TaxTMI 
TaxTMI 
TaxTMI 
2020 (6) TMI 267
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....ng amortization of de-merger expenses claimed by the assessee u/s. 35DD of the Income-tax Act, 1961 (hereinafter referred to as the "Act") 4. Briefly stated facts of the case are that a company named M/s Asian Hotels Limited (in short "AHL') operated three separate and independent undertakings. Pursuant to a scheme of demerger approved by the Hon'ble Delhi High Court, vide their order dated 13.01.2010, which became effective from 11.02.2010, one of the hotel undertakings situated at Kolkata [hereinafter referred to as 'Kolkata Undertaking'] stood transferred by way of demerger to M/s Vardhaman Hotels Ltd [which was renamed as M/s Asian Hotels (East) Ltd. i.e. the assessee] from the appointed date 31.10.2009. The terms and conditions related to the transfer of the Kolkata undertaking to the assessee were set out in Para IV of the Scheme of Arrangement. The relevant excerpts from the Scheme are reproduced hereunder: "4.1 Upon this Scheme becoming effective, the Kolkata Undertaking shall stand demerged from AHL and be vested in Transferee Company - II, without any further deed or act, together with all properties, assets, rights, benefits and interest therein, subject to....
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....itle to the immovable properties and transfer of the leasehold and other rights therein, as applicable, in the name of Transferee Company-II shall be made and duly recorded by the appropriate authorities pursuant to the sanction of this Scheme by the Hon'ble High Court and this scheme becoming effective with effect from the Appointed Date, in accordance with the terms hereof without any further act or deed on part of Transferee Company-II (save and expect for filling the sanction order relating to the Scheme with the Registrar of Companies, NCT of Delhi and Haryana);" 5. It is noted that clause 6.11 of the Scheme further set out a pre-condition that the said Scheme was conditional upon obtaining approval of the Government of West Bengal for vesting of the leasehold property belonging to the Kolkata Undertaking to the transferee company. the said Clause 6.11 read as follows: "6.11 This Scheme is conditional upon and subject to: i. The Scheme being agreed to by the respective requisite majorities of the members (either by way of a meeting or a letter of consent) and the creditors of AHL, and the members of Transferee Company-I and Transferee Company-II in accordance with Section....
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....operating results for the said period was accounted in the books of the resultant company. In connection with this demerger, the assessee had incurred the following expenses which was also debited in the P& L Account for the period 31.10.2009 to 31.03.2010. Sl No. Particulars Amount 1 Permission Fees paid to UDD, Govt of WB for transfer of leasehold property 10,89,84,900 2 AZB & Partners - Legal Fees 1,8,88,450 3 Amarchand&Mangaldas& Suresh A Shroff & Co. - Legal Fees 10,92,509 4 Amarchand&Mangaldas& Suresh A Shroff & Co. - Legal Fees 8,07,207 5 Amarchand&Mangaldas& Suresh A Shroff & Co. - Legal Fees 3,88,118 TOTAL 11,31,61,184 9. The above expenses having been incurred wholly and exclusively with the purpose of demerger and to make the scheme of arrangement effective and operational was claimed by way of deduction on pro-rata basis for five years term in terms of section 35DD of the Act with AY 2010-11 being the first year of claim. For AY 2010-11, the assessment of the assessee was completed u/s 143(3) on 10.10.2012 at total income of Rs. 15,09,04,180/-. In arriving at the assessable income, l/5th of the demerged expenses i.e. Rs. 2,26,32,327/- [11,31....
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.... disallowed the claim of the assessee made u/s. 35DD of the Act for non satisfaction of the precondition that the registration of the leasehold property should be in the name of the assessee. Therefore, he wants us to reverse the order of the Ld. CIT(A) and uphold the order of the AO. Per contra, the Ld. AR of the assessee supported the order of the Ld. CIT(A) and does not want us to interfere in the order of the Ld. CIT(A). 11. We have heard the rival submissions and gone through the facts and circumstances of the case. It is noted that M/s Asian Hotels Limited, inter alia, operated and managed a Hotel Undertaking at Kolkata which was demerged into M/s Vardhaman Hotels Limited, [renamed to M/s Asian Hotels (East) Ltd i.e. the assessee]. The appointed date as per the Scheme of Arrangement was 31.10.2009. On perusal of the terms of the Scheme, it is noted that the 'Hotel Undertaking' at Kolkata was demerged as a going concern along with all its assets and liabilities. It was, therefore, not a case of transfer of individual assets or liabilities but transfer of an undertaking as a whole. It is, however, the AO's case that the registration of leasehold property on which t....
