DCIT CORPORATE CIRCLE 2(2), CHENNAI V. JEEVAN TECHNOLOGIES INDIA P LTD., CHENNAI

ITA 1706/CHNY/2019

• Counselvise Citation: [2021] 104 COUNSELVISE.COM (IT) 5853 (ITAT-CHENNAI)
• Duration Of Justice: 2 year(s) 6 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-12-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2015-2016
• Appeal Filed On: 29-05-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Depreciation
• Section: 68

Judgement Text

आयकर अपीलीय अिधकरण, ‘सी’ ायपीठ, चे ई। IN THE INCOME TAX APPELLATE TRIBUNAL ‘C’ BENCH: CHENNAI ी वी दुगा राव, ाियक सद एवं ी मनोज कु मार अ$वाल, लेखा सद के सम& BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER AND SHRI MANOJ KUMAR AGGARWAL, ACCOUNTANT MEMBER आयकर अपील सं./ITA No.1706/Chny/2019 िनधा रण वष /Assessment Year: 2015-16 The Dy. Commissioner of Income Tax, Corporate Circle-2(2), Chennai. Vs. M/s. Jeevan Technologies India Pvt. Ltd., 9 th Floor, Gee Gee Crystal, No.91, Dr. Radhakrishnan Salai, Mylapore, Chennai-600 004. [PAN: AABCJ 4054B] ( अपीलाथ /Appellant) (()थ+/Respondent) अपीलाथ+ की ओर से/ Appellant by : Mr. M. Murali, CIT ()थ+ की ओर से /Respondent by : Mr. N.V. Balaji, Advocate सुनवाई की तारीख/Date of Hearing : 06.12.2021 घोषणा की तारीख /Date of Pronouncement : 22.12.2021 आदेश / O R D E R PER V. DURGA RAO, JUDICIAL MEMBER: This appeal filed by the Revenue is directed against the order of the learned Commissioner of Income Tax (Appeals)-6, Chennai in I.T.A No.196/CIT(A)-6/2017-18 dated 05.03.2019 relevant to the Assessment Year 2015-16. I.T.A No.1706/Chny/2019 :- 2 -: 2. The brief facts of the case are that the assessee-company during the Financial Year 2014-15, created a goodwill reserve of Rs. 12,76,78,211/- by revaluing its intangible assets. This goodwill is reflected on the assets side of the balance sheet under the fixed assets (i) intangible assets under development goodwill. Similarly, on the liability side, the same amount of Rs. 12,76,78,211/-, is reflected as ‘Goodwill reserve’. The assessee before the A.O has submitted that the company, in order to fetch some good contracts, it had revalued its intangible and the revalued price is shown as goodwill reserve in the liability side of the balance sheet. However, the A.O did not accept the assessee’s version. The A.O treated the goodwill reserve created in the liability side in the balance sheet as unexplained cash credit u/s. 68 of the Income Tax Act, 1961 (hereinafter "the Act") and taxed accordingly. The assessee has submitted before the Ld. CIT(A) that the company in order to fetch some good contracts it has revalued its intangible and the revalued price is shown as goodwill reserve in the liability side of the balance sheet. It was only a book entry and there were no unexplained credits introduced into the books in any name (of another person) therefore, the A.O treating the goodwill reserve created in the liability side of the balance sheet, as unexplained cash credits u/s. 68 of the I.T.A No.1706/Chny/2019 :- 3 -: Act, is not justified. The Ld. CIT(A) by considering the explanation of the assessee deleted the addition made by the A.O. 3. On appeal before us, the ld. counsel for the assessee has reiterated the submission which was made before the Ld. CIT(A). 4. On the other hand, the ld. D.R has strongly relied on the orders passed by the authorities below. 5. We have heard both the sides, perused the materials available on record and gone through the orders of the authorities below. We find that the Ld. CIT(A) by considering the explanation of the assessee has correctly passed the order and in this case s. 68 of the Act has no application at all. The relevant portion of the order of Ld. CIT(A) is extracted as under: “4.4.2 I have considered the assessee's submissions carefully. Section 68 of the IT Act deals with the credit entries found to have been introduced in the books, in the name(s) of some other persons. When some credits are found in the books, and the names of such creditors, their genuineness / creditworthiness are not proved, the Assessing Officer can treat such credits as unexplained credits u/s.68 of the Act. Here in the present case, there are no creditors involved. It was only the revaluation of the intangibles. In the case of revaluation of any assets, the surplus amount, on such revaluation, has to be reflected on the liability side balance sheet, as 'revaluation reserve' or any other suitable name. In the present case, it was shown as 'goodwill reserve'. There is no anomaly in this presentation. 4.4.3 Further, as held by the apex court on several occasions, no man can make profits out of himself. This is the fundamental principle in the accountancy. Therefore, a mere revaluation, irrespective of the purpose for which it is made, cannot result in any taxable income in the hands of the assessee. For all practical purposes the revalued price and its corresponding entries in the books, have no I.T.A No.1706/Chny/2019 :- 4 -: meaning/value for the purpose of Income Tax Act. Even depreciation cannot be allowed on the revalued price of the assets. Even when such revalued assets are sold, the cost of acquisition is to be; reckoned with reference to the original value and not the revalued price. 4.4.4 In view of the above reasons, the Assessing Officer's action of treating the goodwill reserve created on the liability side of the balance sheet, as unexplained cash credits u/s.68 of the Act, is not justified and stands deleted. The assessee succeeds in its appeals in this regard.” 6. From the above order of Ld. CIT(A), we find that no creditors involved in this case and it is only revaluation of assets u/s. 68 of the Act has no application. We are fully agreeing with the Ld. CIT(A) and no interference is warranted. Thus, the appeal filed by the Revenue is dismissed. 7. In the result, the appeal filed by the Revenue is dismissed. Order pronounced on 22 nd December, 2021 in Chennai. Sd/- Sd/- (मनोज कु मार अ$वाल) (MANOJ KUMAR AGGARWAL) लेखा सद /ACCOUNTANT MEMBER (वी दुगा राव) (V. DURGA RAO) ाियक सद /JUDICIAL MEMBER चे ई/Chennai, दनांक/Dated: 22 nd December, 2021. EDN/- आदेश क ितिलिप अ ेिषत/Copy to: 1. अपीलाथ /Appellant 2. यथ /Respondent 3. आयकर आयु (अपील)/CIT(A) 4. आयकर आयु /CIT 5. िवभागीय ितिनिध/DR 6. गाड फाईल/GF