Ascertained debenture redemption liability qualifies for book-profit deduction, while consistent tax treatment protects other claimed deductions.

Disallowance relating to exempt-income investments under section 14A read with Rule 8D was not sustained because the investments were limited, the assessee had sufficient own funds, and no changed facts or law justified departure from the consistently accepted position. The Sikkim unit remained eligible for deduction under section 80-IE, as no impermissible use of old machinery or reconstruction of an existing business was established. Amortisation of intangibles was not disallowable in computing book profit under section 115JB. A Debenture Redemption Reserve created for a known statutory redemption obligation constituted provision for an ascertained liability, not a reserve, and could be claimed in appellate proceedings despite omission from the original return.

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Issues: (i) Whether disallowance relating to exempt-income investments was sustainable under section 14A read with Rule 8D; (ii) Whether the Sikkim unit was eligible for deduction under section 80-IE; (iii) Whether amortisation of intangibles could be disallowed in computing book profit under section 115JB; and (iv) Whether the amount transferred to the Debenture Redemption Reserve was deductible in computing book profit under section 115JB.

Issue (i): Whether disallowance relating to exempt-income investments was sustainable under section 14A read with Rule 8D.

Analysis: The investments in tax-free bonds were held for a limited period without substantial buying or selling activity. The assessee possessed sufficient own funds for the investments, and the approach adopted by the appellate authority followed the consistent position accepted in the assessee's preceding assessment years. No changed facts or legal position justified departure from that consistent view.

Conclusion: The appellate treatment of the disallowance under section 14A read with Rule 8D was sustained, in favour of the assessee.

Issue (ii): Whether the Sikkim unit was eligible for deduction under section 80-IE.

Analysis: Eligibility of the Sikkim unit had been sustained in the assessee's own earlier years, including findings that the Revenue had not established use of old machinery beyond the permissible threshold or reconstruction of an existing business. The Revenue identified neither distinguishing facts nor any change in law or binding reversal of the earlier decisions.

Conclusion: The deduction under section 80-IE for the Sikkim unit was allowable, in favour of the assessee.

Issue (iii): Whether amortisation of intangibles could be disallowed in computing book profit under section 115JB.

Analysis: The appellate relief followed the consistent decisions in the assessee's earlier years concerning the treatment of amortisation of intangibles for minimum alternate tax computation. No material was produced warranting a different conclusion.

Conclusion: The amortisation of intangibles was not disallowable for computation of book profit under section 115JB, in favour of the assessee.

Issue (iv): Whether the amount transferred to the Debenture Redemption Reserve was deductible in computing book profit under section 115JB.

Analysis: The reserve was created under section 71(4) of the Companies Act, 2013 for redemption of debentures and had been appropriated from the relevant year's profits through the Profit and Loss Account. A liability to redeem debentures is known and existing; consequently, the amount earmarked for it is a provision for an ascertained liability rather than a reserve. Further, an appellate authority may entertain a legally sustainable claim even where it was not made in the original return, and a substantive claim cannot be denied solely because of the presentation constraints of the return utility.

Conclusion: The Debenture Redemption Reserve represented an ascertained liability and was deductible in recomputing book profit under section 115JB, in favour of the assessee.

Final Conclusion: The assessee retained the claimed tax treatment for exempt-income expenditure, the Sikkim-unit deduction, intangible amortisation under minimum alternate tax computation, and the Debenture Redemption Reserve adjustment.

Ratio Decidendi: An amount set aside for redemption of debentures pursuant to a statutory obligation is a provision for an ascertained existing liability, not a reserve, and a legally allowable claim may be granted in appellate proceedings despite its omission from the original return.

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