ITAT upholds deletion of Section 68 addition for company-to-LLP conversion capital transfer to partners

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....ITAT allowed assessee's appeal challenging addition under Section 68 read with Section 115BBE for unexplained credits. Upon conversion from private company to LLP, assessee transferred share capital, reserves and surplus to partners' accounts. AO alleged violation of Section 47(xiiib)(f) conditions prohibiting distribution of accumulated profits within three years of conversion, making addition under Section 68. CIT(A) deleted the addition. ITAT held Section 47 pertains only to capital gains computation under Section 45, not unexplained credits under Section 68. The transferred amounts had identifiable nature and source, being company's own accumulated profits. Addition was erroneously made in assessee's hands when credits appeared in partners' accounts. None of Section 68's ingredients were satisfied as credits were not unexplained. CIT(A)'s deletion of addition was upheld.....