TaxTMI 
TaxTMI 
TaxTMI 
2020 (11) TMI 47
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....essing Officer in computing the total income at Rs. 2,56,06,81,0687- as against that of Rs. 1,38,88,41,840/-declared by the appellant in the return of income filed on 30/09/2015. 2. The learned Commissioner of Income Tax (Appeals) has erred in passing the appellate order in undue haste without granting adequate opportunity of representation to the appellant Company when the written submissions dtd. 10/10/2019 filed before him specifically stating therein that the written submissions have been filed in part and the balance submissions shall be furnished to you shortly. Hence the order so passed being against the principles of natural justice and law requires to be cancelled. 3. The learned Commissioner of Income Tax (Appeals) has erred in not appreciating the fact that the assessee company had filed written submissions dtd.09/07/2019 and 10/10/2019. He ought to have considered the fact that in both the written submissions it has been specifically stated that the submissions have been made in part and the balance submissions shall be furnished to you shortly. 4. The learned Commissioner of Income Tax (Appeals) has erred in passing appellate order without granting further opport....
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....existing business of a group company has been amalgamated with a paper company of the same group only by issue of shares and without any material change in shareholding. 13. The learned Commissioner of Income Tax (Appeals) has erred in confirming action of the Assessing Officer in holding that the assessee has issued shares at a huge premium to the same shareholders of the group and the transferee company is a paper company with no worthwhile activities. 14. The learned Commissioner of Income Tax (Appeals) has erred in confirming action of the Assessing Officer in making allegation that high value tax evasion is happened in both by way of claiming excess depreciation and creation of dubious capital in the converted entity LLP. 15. The learned Commissioner of Income Tax (Appeals) has erred in confirming action of the Assessing Officer in not accepting valuation report of RBSA Capital Advisors LLP submitted by the Appellant and further holding that adoption of different value method for two companies UPPL and UMPL is unjustified. 16. The learned Commissioner of Income Tax (Appeals) has erred in confirming action of the Assessing Officer in holding that the valuation report ha....
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....about the decision of the Hon'ble Supreme Court in the case of Maruti Suzuki India Ltd (supra) when the appeal was filed. It came to its notice subsequently. On the strength of the Hon'ble Supreme Court's decision in the case of National Thermal Power Co. Ltd. Vs. CIT, (1998) 229 ITR 383 (SC), he contended that this will go to the root of the assessment of the assessee and, therefore, being a legal issue, the assessee be permitted to raise these grounds. On the other hand, learned CIT-DR opposed the prayer of the assessee. He contended that the assessee never took this objection before the Revenue Authorities below. According to him, permission to raise these additional grounds of appeal at this stage would require investigation of fresh facts which are not available on record. Therefore, assessee's application be rejected. We have duly considered the rival contentions and gone through the record carefully. The issue which assessee wishes to raise by way of this application is purely a legal issue. The relevant facts require to be noted are already mentioned in paragraph no.3 to 3.6 of the assessment order. According to the decision of Hon'ble Supreme Cour....
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....nbsp; sd/- (WA) (RPY) AM &nbs....
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....existent entity at that point of time. The ld. AR has filed a paper book running from pages 1 to 59 and highlighted the chronology of events right from the date of filing the returns, scheme of amalgamation, intimations for change of name and conversion into LLP and the assessment framed under section 143(3) read with section 144C of the Act dated 27th December 2018. 7. On the other hand the Ld. DR submitted that the notice under section 143(2) of the Act was issued on 8-4-2016 in the name of the erstwhile company before the approval of the scheme of amalgamation by the Hon'ble High Court. Therefore, the notice issued under section 143(2) of the Act was valid and consequent assessment in the name of the erstwhile company under section 143(3) of the Act was also valid. 8. We have heard both the parties and perused the materials available on record before us, especially the impugned orders and the case law cited therein and also cited by the learned AR of the assessee as discussed aforesaid. 9. Now coming to the legality of order framed by the AO under section 143(3) read with section 144C of the Act vide order dated 27thDecember 2018, in this regard we note that the AO on the fir....
