Case Law Details
Issue – Whether on the facts and in the circumstances of the case the Tribunal in computing book profit under Section 115JB was justified in confirming the addition of Rs. 9,80,00,000/- transferred to the special reserve pursuant to the provisions of Section 45-IC of the Reserve Bank of India Act, 1934 under Clause (b) of the Explanation to Section 115JB?
Whether on the facts and in the circumstances of the case the Tribunal in computing book profit under Section 115JB was justified in confirming the additions of :-
(a) Rs. 16,00,00,000/- transferred to the special reserve pursuant to the provisions of Section 45-IC of the Reserve Bank of India Act, 1934; and
(b) Rs. 18,66,00,000/- transferred to the debt redemption reserve, both under Clause (b) of the Explanation to Section 115JB?
The appellant is a non-banking financial company engaged, inter alia, in the business of leasing of commercial vehicles, infrastructure construction machinery/equipment and financing of infrastructure projects equipment/machinery. For the assessment year 2006-07, the appellant had filed return on 27th November, 2006, declaring total income of Rs. 2,03,13,738/- under normal provisions and had declared book profit of Rs.38,95,04,834/- under Section 115JB of the Act. This return was revised on three occasions and in the last revised return dated 3 1st March, 2008, the returned income under normal provisions was revised to Rs.1,25,92,360/-. The book profits remained unchanged at Rs.38,95,04,834/-. By assessment order dated 31st December, 2008, the total income of the appellant-assessee was assessed under the normal provisions at Rs.16,17,08,631/- and the book profits under Section 1 15JB of the Act were computed at Rs.67,92,04,834/-. The appellant approached the Commissioner of Income Tax (Appeals) and then filed an appeal before the Tribunal. By the impugned order, addition of Rs.9,80,00,000/- to the special reserve as per the mandate of Section 45-IC of the Reserve Bank of India Act, 1934 stands confirmed relying upon Explanation 1 clause (b) to Section 11 5JB(2) of the Act.
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Sub-section (2) of 45IC: No appropriation of any sum from the reserve fund shall be
made by the non-banking financial company except for the purpose as may be
specified by the Bank from time to time.
Two Questions to have clarity about:
1. How to apply RBI for appropriation;
2. What are the instances of appropriation.