TaxTMI 
TaxTMI 
2013 (3) TMI 392
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.... That, on the facts and in the circumstances of the case and in law, the learned CIT(A)- VII Kolkata has erred in considering the provisions of Section 47(vii) of the Income Tax Act, 1961, when it has not been relied upon by the assessee during the course of assessment proceedings under section 143(3) of the Income Tax Act, 1961. Therefore, the said order of the learned CIT(A)- VII, Kolkata is perverse and liable to be quashed. 3. That, on the facts and circumstances of the case and in law, the learned CIT(A)- VII Kolkata has erred in not providing any opportunity to the undersigned while considering the provisions of Section 47(vii) of the Income Tax Act, 1961, in favour of the assessee, which makes the order bad in law and perverse. 4. That, on the facts and circumstances of the case and in law, the learned CIT(A)- VII Kolkata has erred in concluding that the amalgamation is not an adventure in the nature of trade, without negating the reasons to the contrary, mentioned in order under section 143(3) of the Income Tax Act, 1961 dated 28.12.2010. That, on the facts and circumstances of the case and in law, the learned CIT(A)-VII K....
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....nd 31.03.2007 respectively. The earning per share of the company (in Rupees) has been mentioned in the audited accounts for the year ended on 31.03.2007 as negligible. No dividend has been distributed by both the companies in any of the previous years. (ii) It has been found that the assets and liabilities of the amalgamated company had been taken over by the amalgamating company which resulted in income of Rs. 2,06,87,692/- after deducting capital Suspense Account of Rs. 82,15,980/- from the net worth (assets - liabilities) of the amalgamated company. The amount of Rs. 2,06,87,692/- represents the difference owning to the swap ratio determined by the Hon'ble High Court at Calcutta. Therefore, it is clear that there is a surplus amount of the net worth after allocation of share capital to the share holders of the amalgamated company as per Court's order. (iii) As already stated, that the performance of both the amalgamated and amalgamating companies is more or less similar. The said two companies are investment companies having no business activities. Therefore, the reason for amalgamation is unknown. (iv....
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....he company were alike and there was no actual business shown by it during the past year (other than investment in mostly in private limited companies). Therefore, the resultant of amalgamation is considered as a business transaction and the profit arising out of merging of accounts of the amalgamated company with the amalgamating company is business income which is in the nature of benefit or perquisite arising from business or the exercise of a profession, covered under section 28(iv) of the Income Tax Act, 1961. In view of this, Rs.2,06,87,692/- is added to the total income of the assessee under the head 'Business'. 3. Aggrieved by the stand so taken by the Assessing Officer, the assessee carried the matter in appeal before the CIT(A). Learned CIT(A) deleted the impugned addition, and observed as follows: I have gone through the submissions of the A.R. and the order of the AO, I agree with the A/R that the amalgamation of the two companies are consequent transfer of assets of amalgamating company into amalgamated company and issue of shares by amalgamated company to the shareholders of amalgamating company in lieu of transfer of undertaking of amalgamating company are all trans....
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....d on our records as well, that the capital reserve of the amalgamating company, i.e. VVPL, was shown in the books of accounts of the assessee. The short question that we really need to answer is whether on these facts, the transfer of capital reserve to the assessee company can indeed be considered to be an income of the assessee under section 28 (iv) as a 'business income'. As we deal with this issue, we may also mention that given these facts, as far as learned CIT(A)'s reliance on this Tribunal's decision in the case of DCIT v. M L Dalmiya & Co Ltd (98 ITD 93) is concerned, it is really out of place inasmuch as the question before the Tribunal in the said case whether an addition, in respect of entries pertaining to inter alia share amalgamation reserve, can be made to the 'undisclosed income' under section 158 BB - particularly when all the relevant details were furnished at the time of regular assessment proceedings. Answering this question, the co-ordinate bench observed that, "Coming to the merits of the case, we find that the learned CIT(A) has deleted the addition observing that the addition made by the Assessing Officer on account of undisclosed income was not justified a....
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....me, there cannot be any occasion to bring the same to tax under section 28(iv). Hon'ble Supreme Court, in the case of Padmaraje R Kadambande v. CIT (195 ITR 877) observed that, "...we hold that the amounts received by the assessee during the financial year in question have to be regarded as capital receipts, and, therefore, are not income within meaning of section 2(24) of the Income Tax Act." (Emphasis by underlining supplied by us). This clearly shows, as is the settled law, that a capital receipt, in principle, is outside the scope of income chargeable to tax. Of course, there are specific provisions under the Income Tax Act which provide that certain capital receipts can also be considered as income, such as under section 2 (24)(vi) which covers "any capital gains chargeable under section 45", but right now we are confined to normal connotations of the expression 'income'. Howsoever liberal or narrow be the interpretation of expression 'income', it cannot alter character of a receipt, i.e. convert a capital receipt into revenue receipt or vice versa. The crucial distinction between capital and revenue cannot be blurred or nullified by even the most liberal interpretation of exp....
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....s used for blended undertaking, which holds existence of those two or more companies. In essence thus, the whole exercise of amalgamation in the nature of merger is an exercise in that of pooling of resources, as also pooling of assets, into the company in which two or more companies are blended. It is a process of corporate reconstruction and it is only with the approval of Hon'ble jurisdictional High Court that this exercise is carried out. In the present case also, as stated in paragraph 4 of Part I of Schedule A (i.e. scheme of amalgamation) to Hon'ble Calcutta High Court's order dated 9th April 2008, "for the purpose of better, efficient and economical management, control and running of the business and to withstand the recessionary trend in the economy of the business undertaking concerned and for administrative convenience and to obtain advantage of economies of large scale, the present scheme is proposed to amalgamate the transferor company (i.e. VVPL) with the transferee company (i.e. the assessee)". As a result of amalgamation, the assessee, being the transferee company, will increase its assets and liabilities, and, even if there be any benefit in the process, such a ben....