015? (III) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT (A) WAS RIGHT IN DELETING THE ADJUSTMENT OF RS.5,25,00, 000/- MADE BY THE AO IN RELATION TO SUCH AMOUNT TRANSFERRED TO DEBENTURE REDEMPTION RESERVE (DRR) WHILE COMPUTING THE BOOK PROFIT U/S 115JB OF THE I.T. ACT , EVEN THOUGH SUCH LIABILITY IS ON CAPITAL ACCOUNT NOT ELIGIBLE FOR DEDUCTION, AS NOTE D BY HON'BLE ITAT, MUMBAI IN THE CASE OF JSW ENERGY LTD VS ACIT CIRCLE 11(5), MUMBAI (2013) 34 TAXMANN.COM 152 (MUMBAI TRIBUNAL) AS EVIDENT, THE SUBJECT MATTER OF PRESENT APPEAL BE FORE US IS-(I) DISALLOWANCE U/S. 40(A)(IA) FOR RS.432.80 LACS; (II ) ADJUSTMENT OF DEBENTURE REDEMPTION RESERVE OF RS.525 LACS WHILE C OMPUTING BOOK PROFITS U/S. 115JB OF THE ACT. 1.2 WE HAVE CAREFULLY HEARD THE RIVAL SUBMISSIONS A ND PERUSED THE RELEVANT MATERIAL ON RECORD. WE HAVE ALSO DELIBERAT ED ON JUDICIAL PRONOUNCEMENT AS CITED BEFORE US. OUR ADJUDICATION TO THE SUBJECT MATTER OF APPEAL WOULD BE AS GIVEN IN SUCCEEDING PARAGRAPH S. 2.1 FACTS ON RECORD WOULD REVEAL THAT THE ASSESSEE BEING RESIDENT CORPORATE ASSESSEE STATED TO BE ENGAGED AS A BUILDE R AND DEVELOPER WAS ASSESSED FOR YEAR UNDER CONSIDERATION U/S 143(3 ) ON 30/03/2015, WHEREIN THE INCOME UNDER NORMAL PROVISIONS WAS DETE RMINED AT RS.475.85 LACS AFTER SOLE ADDITION U/S 40(A)(IA) FO R RS.432.80 LACS. THE SAID DISALLOWANCE WAS MADE IN THE VIEW OF THE FACT THAT THE ASSESSEE DID NOT PAY TDS BEFORE DUE DATE OF FILING OF RETURN ON INTEREST PAYMENT OF RS.432.80 LACS. ALTHOUGH THE ASSESSEE INITIALLY DIS ALLOWED THE SAME ITA NO.4323/MUM/2018 M/S. DEVKRUPA BUILD TECH LTD. ASSESSMENT YEAR:2012-13 3 WHILE FILING ORIGINAL RETURN OF INCOME BUT CLAIMED IT IN THE REVISED RETURN OF INCOME, INTER-ALIA, BY RELYING UPON CBDT INSTRUCTION NO.275/201/95-IT(B ) DATED 29/01/1997 AND THE DECISION OF HONBLE SUPREM E COURT RENDERED IN HINDUSTAN COCA COLA BEVERAGES PVT. LTD. V/S CIT (29 3 ITR 226). RELIANCE WAS ALSO PLACED ON THE BENEFIT GRANTED BY SECOND PROVISO TO SECTION 40(A)(IA) AS INSERTED BY FINANCE ACT, 2012 W.E.F. 01/04/2013 SINCE THE DEDUCTEE HAD ALREADY INCLUDED THE RELEVAN T INCOME IN HIS TOTAL INCOME AND PAID DUE TAXES AGAINST THE SAME. HOWEVER , DISREGARDING THE SAME, THE AMOUNT OF RS.432.80 LACS WAS DISALLOWED. 