Shriram City Union Finance Limited Vs ACIT (Madras High Court)
Madras High Court held that the amount transferred to the statutory reserve as mandated under the provisions of the RBI Act, is not an allowable deduction in computing the assessable income under the regular computation and computation of book profits under section 115JB of the Income Tax Act.
Facts- Present appeal has been filed by the appellant mainly contesting that whether the Tribunal was right in holding that there has been no diversion of income by overriding charge in respect of amount transferred to Statutory Reserve Fund in compliance with the mandatory provisions of Sec.45IC read with Sec. 45Q of RBI Act. Further, it is also contested that whether the Tribunal was right in noticing that the amount transferred to Reserve Fund in compliance with the provisions of Reserve Bank of India Act, 1934, by the appellant from its income, is not an allowable deduction in computing the assessable income under the provisions of Indian Income Tax Act, 1961.
Conclusion- Held that the reserve is the amount of profit which is retained for use in business, when difficulty arises and on the basis of our earlier findings and from the very language of section 45 IC, this court comes to a conclusion that the amount transferred by the assessees herein, to the statutory reserve as mandated under the provisions of the RBI Act, is not an allowable deduction in computing the assessable income under the provisions of the Act under the regular computation and computation of book profits under section 115JB.