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....he deduction claimed u/s 35DD of the Act alleging the demerger to be incomplete. It is further noted that the initial year of claim of deduction u/s 35DD of the Act was AY 2010-11. On perusal of the assessment order passed u/s 143(3) of the Act dated 10.10.2012 by the Dy.CIT, Circle 2( 1), New Delhi, we note that the AO had discussed in detail various aspects of the demerger order of the Hon'ble High Court and also the figures of the assets, liabilities and turnover of the resultant company. It is only upon being satisfied that the demerger was complete that the AO had assessed the income of the Kolkata undertaking for the period 01.11.2009 to 31.03.2010 in the hands of the assessee. We further observe that the deduction claimed by the assessee u/s 35DD of the Act was allowed by the AO in the assessment order passed for AY 2010-11. The relevant findings recorded by the AO in the assessment order for AY 2010-11 is as follows: 2. The assessee company was engaged in the business of running a Hotel and investment in shares and securities including those of subsidiary companies for furtherance of its hotel activities. During the previous year ended on 31-3-2010, relevant to the presen....
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....come during the period from 1st April 2009 till 31st October, 2009 are to be taxed and assessed in the hands of Asian Hotels (North) Ltd. (erstwhile Asian Hotels Ltd.) and income during the period from 1st November, 2009 till 31st March, 2011 are to be taxed and assessed in the hands of assessee company. 6.1 The assessee company has also declared that the assets and liabilities etc have been transferred to the assessee company from the demerging entity is in accordance to the terms and conditions of the Scheme of Arrangement and Demerger approved by the High Court of Delhi by its order dated 13th January 2010. 6.2 Therefore no taxable capital gains/ loss arise on account of the transfer of undertakings to the two demerged companies in terms of clause (vib) of Sections 47 of the Income Tax Act, 1961. 6.3 The figures of transfer of assets have been test checked with the operative terms and have been found prima facia correct and satisfactory 6.4 The turnover of the assessee for the Assessment Year 2010-11 was Rs. 41,21,54,895/- ." 14. It is further observed that the said deduction was also allowed in the order passed u/s. 143(3) of the Act for AY 2011-12. In view or the forego....
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....his claim of the assessee was found to be justified and allowable under the aforesaid provisions and on that basis 1/10th share issue expenses was allowed under Section 35D of the Act. When it was again claimed for the Assessment Year 1996-97, though it was disallowed and on directions of the Appellate Authority, the Assessing Officer made physical verification of the factory premises. He was satisfied that there was expansion of the facilities to the industrial undertaking of the assesseee. It is on this satisfaction that for the Assessment Year 1996-97 also the expenses were allowed. Once, this position is accepted and the clock had started running in favour of the assessee, it had to complete the entire period of 10 years and benefit granted in first two years could not have been denied in the subsequent years as the block period was 10 years starting from the Assessment Year 1995-96 to Assessment Year 2004-05. The High Court, however, disallowed the same following the judgment of this Court in the case of Brook Bond India Ltd (supra). In the said case it was held that the expenditure incurred on public issue for the purpose of expansion of the company is a capital expenditure. ....
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....sidering only those investments which have yielded tax free income during the year. We find that this direction of the Ld. ClT(A) is in accordance with the decision rendered by this Tribunal in the case of REI Agro Ltd. Vs. DClT in ITAT No.1331/K01/2011, which has since been upheld by the Hon'ble Calcutta High Court. Since the Ld. CIT(A) adjudicated the issue, as stated above, by following the decision the Tribunal, Kolkata Benches following the dictum of law laid in REI Agro Ltd. (supra), we do not see any reason to interfere with the order of the Ld. CIT(A) on this issue. Therefore, this ground of the Revenue is dismissed. 18. Ground No. 3 of the Revenue is against the action of Ld. CIT(A) in holding that employees' contribution deposited by employer beyond the prescribed due date is allowable as deduction u/s 43B of the Act. Briefly stated, facts are that in this case the AO disallowed a sum of Rs. 13,57,305/- being delayed payment of Employees PF contributions which the assessee had paid beyond the statutory date as provided in the Provident Fund Act [PF Act], but within the due date of filing of Income Tax Return u/s. 139(1) of the Act. On appeal, the Ld. CIT(A) fol....
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....y invoking the aforesaid amended provisions of Section 43(B) of the Act. We, therefore, find that no substantial question of law is involved in this appeal and consequently, we dismiss this appeal." 20. In view of the aforesaid decision of the Hon'ble Calcutta High Court, we are of the view that the Ld. CIT(A) has rightly allowed the deduction in respect of the employee's contribution to PF & ESI which admittedly remitted on or before the due date for filing the return of income u/s. 139(1) of the Act. We therefore do not find any infirmity in the order of the Ld. CIT(A) and, we confirm the same and dismiss this ground or appeal of revenue. ITA No. 115/Ko/2019 [AY 2013-141 21. Ground no. 1 of the appeal relates to the Ld. CIT(A)'s action of deleting the disallowance on account of the amortization of demerger expenses of Rs. 2,26,32,237/- claimed by the assessee u/s 35DD of the Act. After considering the rival submissions, it is observed that the issue involved in this ground is similar to the Ground no. 1 of Revenue's appeal in A.Y. 2012-13. Following our conclusion drawn in A.Y. 2012-13, we dismiss this ground of the Revenue. 22. Ground no. 2 of the Revenue is agains....