2.2 THE LD. CIT(A), RELYING UPON TRIBUNALS ORDER F OR AY 2012-13 IN THE CASE OF ASSESSEES GROUP CONCERN NAMELY M/S URVI BUILD-TECH PVT. LTD. IN ITA NO.3252/MUM/2016 DATED 28/12/2016, DIRECTED LD. AO TO DELETE THE DISALLOWANCE SUBJECT TO VERIFICATION OF THE FAC T THAT THE DEDUCTEE HAD SHOWN THE AMOUNTS IN THEIR RESPECTIVE TAX RETURNS A ND HAD PAID THE DUE TAXES. AGGRIEVED, THE REVENUE IS UNDER FURTHER APPE AL BEFORE US. 2.3 UPON DUE CONSIDERATION OF IMPUGNED ORDER ON THI S ISSUE, WE FIND THAT LD. CIT(A) HAS MERELY FOLLOWED THE DECISION OF THIS TRIBUNAL FOR SAME ASSESSMENT YEAR RENDERED IN THE CASE OF ASSESSEES GROUP CONCERNS. THEREFORE, NO INFIRMITY COULD BE FOUND IN THE SAME. THE LD. DR COULD NOT POINT OUT ANY DISTINGUISHING FEATURE. NO CONTRARY D ECISION HAS BEEN PLACED ON RECORD. THEREFORE, WE DO NOT FIND ANY INF IRMITY IN THE IMPUGNED ORDER, ON THIS ISSUE. GROUND NO.1 STAND DISMISSED. 3.1 THE SECOND ISSUE PERTAINS TO DISALLOWANCE OF DE BENTURE REDEMPTION RESERVE (DRR) WHILE COMPUTING BOOK PROFI TS U/S 115JB. IT TRANSPIRED THAT THE ASSESSEE CLAIMED ADJUSTMENT OF RS.525 LACS, BEING AMOUNT TRANSFERRED TO DEBENTURE REDEMPTION RESERVE . THE LD. AO ITA NO.4323/MUM/2018 M/S. DEVKRUPA BUILD TECH LTD. ASSESSMENT YEAR:2012-13 4 DENIED THE SAME IN VIEW OF THE FACT THAT THE SAME W AS NOT CREDITED TO PROFIT & LOSS ACCOUNT. 3.2 BEFORE LD. CIT(A), THE ASSESSEE SUBMITTED THAT DRR WAS NOT A RESERVE BUT PROVISION FOR ASCERTAINED LIABILITIES. RELIANCE WAS PLACED, INTER-ALIA, ON THE DECISION OF THIS TRIBUNAL RENDERED IN THE CA SE OF ASSESSEES HOLDING COMPANY NAMELY ACKRUTI CITY LIMITED (ITA NO.7696/MUM/2014). THE ATTENTION WAS DRAWN TO SEC. 117C OF THE COMPANIES ACT AND THE CIRCULAR OF MINISTRY OF LAW, JUSTICE AND COMPANY AFFAIRS, GOVERNMENT OF INDIA CIRCULAR NO.09/2002 DA TED 18/04/2002 WHICH WOULD MANDATE CREATION OF DRR. RELIANCE WAS A LSO PLACED IN THE DECISION OF HONBLE SUPREME COURT IN NATIONAL RAYON CORPORATION LTD. V/S CIT (227 ITR 764) TO DRAW THE DISTINCTION BETWEEN RESERVE AND PROVISION. THE LD. CIT(A) RELYING UPON THE DECISION OF THIS TR IBUNAL IN IN THE CASE OF ASSESSEES HOLDING COMPANY NAMELY ACKRUTI CITY LIMITED (ITA NO.7696/MUM/2014 DATED 30/06/2017) DIRECTED LD. AO TO ALLOW THE DEDUCTION OF THE SAME WHILE COMPUTING BOOK PROFITS U/S 115JB. AGGRIEVED, THE REVENUE IS UNDER FURTHER APPEAL BEFO RE US . 3.3 THE LD. DR POINTED OUT THAT THE ASSESSEE ISSUED UNSECURED, REDEEMABLE, OPTIONALLY CONVERTED DEBENTURES FOR RS. 15 CRORES. THE DEBENTURES WERE REDEEMABLE AFTER 5 YEARS WITH PUT AND CALL OPTION. THERE WAS NO BASIS TO CREATE A PROVISION OF RS.5.25 CRORES IN THE FIRST YEAR ITSELF. IT HAS ALSO BEEN SUBMITTED THAT THE SA ID APPROPRIATION HAS BEEN CREATED IN THE BALANCE SHEET AND NOT ROUTED TH ROUGH PROFIT & LOSS ACCOUNT. THE LD. AR, ON THE OTHER HAND, SUBMITTED T HAT SEC.117C OF COMPANIES ACT MANDATE ASSESSEE TO CREATE DRR FOR RE DEMPTION OF SUCH ITA NO.4323/MUM/2018 M/S. DEVKRUPA BUILD TECH LTD. ASSESSMENT YEAR:2012-13 5 DEBENTURES FROM OUT OF ITS PROFITS EVERY YEAR UNTIL SUCH DEBENTURES ARE REDEEMED. THE AMOUNT SO CREDITED COULD NOT BE UTILI ZED EXCEPT FOR THE PURPOSE OF REDEMPTION OF DEBENTURES. 