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2012 (5) TMI 4 - AT - Income TaxMAT - Book profit - Adjustment of reserves created on revaluation of the assets of the amalgamated Company - held that:- Supreme Court clearly observed in the case of National Hydroelectric Power Corpn. Ltd. (2010 -TMI - 77137 - SUPREME COURT) that for making an addition under clause (b) of Explanation 1 to sec.115JB two conditions must be satisfied jointly. (1)(a) There must be a debit of the amount to the profit & loss account, (clause (b) of Explanation 1 to sec.115JB) the amount so debited must be carried to the reserve. - Further, the reserve contemplated by clause (b) of Explanation 1 to sec.115JB is required to be carried through the profit & loss account. - The Hon'ble court also observed that there can be two types of reserves, namely, those that are routed through the profit & loss account and those which are not routed through the profit & loss account, e.g. capital reserve such as share premium account. It is clear that assessee has debited a sum of Rs. 47,39,19,646/- which is the present market value of the work-in-progress which has been taken over and, therefore, it cannot be said that it consists of some portion of reserve also. Creation of general reserve out of revaluation reserve cannot be said to be out of appropration of profits - the amount which was never routed through the profit & loss account and never debited to the profit & loss account could not be considered for the purpose of determination of book profits under clause (b) of Explanation 1 to sec.115JB - Decided in favor of the assessee
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