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....ing Pvt Ltd (UMPL or Transferee Company). The excess consideration discharged by UMPL, over book value of UPPL Transferor Company, was recorded as goodwill in the books of UPPL, Transferee Company. In terms of the scheme, All the assets of UPPL transferred to and vested in UMPL pursuant to the Scheme have been recorded at the book value and all the liabilities of UPPL transferred to and vested in UMPL pursuant to the Scheme have been recorded at the book value. The difference of Rs. 4,68,73,56,913/- between net value of assets over consideration has been debited to goodwill account in the books of the company." 10. The AO vide letter dated 25-1-2017 bearing No. ITO/Wd.4(1)(4)/AHD/Advance Tax/2016-17 has also requested to the UPPL for making the advance payment of tax. The copy of the letter is placed on page 51 of the paper book. Similarly, the fact of intimating the non-existence of the company UPPL and its conversion into LLP was brought to the notice to AO vide letter dated 6-2-2017. The copy of the letter is placed on page 52 of the paper book. 11. Likewise, the assessee vide letter dated 13-3-2018 under section 154 of the Act requested the AO for the grant of credit of the t....
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....transferor company was to stand dissolved without winding up. The scheme stipulated that the order of amalgamation will not be construed as an order granted exemption from the payment of stamp duty or taxes, or any other charges, if any payable in accordance with law. The AO has initiated the assessment proceedings by issuance of notice under section 143(2) on 26thSeptember 2013 followed by a notice under section 142(1) of the Act to the amalgamating company. MSIL participated in the assessment proceedings of erstwhile amalgamating entity i.e. SPIL through its authorized representative and officers. The assessment was framed. Thereafter during the appellate proceedings before the Tribunal the assessee took an objection that final assessment order was passed on 31.10.2016 in the name of SPIL which was amalgamated with MSIL. The assessee took an objection that the assessment order has been passed in the name of company which ceased to exist and therefore, the assessment order is void ab initio. This plea of the assessee was accepted by the Tribunal. This order of the Tribunal was upheld by the Hon'ble High Court. Ultimately issue travelled upto Hon'ble Supreme Court. While ta....
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.... loses its entity." (iv) Fourthly, upon the amalgamating company ceasing to exist, it cannot be regarded as a person under Section 2(31) of the Act 1961 against whom assessment proceedings can be initiated or an order of assessment passed; (v) Fifthly, a notice under Section 143 (2) was issued on 26 September 2013. To the amalgamating company, SPIL, which was followed by a notice to it under Section 142(1); (vi) Sixthly, prior to the date on which the jurisdictional notice under Section 143 (2) was issued, the scheme of amalgamation had been approved on 29 January 2013 by the High Court of Delhi under the Companies Act 1956 with effect from 1 April 2012; (vii) Seventhly, the assessing officer assumed jurisdiction to make an assessment in pursuance of the notice under Section 143 (2). The notice was issued in the name of the amalgamating company in spite of the fact that on 2 April 2013, the amalgamated company MSIL had addressed a communication to the assessing officer intimating the fact of amalgamation. In the above conspectus of the facts, the initiation of assessment proceedings against an entity which had ceased to exist was void ab initio. 20. In Spice Entertainment....
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....pany and thus, ceased to exist from 7 December 2009. The Court rejected the argument of the Revenue that the assessment was in substance and effect in conformity with the Act by reason of the fact that the assessing officer had used correct nomenclature in addressing the Assessee; stated the fact that the company had amalgamated and mentioned the correct address of the amalgamated company. It was the Revenue's contention that the omission on the part of the assessing officer to mention the name of the amalgamated company is a procedural defect. The Delhi High Court rejected this contention. In doing so, it relied on the holding in Spice Entertainment, (supra) where the High Court expressly clarified that "the framing of assessment against a non-existing entity/person" is a jurisdictional defect. The Division Bench also relied on the holding in Spice Entertainment (supra) that participation by the amalgamated company in proceedings does not cure the defect as "there can be no estoppel in law", to affirm the quashing of the assessment order. 22. In Micron Steels, (supra) a notice was issued to Micron Steels Pvt Ltd (original assessee) after it had amalgamated with Lakhanpal Inf....
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....legal principle that the amalgamating entity ceases to exist upon the approved scheme of amalgamation. Participation in the proceedings by the appellant in the circumstances cannot operate as an estoppel against law. This position now holds the field in view of the judgment of a co-ordinate Bench of two learned judges which dismissed the appeal of the Revenue in Spice Enfotainment (supra) on 2 November 2017. The decision in Spice Enfotainment has been followed in the case of the respondent while dismissing the Special Leave Petition for AY 2011-2012. In doing so, this Court has relied on the decision in Spice Enfotainment (supra). 34. We find no reason to take a different view. There is a value which the court must abide by in promoting the interest of certainty in tax litigation. The view which has been taken by this Court in relation to the respondent for AY 2011- 12 must, in our view be adopted in respect of the present appeal which relates to AY 2012-13. Not doing so will only result in uncertainty and displacement of settled expectations. There is a significant value which must attach to observing the requirement of consistency and certainty. Individual affairs are conducted....
