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

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.

reiterated the submission which was made before the Ld. CIT(A).

passed by the authorities below.

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.

Order pronounced on 22nd December, 2021 in Chennai.

Sd/- Sd/- (मनोज कुमार अ$वाल) (वी दुगा� राव) (MANOJ KUMAR AGGARWAL) (V. DURGA RAO) लेखा सद�/ACCOUNTANT MEMBER �ाियक सद�/JUDICIAL MEMBER चे�ई/Chennai, �दनांक/Dated: 22nd 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