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2013 (6) TMI 502 - ITAT DELHIAddition while completing the assessment on account of 80HHC - reserve which the appellant had transferred to his capital account in the books of his sole proprietary concern M/s Loreto & Co on closure of export business - Held that:- As during the accounting year relevant to assessment year under consideration, the assessee only transferred, reserve created as per provision of Section 80HHC as it existed in the year 1985, to the capital account. By transfer of such reserve to the capital account, there cannot be any income unless the provision of Section 80HHC so provides. Admittedly, there is no provision in Section 80HHC prohibiting the transfer of reserve so created to the capital account. In view of the above, agreeing with the CIT(A) that by transfer of reserve to the capital account, no income is generated. However, merely because there was a debit balance of the assessee in the books of account of M/s Loreto & Company, then also the addition cannot be made to the extent of debit balance. Transfer of reserve to the capital account and debit balance in the capital account are two different things. Therefore, there is no justification for sustaining the addition to the extent of debit balance i.e. Rs.8,14,073/-. In favour of assessee.
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