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.... dated 27thDecember 2018 for the year under consideration is void ab-initio and bad in law. Hence the assessment order is a nullity in the eye of law and the same is quashed. The additional ground raised by the assessee is allowed. 19. The grounds raised in the appeal memo are descriptive and argumentative in nature. They are in fact inter-connected to each other, raising to only one issue, that is to say, in ground no.1 to 17, the effective issue involved is that the ld.CIT(A) has erred in confirming the disallowance of depreciation for Rs. 1,17,18,39,228/- on the intangible assets/goodwill acquired in the scheme of amalgamation. 20. The facts in brief are that M/s Unicorn Packers Private Limited (amalgamating co.) got amalgamated with the assessee company [M/s. Urmin Marketing Pvt Ltd. (amalgamated co.)]w.e.f. 01st April 2014 in a scheme of amalgamation approved by the Hon'ble Gujarat High Court vide order dated 27thJuly 2015. All the assets and liabilities of the amalgamating company i.e. M/s Unicorn Packers Private Limited (here-in-after known as UPPL) as on 31stMarch 2014 became the assets and liabilities of the assessee (amalgamated co.) w.e.f. 1stApril 2014. 20.1 The net ....
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....same as it was there in the books of amalgamating company prior to the amalgamation. Accordingly, the AO was of the opinion that as there was no goodwill in the books of UPPL prior to amalgamation, therefore the value of goodwill in the books of UMPL should also be NIL for the purpose of taxation. 20.5 The AO further observed that in a scheme of amalgamation two or more separate entities join hands together and become one entity. The shareholders of amalgamating company, in consideration for the transfer of the assets and liabilities, receive shares in new resultant company (amalgamated co.). The value of the shares of the amalgamating company is determined after considering various factor i.e. on the basis of valuation of the business and revaluation of assets and liabilities of the amalgamating company which results in the goodwill in the hands the amalgamated company if the purchase consideration is in excess to the net assets acquired by it from the amalgamating company. 20.6 Accordingly, the AO was of the view that such intangible asset in form of goodwill emerging in books of resulting company (amalgamated company) was on account of valuation of business and revaluation of....
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.... I. CIT vs. Smifs Securities Ltd [2012] 348 ITR 302 (SC) II. PCIT vs. Zydus Wellness Ltd [2017 87 taxmann.com 82(Gujarat) III. Vimalachal Print & Pack Pvt. Ltd vs. DCIT (2016 tax Pub(DT) 3326 (Guj)) The assessee in view of above judgment claimed that the depreciation on goodwill arising in the scheme of amalgamation is allowable under section 32 of the Act. 22.5. However the AO during the assessment proceedings after considering the detailed submission made by the assessee observed certain facts which can be categorized under the sub-head as detailed under: I. Controlled transaction/ same management :- i. The directors/shareholders in both the companies i.e. UPPL and UMPL before and after the amalgamation were common. Similarly, there was no change in the shareholding pattern of the shareholders pre and post amalgamation. Thus both the companies were managed and controlled by the same group of persons. ii. Likewise, the registered address of both the companies was common and the residential addresses of the directors was also common. Thus all the directors were belonging to the same group/family in case of both the companies. iii. The amalgamated company namely UMP....
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.... such as market capitalization, beta and risk free premium were also inconsistent. As such market capitalization has been determined onthe basisof one year data, beta determined on average of 5 years and risk free premium were calculated on an average of 10 year data. Thus the assumptions /basis i.e. market capitalization, beta and risk free premium used in the formula adopted for the valuation of shares were not as per the standard practice. d. Based on the above discrepancies in valuation report it emerged that the valuation was done intentionally in such a way whichsuits to the directors/share holder of the assessee company so that it can claim huge depreciation on such goodwill. III. Inflated amount of profit in the books of amalgamated company i.e. UPPL: 23. The higher profit before tax shown by the UPPL before amalgamation for the year ending 31stMarch 2014 is mainly due to reduction in the purchase price of the materials consumed in comparison to the earlier years which was supplied by the group concern. As such the reasonableness of cost of purchase is not known. Further the employee cost in relation to the revenue from operation of UPPL is negligible which suggest....