3.4 UPON CAREFUL CONSIDERATION, WE FIND SUBSTANCE I N LD. ARS SUBMISSIONS. THE UNDISPUTED FACT THAT EMERGES ARE T HAT THE ASSESSEE HAS ISSUED CERTAIN UNSECURED, REDEEMABLE, OPTIONALL Y CONVERTED DEBENTURES FOR RS.15 CRORES AND CREATED DRR OF RS.5 .25 CRORES DURING THE YEAR UNDER CONSIDERATION. THE DEBENTURES WOULD BE IN THE NATURE OF LOANS, THE REDEMPTION OF WHICH WOULD ENTAIL COMPANY S RESOURCES. SECTION 117C OF THE COMPANIES ACT MANDATE THE ASSES SEE TO PROVIDE FOR DRR FOR THE PURPOSE OF REDEMPTION OF DEBENTURES. TH EREFORE, IT COULD NOT BE SAID THAT DRR WAS MERE APPROPRIATION OR PROVISIO N FOR UNASCERTAINED LIABILITY SINCE THE ASSESSEE HAD DEFINITE LIABILITY TO REDEEM THE DEBENTURES. SINCE THE DEBENTURES ARE WITH PUT AND CALL OPTION THEN NATURALLY THE CREATION OF DRR WOULD REQUIRE SOME KI ND OF ESTIMATION SINCE IT WOULD NOT BE KNOWN IN ADVANCE THAT WHAT QU ANTUM OF DEBENTURES WOULD BE REDEEMED AT DIFFERENT POINTS OF TIME. THER EFORE, CREATION OF DRR, DUE TO TERMS OF DEBENTURES, WOULD INVOLVE SOME KIND OF ESTIMATION. NEVERTHELESS, THE SAME WOULD BE TOWARDS DISCHARGE O F ASCERTAINED LIABILITY ONLY. 3.5 WE FIND THAT SIMILAR FAVORABLE VIEW HAS BEEN TA KEN BY THE TRIBUNAL IN CASE OF ASSESSEES HOLDING COMPANY DCIT V/S ACKRUTI CITY LTD. (ITA NO. 7696/MUM/2014 DATED 30/06/2017) WHEREIN THE COORDINATE BENCH HAS FOLLOWED THE DECISION OF HONBLE BOMBAY HIGH CO URT IN RAYMOND LTD. (2012 209 TAXMAN 65) AND THE DECISION OF THIS TRIBUNAL RENDERED IN JSW ENERGY LTD. V/S ACIT (2014 150 ITD 406). THIS DECISION HAS ITA NO.4323/MUM/2018 M/S. DEVKRUPA BUILD TECH LTD. ASSESSMENT YEAR:2012-13 6 SUBSEQUENTLY BEEN FOLLOWED IN AY 2012-13 ITA NO.962 /MUM/2017 ORDER DATED 31/05/2019. 3.6 THEREFORE, CONSIDERING THE ENTIRETY OF FACTS AN D CIRCUMSTANCES, WE FIND NO REASON TO INTERFERE IN THE IMPUGNED ORDER. GROUND NOS. 2 & 3 STAND DISMISSED. 4. THE APPEAL STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 12 TH MARCH, 2020. SD/- SD/- (MAHAVIR SINGH) (MAN OJ KUMAR AGGARWAL) + / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 12/03/2020 SR.PS, JAISY VARGHESE ! / COPY OF THE ORDER FORWARDED TO : 1. !# / THE APPELLANT 2. $%!# / THE RESPONDENT 3. - ( ) / THE CIT(A) 4. - / CIT CONCERNED 5. ./$'0 , 0 , / DR, ITAT, MUMBAI 6. /123 / GUARD FILE / BY ORDER, / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI.