Lan Finance Private Limited Vs DCIT (ITAT Mumbai)
ITAT Mumbai: No Section 68 Addition Merely Because Shareholder Company Struck Off by ROC
The ITAT Mumbai held that Section 68 addition cannot be made merely because a shareholder company is struck off by the Registrar of Companies (ROC), especially when no fresh credit arises during the relevant year.
In this case, the assessee (NBFC) had share capital from a company whose name was later struck off by the ROC. The AO treated the amount (₹56.7 lakh) as unexplained credit solely on this ground.
The Tribunal observed:
- No fresh amount was received during the year under consideration—share capital was introduced in earlier years.
- Section 68 applies only when there is a credit in the relevant year, which was absent here.
- Striking off of a company does not invalidate past genuine transactions.
It further noted:
- AO himself accepted that the company was an existing shareholder from earlier years.
- Mere ROC action (strike-off) cannot convert an old, explained capital into unexplained income.
A sharp ruling-no addition under Section 68 without a fresh credit in the year; corporate strike-off alone is irrelevant for taxing historical share capital.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
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