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....t. Hence as per the provision of section 55(2)(a)(ii) of the Act value of assets which has been acquired without incurring any cost should be taken at NIL. Similarly, there would not be any possibility for allowing the deduction for the assets resulting on account of revaluation of assets. 23.6 The AO Further observed that as per AS-14 there are two methods of accounting namely pooling of interest method and purchase method which are applied for recording the transaction arising in the scheme of amalgamation of companies. In case the conditions, in a scheme of amalgamation prescribed under para 3(e) of AS 14 are fulfilled, then pooling of interest method of accounting should be applicable. Under pooling of interest method any difference between purchase consideration and book value of assets & liabilities should be recognized as amalgamation reserve. As such no concept of goodwill is available in this method of accounting. Whereas any of the condition prescribed under para 3(e) is not fulfilled, in such case assets and liabilities are transferred at revalued price and any difference between purchase consideration and market value of assets & liabilities is to be recognized as good....
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....as also invited objection from the central government if any in the scheme of amalgamation, but there was no objection of any type raised despite having the specific opportunity. Accordingly the learned AR claimed that the AO had no jurisdiction for disturbing the impugned amount of goodwill as there was not any violation in the implementation of the scheme which is approved by the Hon'ble Gujarat High Court. 25.2 It was also pointed out that all the details about the management / ownership/ shareholding patterns /control pre and post amalgamation about both the companies were available in the public domain and nothing was concealed in the impugned scheme of amalgamation. Furthermore, the reasons and the rationale behind the impugned scheme of amalgamation was duly explained in the scheme of amalgamation. Therefore, the common ownership/control/management cannot be a reason for not allowing the claim of goodwill on the assumption of that the entire scheme was a colourable device. The amalgamated company was earning huge amount of profit and it had a lot of business potential and other assets including creditors , customers, market base , supplier information, skilled labour/train....
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....nce of nearly 48 years in the field and registered with the SEBI. In case, the AO was dissatisfied with the valuation report, then he should have sought clarification directly from the valuer by issuing notice under section 133(6) of the Act. As such the valuation of the business requires distinct technical expertise and the AO does not possess such technical expertise. Therefore the AO was under the obligation to take the assistance of the valuer in the event of being dissatisfied with valuation. The learned AR in support of his contention referred to the orders of this tribunal in case of Synbiotics Ltd. vs. ACIT reported in 48 ITR (T) 210 (Ahd) and order of Delhi tribunal in case Cinestaan Entertainment Pvt. Ltd. vs. ITO reported in 177 ITD 809. 25.7 The learned AR for the ready reference has also filed the copy of the valuation report which is placed on pages 306 to 344 of the paper book. 25.8 The learned AR further contended that there is no violation of the proviso of 5 to section 32(1) of the Act as the impugned amount of goodwill was not shown by the amalgamating company. As such the amount of goodwill was generated by the assessee company in the process of amalgamation.....
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.... transfer of the capital assets by the holding company to the subsidiary and vice versa and therefore the provisions as specified under section 47(iv) & (v) are not applicable in the given facts and circumstances. Likewise, the provisions of section 47(vi) are not applicable to the present facts of the case for the simple reason that there was no goodwill appearing in the balancesheet/ block of assets of the amalgamating company. Similarly the other provisions as specified under section 47 (iva), 47(ivaa), 47(ivab), 47(ivb), 47(ivc), 47(ivca), 47(ivcb) , 47(ivcc, 47(xiii) and 47(xiv) are not applicable in the case of the assessee on account of goodwill shown by it in the books of accounts. In view of the above, the assessee claimed that the property being goodwill has not become its property in the mode as specified under section 47 of the Act. Accordingly the provisions of section 49(1)(iii)(e) of the Act cannot be applied in the case on hand. The assessee also contended that goodwill being a business asset cannot be treated as capital assets for applying the provisions of the capital gain. 26.4 The learned AR further contended that the provisions of section 55 (2)(a)(ii) are rel....
