Reserve account compliance under section 80HHC is satisfied by crediting a general reserve for business use.

The second proviso to section 80HHC(1) required the amount equal to the deduction to be debited to profit and loss account and credited to a reserve account for use in the assessee's business. The Madras High Court noted that the provision did not require a separate or special reserve account, and compliance was satisfied where the amount was credited to a general reserve that remained available for business use. An additional statutory condition could not be read into the provision. The assessee was therefore entitled to the deduction, and credit to a general reserve was accepted as sufficient compliance.

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Issues: Whether deduction under the second proviso to section 80HHC(1) of the Income-tax Act, 1961 could be denied on the ground that the amount was credited to a general reserve account and not to a separate special reserve account created for that purpose.

Analysis: The relevant proviso required the amount equal to the deduction to be debited to the profit and loss account and credited to a reserve account to be utilised for the purposes of the business of the assessee. The provision did not stipulate that the reserve must be a separate or special reserve. Since it was undisputed that the amount had been credited to a reserve and that the reserve was used for the assessee's business, the statutory requirement stood satisfied. Reading an additional condition into the provision was impermissible.

Conclusion: The assessee was entitled to the deduction, and the Revenue's objection was rejected.

Ratio Decidendi: Where a taxing provision requires credit to a reserve account for business use, compliance is sufficient if the amount is credited to any reserve account so long as it is available for the business of the assessee; no separate special reserve is mandated unless the statute expressly says so.

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