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1 - 7 of 7 (0.18 seconds)Section 80IB in The Income Tax Act, 1961 [Entire Act]
The Commissioner Of Income Tax-2 vs Raymond Ltd on 21 March, 2012
13. We have heard the rival contentions and perused the material available
on record. At the outset, we find that the judgment of Hon'ble Bombay High
Court in the case of CIT vs. Raymond Ltd. (2012) 209 taxman 65 (Bom) has
held that the debenture redemption reserve is a ascertained liability and
therefore allowable deduction u/s. 115JB of the Act. The relevant extract of
head-note is reproduced below:-
Section 115JA in The Income Tax Act, 1961 [Entire Act]
The Companies Act, 1956
Section 80B in The Income Tax Act, 1961 [Entire Act]
National Rayon Corporation Ltd vs The Commissioner Of Income Tax on 29 July, 1997
"Company-Debenture Redemption Reserve-Whether a reserve-Whether ITAT
was right in deleting the adjustment made by the AO relating to Redemption
of Debentures Reserve amounting to Rs.18.80 crores-Held, nature of a
Debenture Redemption Reserve (DDR) has been considered by the judgment
of the Supreme Court in National Rayon Corporation Ltd. Vs. Commissioner
of Income Tax [(1997) 227 ITR 764], wherein it was held that "the basic
principle is that an amount set apart to meet a known liability cannot be
regarded as reserve"- where a company issues debentures, the liability to
repay arises the moment the money is borrowed-By issuing debentures a
company takes a loan against the security of its assets-Though the loan may
not be repayable in the year of account, the obligation to repay is a present
obligation. Hence any money set apart in the accounts of the company to
ITA No.1800/Kol/2010 A.Y. 2007-08
DCIT Cir-2, Kol. Vs. M/s LMJ Logistics Ltd. Page 12
redeem the debenture has to be treated as monies set apart to meet a known
liability-Consequently, debentures have to be shown in the balance sheet of a
company as a liability-Being monies set apart to meet a known liability, a
Debenture Redemption Reserve cannot be regarded as a reserve for the
purpose of Schedule VI to the Companies Act, 1956-Mere fact that a
Debenture Redemption Reserve is labeled as a reserve will not render it as a
reserve in the true sense or meaning of that concept-An amount which is
retained by way of providing for a known liability is not a reserve-Therefore,
Tribunal was correct in holding that the amount which was set apart as a
Debenture Redemption Reserve is not a reserve within the meaning of
Explanation (b) to Section 115JA of the Income Tax Act, 1961."
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