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.... purchase consideration to the amalgamating company. In view of the above the learned AR submitted that claim of the assessee for the depreciation on the goodwill being intangible assets should be allowed under the provisions of section 32 of the Act. 27. On the other hand the learned DR submitted that the scheme of amalgamation is tax neutral exercise and therefore there cannot be any question of goodwill arising in such a scheme. 28. The learned DR also argued that the assessment proceedings and the amalgamation proceedings are different exercises. In the amalgamation proceedings, there was no question raised about the allowability of the depreciation on such goodwill. Accordingly issue of allowability of the depreciation under the provisions of section 32(1) of the Act was verified during the assessment proceedings. Thus, no objection filed by the revenue in the amalgamation proceedings cannot be a ground for allowing the depreciation in the assessment proceedings. 28.1 The learned DR has also pointed out that the valuation report was not furnished to the Hon'ble High Court along with the scheme of amalgamation. The learned DR also reiterated the defects in the valuation rep....
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....iii) shareholders holding not less than three-fourths in value of the shares in the amalgamating company or companies (other than shares already held therein immediately before the amalgamation by, or by a nominee for, the amalgamated company or its subsi-diary) become shareholders of the amalgamated company by virtue of the amalgamation, otherwise than as a result of the acquisition of the property of one company by another company pursuant to the purchase of such property by the other company or as a result of the distribution of such property to the other company after the winding up of the first-mentioned company; A bare perusal of the above provisions of the Act would indicate that in a scheme of amalgamation all the properties & liabilities of the amalgamating company would become the assets and liabilities of the amalgamated company. Similarly it was also provided that the shareholders holding not less than 75% in value of the shares in the amalgamating company should become the shareholders of the amalgamated company. The provision of section 2 (1B) of the Act reads as under: (1B) "amalgamation", in relation to companies, means the merger of one or more companies with ....
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.... factors which may affect future profitability and growth. Such factors includes previous earnings, future possible earnings, location, technical knowhow, customer base, marketing network etc.Thus it leads to difference between net value of assets taken over and purchase consideration paid. 31.3 Accounting standard-14, issued by the ICAI prescribes two method of accounting for the transaction carried out in the scheme of amalgamation namely pooling of interest method and purchase method. If scheme of the amalgamation fulfills the condition of para 3(e) of the Accounting standard- 14 then pooling of interest method should be followed otherwise purchase method of accounting should be applied. The relevant extract of accounting standard reads as under: 7. There are two main methods of accounting for amalgamations: (a) the pooling of interests method; and (b) the purchase method. 8. The use of the pooling of interests method is confined to circumstances which meet the criteria referred to in paragraph 3(e) for an amalgamation in the nature of merger. 31.4 Under pooling of interest method the difference between purchase considerations and the net assets taken over by the amalg....
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....ed 24thJuly 2015 which was effective from 1-4-2014. Subsequently the assessee at the time of filing return of income claimed depreciation on such goodwill by treating the same as intangible assetswhich was disallowed by the AO and confirmed by the learned CIT (A) by holding it at NIL value for the purpose of taxation. 31.8 Undeniably, the purchase consideration paid by the assessee to the shareholders of the transferor/ amalgamating company stands at Rs. 555.75 crores as evident from the scheme of amalgamation. The relevant clause of the scheme of the amalgamation stands as under: 500 (five hundered) fully paid Equity Shares of Rs. 10/- each of Transferee Company shall be issued and allotted for every 1(one) Equity share of Rs. 10/- each held in Transferor company. XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX The new equity shares shall be issued by Transferee Company to the shareholders of Transferee Company at a premium of Rupees one hundred thirteen rupees and fifty paisa per share 31.9 Hence, the purchase consideration exceeds the book value of net asset acquired by it by Rs. 486,73,56913/- as discussed above. The excess amount was recorded as goodwil....
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....agraph 2(a) and 2(b) contain statements of fact and do not require any response. ii. The only observation of the Regional Director made vide paragraph 29c0 pertains to the letter dated 8.5.2015 sent by the Regional Director to the Income Tax Department to invite their objections, is any. It has been submitted on behalf of the petitioner that since the statutory period of 15 days as envisaged by the relevant circular of the Ministy of Corporate Affairs is over, it can be presumed that the Income Tax Department has no objection to the proposed scheme of arrangement. The petitioner companies have agreed to comply with the applicable provisions of the Income Tax Act and Rules. In view of the same, no further directions are required to be issued to the petitioner companies in this regard. iii. The Regional Director has confirmed that there are no complaints received against the Petitioner companies in the office of the Registrar of Companies, and there are no other objection to the scheme. 31.12 In this connection we note that the scheme for the amalgamation was presented before the Hon'ble Gujarat High Court for the approval in pursuance to the provisions of section 391 to 394A of....
