Section 68 and non-cash share issuance: goodwill adjustment credited to share capital was not treated as unexplained cash credit.

Section 68 did not apply where shares were issued against a goodwill adjustment and no actual cash or cheque was received by the assessee company. A mere book entry debiting goodwill and crediting share capital, when satisfactorily explained, was not treated as an unexplained cash credit. The absence of a real monetary receipt was decisive, so the addition was deleted and the assessee obtained relief.

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Issues: Whether additions under section 68 of the Income-tax Act, 1961 were sustainable where shares were issued against a goodwill adjustment without any actual receipt of cash by the assessee company.

Analysis: The transaction involved a debit to the goodwill account and a corresponding credit to share capital for allotment of shares, with no cash or cheque receipt in the hands of the assessee. On these facts, the credit did not represent an unexplained cash credit within the statutory setting of section 68. The explanation offered for the book entry was accepted as satisfactory, and the absence of actual money receipt was treated as decisive against invocation of the provision.

Conclusion: Section 68 was not attracted, and the deletion of the addition was upheld in favour of the assessee.

Ratio Decidendi: Section 68 applies only where a sum is found credited in the books as a real monetary credit to the assessee, and a mere non-cash book entry, satisfactorily explained, does not constitute unexplained cash credit.

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