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<h1>Debenture redemption reserve not part of capital for surtax</h1> The High Court ruled in favor of the Revenue, stating that the debenture redemption reserve should be treated as a provision and not included in the ... - Issues:1. Whether the debenture redemption reserve should be included in the capital computation for surtax purposes.Analysis:The case involved a dispute regarding the inclusion of a debenture redemption reserve in the capital computation for surtax purposes. The assessee, M/s Tube Investments of India Ltd., claimed that the debenture redemption reserve should be considered as part of the capital, while the Revenue contended that it should be treated as a provision and not included in the computation. The CIT(A) and the Tribunal sided with the assessee, leading to the Revenue challenging the decision.The Revenue argued that the debenture redemption reserve should not be considered a reserve as it is meant to meet a known liability, citing a recent Supreme Court decision in the case of National Rayon Corporation Ltd. The assessee's counsel, on the other hand, acknowledged the position but raised the point that if there was any excess provision beyond the known liability, that amount could be treated as a reserve and included in the capital computation.The High Court, after considering the arguments from both sides, referred to the Supreme Court decision in National Rayon Corporation Ltd. The Court emphasized that if the debenture redemption reserve was solely for a known liability, it should be treated as a provision and not included in the capital. However, the Court noted that there was a lack of clarity on whether there was any excess amount beyond the known liability, which could potentially be considered as a reserve. As the Tribunal had not addressed this aspect, the High Court directed the Tribunal to reevaluate the matter in light of the Supreme Court's principles and determine if any portion of the debenture redemption reserve could be included in the capital computation for surtax purposes.In conclusion, while the High Court answered the question of law in favor of the Revenue, it directed the Tribunal to reconsider the issue to determine if any part of the debenture redemption reserve could be treated as a reserve based on the existence of any excess amount beyond the known liability.
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