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....recently come to light wherein a Regional Director did not project the objections of the Income Tax Department in a case under Section 394. The matter has been examined and it is decided that while responding to notices on behalf of the Central Government under Section 394A, the Regional Director concerned shall invite specific comments from Income Tax Department within 15 days of receipt of notice before filing his response to the Court. If no response from the Income Tax Department is forthcoming, it may be presumed that the Income Tax Department has no objection to the action proposed under Section 391 or 394 as the case may be. The Regional Directors must also see if in a particular case feedback from any other sectoral Regulator is to be obtained and if it appears necessary for him to obtain such feedback, it will also be dealt with in a like manner. 4. It is also emphasized that it is not for the Regional Director to decide correctness or otherwise of the objections/views of the Income tax Department or other Regulators. While ordinarily such views should be projected by the Regional Director in his representation, if there are compelling reasons for doubting the correctn....
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....t are sent by the concerned CIT to Regional Director, MCA for incorporating them in its response to the Court, immediately after receiving information about any scheme of amalgamation or reconstruction etc. 4. This issues with approval of Member (A&J). 31.14 From the above circular, it is transpired that the Revenue was conscious about the fact that there was the possibility of misusing the provisions of the Income Tax Act in the name of the scheme of amalgamation as provided under section 2(1B) causing prejudice to the Revenue. But the Revenue despite having the opportunity in its hand did not raise any objection within the time allowed by the MCA or subsequently by raising the objection in the impugned scheme of amalgamation. Thus from the conduct of the Revenue, it is revealed that there was no grievance in the impugned scheme of amalgamation. Had there been any grievance of the Revenue, the same could have been brought to the notice of the regional director of the MCA, then the suitable action should have been initiated against the impugned scheme of the amalgamation. In this regard, we note that recently the Mumbai bench of NCLT in one of the petitionfor amalgamation in cas....
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.... in the public interest, thousands of shareholders of Transferee company especially retail shareholders. The market value of the same number of shares as at 31.03.2016 was 1,182.59 Crores. 39. Since Income Tax department (IT) has raised strong objections about tax benefit, tax avoidance, tax loss as discussed above, we are of the opinion that it would be www.taxguru.in advisable to settle the important/crucial issue of huge tax liability before sanctioning the scheme by the Tribunal rather than disputing the same at a later stage after the scheme is sanctioned by the Tribunal. It is mandatory as per section 230 (5) of the Companies Act, 2013, a notice under sub section (3) along with all the documents in such form shall also be sent to central government, Income Tax Authorities, RBI, SEBI, ROC, stock exchanges, OL, CCI and other Sectoral regulators or Authorities for their representations. In response to the notice received as per above section the Income Tax Department has raised valid observation/objections as detailed above, we find merit in the objections raised by Income Tax Department and we are also inclined to agree with the objections raised. From the above, it is inferre....
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.... refer certain provisions of law in the context of the scheme of amalgamation as provided under section 2(1B) of the Act as detailed under: Depreciation. 1932. (1) 20[In respect of depreciation of- (i) XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX (ii) know-how, patents, copyrights, trademarks, licences, franchises or any other business or commercial rights of similar nature, being intangible assets acquired on or after the 1st day of April, 1998, owned 21, wholly or partly, by the assessee 21 and used for the purposes of the business 21 or profession, the following deductions shall be allowed-] 22[(i) XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX (ii) 24[in the case of any block of assets, such percentage on the written down value thereof as may be prescribed 25:] XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX 38[Provided also that the aggregate deduction, in respect of depreciation of buildings, machinery, plant or furniture, being tangible assets or know-how, patents, copyrights, trademarks, licences, franchises or any other business or commercial rights of similar nature, being intangible assets allowable to the predecessor and the successor in the case of succession refe....
