Case Law Details
Hindustan Coca Cola Beverages Private Limited Vs DCIT (ITAT Delhi)
The issue under consideration is whether tax is applicable on securities premium merely because it used to set off losses?
ITAT states that, the ld. CIT(A) while deleting the addition has held that security premium account, being part of capital of the company is not in the nature of an entry bearing the character of income and since it has not been credited by debiting the Profit & Loss Account of the company, its reversal in any subsequent year is not required to be reflected in the profit & loss account. In other words, applicability of clause (b) of Explanation to section 115JB(2) was ruled out. He held that clause (c) of said Explanation has no applicability since securities premium account is not in the nature of provision; In any case, no addition can be made to the book profits since the securities premium account was never debited to the profit & loss account. According to the CIT(A), the assessing officer did not have power to recast the accounts which have been audited, prepared in accordance with Part II & III of Schedule VI of the Companies Act, 1956 and adopted at the AGM. For making any additions to the ‘book profits’ as shown in the profit & loss account, the assessing officer could only invoke Explanation to section 115JB(2). ITAT do not find any infirmity in the order of the CIT(A) who, while deleting the addition, has considered the decision of the Hon’ble Delhi High Court approving the adjustment of security premium account with brought forward losses. Further, the Hon’ble Supreme Court in the case of Apollo Tyres (supra) has held that the AO does not have the jurisdiction to go beyond the net profit shown in the Profit & Loss Account except to the extent provided in the Explanation to section 115J which has been relied on by the CIT(A). Accordingly, the order of the CIT(A) is upheld and the ground raised by the Revenue is dismissed. In the result, the appeal filed by the assessee is allowed for statistical purposes.
FULL TEXT OF THE ITAT JUDGEMENT
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