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....ation 7.-Where, in a scheme of amalgamation, any capital asset is transferred by the amalgamating company to the amalgamated company and the amalgamated company is an Indian company, the actual cost of the transferred capital asset to the amalgamated company shall be taken to be the same as it would have been if the amalgamating company had continued to hold the capital asset for the purposes of its own business.] 33.2 We further note that the WDV of the assets acquired in the scheme of amalgamation in the hands of the amalgamated company will continue to be the same as it would have been in the hands of the amalgamating company in the event, had there not been any amalgamation. The relevant extract of the explanation 2 to section 43(6)(c) of the Act reads as under: (6) "written down value" means- XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX 42[Explanation 2.-Where in any previous year, any block of assets is transferred,- (a) XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX (b) by the amalgamating company to the amalgamated company in a scheme of amalgamation, and the amalgamated company is an Indian company, then, notwithstanding anything contai....
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....areholders, received as consideration for transfer of shares of amalgamating company, to be same as the cost of shares of amalgamating company under section 49(2) of the Act. 33.5 From the above, it would appear that the intent of the Legislature is to make amalgamation a tax neutral scheme for companies as well as for the shareholdersand not to provide a tax planning mechanism to either of them.However, a conjoint reading of the above provisions reveal that the assets which were transferred by the amalgamating company to the amalgamated company in the process of amalgamation were not made subject to the capital gain tax. Furthermore, the 6thproviso to section 32 of the Act has limited the amount of depreciation available to the amalgamated company post amalgamation to the extent of the amount of depreciation which would have been available to the amalgamating company, had there not been any amalgamation. Indeed there was no entry in the books of the transferor/amalgamating company for the intangible assets/ goodwill being self-generated assets. However, we note that all the relevant provisions of the Act as discussed above deal with respect to the assets available/recorded in the....
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....mifs Securities Ltd reported in 348 ITR 302 has held that the goodwill falls within the definition of the assets under the category of any other business or commercial rights of similar nature. The relevant extract reads as under: Explanation 3 to section 32(1) states that the expression 'asset' shall mean an intangible asset, being know-how, patents, copyrights, trademarks, licences, franchises or any other business or commercial rights of similar nature. A reading of the words 'any other business or commercial rights of similar nature' in clause (b ) of Explanation 3 indicates that goodwill would fall under the expression 'any other business or commercial rights of a similar nature'. The principle of ejusdem generis would strictly apply while interpreting the said expression which finds place in Explanation 3 (b). (Para 4) In view of the above, it is opined that 'Goodwill' is an asset under Explanation 3(b) to section 32(1). (Para 5) In view of the above judgment, there remains no ambiguity that the goodwill is part and parcel of intangible assets. Hence, the assessee is eligible for depreciation on the goodwill. 33.8 Moving further, we note ....
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....ribunal in case of Synbiotics Ltd vs. ACIT reported in [2016] 48 ITR(T) 210 (Ahd) where it was held as under: Assessing Officer has adopted the value of Rs. 250 per sq. mtr. On the basis of the sale instances related to residential areas situated 2 to 3 kms. away from the property in question. There is no dispute with regard to the fact that property in question is an industrial land which cannot be compared with the residential properties. Admittedly, neither the Assessing Officer nor the Commissioner (Appeals) called for report from the Departmental Valuation Officer and proceeded to make their own estimation. It is incumbent upon the assessing authority to call for report from Departmental Valuation Officer for ascertaining the fair market value of the asset, in the event he is not satisfied about the claim of the assessee. Both the authorities below are not justified in adopting the rate as the assessee had furnished a report from an expert, i.e., Government approved valuer. 34.1 The subsequent allegation of the AO is that both the companies i.e. amalgamated and the amalgamating companies were controlled and managed by the same group of personpre and post amalgamation. Thus ....
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.... purchase consideration by the amalgamated company to the shareholders of the amalgamating company was duly disclosed in the scheme of amalgamation. b) The valuation of the business of the amalgamating company was based on the approved valuation report. c) The fact of the common control and management of the both the amalgamated and amalgamating companies were disclosed in the scheme of amalgamation which was also noted by the Hon'ble Gujarat High Court and this fact was also in the knowledge of Revenue. Thus, we are of the view no facts were concealed or hidden. (ii) whether it could be a normal business practice; Ans: In today's time the activity of amalgamation is very common and prevailing in the corporate world for synergising resources, control, eliminate the competition etc. (iii) Even where individual transactions of the device are legal or legitimate, whether combination of these steps creates an effect which is abnormal in the business world and could not have been otherwise undertaken in normal circumstances; Ans. In the present case there was no reference made by the authorities below suggesting that the transaction is carried illegally. Moreover, the tran....