TaxTMI 
TaxTMI 
2023 (4) TMI 899
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..../2006 M/s.Dadha Pharma Pvt. Ltd. [Dadha Group] 2 648/09 16.11.2007 I.T(SS).A.No.180/Mds/2002 Shri. S.Mohanchand Dadha (Indl) [SMD] 3. By the impugned orders, the Tribunal has dismissed the respective appeals of the Income Tax Department in I.T(SS).A.No.150/Mds/2006 and in I.T(SS).A.No.180/Mds/2002 filed against the orders of the Commissioner of Income Tax (Appeals) [hereinafter referred to as "Appellate Commissioner"] allowing the respective appeals of the respondents in ITA TR No.65/04-05 vide order dated 28.03.2006 and in ITA No.CIT(A)(C).VIII/DCCC.32/1.T/ 100/2001-02 vide order dated 05.07.2002 respectively. 4. The dispute in these appeals pertains to the Block Assessment period between 01.04.1988 and 15.12.1998. At the time of admission of these appeals, the following substantial questions of law were framed for being:- i. Whether in the facts and circumstances of the case, the Tribunal was right in holding that since the amalgamation is a reality, amounts received by the assessee from the amalgamated company from even before the amalgamation cannot be brought to tax? ii. Whether in facts and circumstances of the case, the Tribunal was ....
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....he Hon'ble High Court expounded as under: Section 158BB occurs in Chapter XIV-B, which provides for special procedure for assessment of search cases. The computation of undisclosed income of the block period is contemplated under section 158BB. As per the section, the undisclosed income of the block period should be the aggregate of the total income of the previous year falling within the block period computed in accordance with the provisions of this Act, on the basis of the evidence found as a result of search or requisition of books of account or other documents and such other materials or information as are available with the Assessing Officer and relatable to such evidence, as reduced by the aggregate of the total income, or as the case may be, as increased by the aggregate of the losses of such previous years. A mere reading of the above provision clearly indicates that the sentence "such other materials or information as are available with the Assessing Officer" cannot be bisected or taken in isolation for, the purpose of computation. Such other materials or information as are available with the Assessing Officer, should as per the section relatable to ....
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.... this assessment is under sec.158BD of the Act, cannot be sustained as clearly the conditions precedent to initiate sec.158BD as expounded by the Hon'ble Apex Court above, have not been followed. This is therefore a case where section 158BD was required to be invoked. Such requirement cannot be obviated merely because a search was also conducted in the case of the Assessee, admittedly yielding no undisclosed income. Section 158BB(1) only provides for computation of undisclosed income during the block period. It does not override or negate the provisions of section 158BD. Irrespective of whether the assessment is made under section 158BC or under section 158BD read with section 158BC, the undisclosed income of the block period has to be computed under section 158BB of the Act. Since in the instant case the undisclosed income of the Assessee was found from the material seized from search of other persons, such income could not be assessed under Chapter XIVB without invoking the provisions of section 158BD. In the prevailing facts and circumstances the block assessment made under section 158BC without invoking the provisions of section 158BD is illegal. This issue is therefore dec....
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....e reasons for which it was made. The other arguments of the learned Counsel of the Assessee for the deletion of this protective addition also appear to us to be quite convincing. It is observed that Sri Sudhir Valia during the course of recording of the statement under sec.131 of the Act, stated that Rs.1,28,50,000/- was offered for taxation on account of various amounts paid to Dadhas of Chennai and the said amount after verification from the records of SPIL increased to Rs.1,33,50,000/- and the same was disclosed in the block return of SPIL. This addition is also not sustainable in view of the Hon'ble Apex Court's decision in the case of CIT v. D.P.Sandhu Bros. Chembur P. Ltd. [2005] 273 ITR 1 wherein it was held that if a particular income falling under a particular head of income cannot be so taxed, the same cannot be taxed in any other head. In the background of the aforesaid discussion and precedent, we are of the view that the C.I.T. (Appeals) was justified in deleting the addition of Rs.1,33,50,000/- made in the hands of the Assessee on protective basis. In the result, the appeal of the Revenue is dismissed. T.C.A.No.1925/2008: OPERATIVE PORTION OF THE I....
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....the theory of receipt of sale consideration by the Assessees is sought to be established by the Department are by themselves not adequate to prove that any such amount was received by the Assessee. The facts being identical, in these appeals also there is no reason to differ from the aforesaid findings. In the said case of Shri S.Mohandchand Dadha (HUF) cited supra in para 26, reliance had also been placed upon the Hon'ble Apex Court's decision in K.P.Varghese v. ITO (1981) 131 ITR 597, P.V.Katyanasundaram (294 ITR 49) and CIT v. D.P.Sandu Bros.Chembur P.Ltd.(2005) 273 ITR 1. In the background of the same reasoning and precedent, we decide this issue in favour of the Assessees and reverse the order of the C.I.T.(Appeals) on this issue. Since there is no sale of shares, capital gain did not arise an the C.I.T. (Appeals) was justified in deleting the capital gain in the case of Dadha Pharma P.Ltd. Hence, we allow the appeals of the Assessees on this issue and the appeal of the Revenue on this issue is dismissed. 8. As far as the supplementary issue relating to the interest on delayed payment of consideration received from M/s.Sun Pharma Industries Limited (SPIL) is concern....
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.... Group by way of interest free loans and advances, deposits and trade advances and that if the scheme of amalgamation is to be followed, then there was no need for Sun Group to advance loan to Dadha Group to acquire shares from the M/s.Tamil Nadu Industrial Development Corporation Ltd. (TIDCO). It is submitted that the transfer of huge amounts from Sun Group to Dadha Group for this purpose is also accepted by the respondent. 12. It is submitted that though the Scheme of Amalgamation was approved by the Gujarat High Court and this Court in November, 1997, payments have been made continuously by the Sun Group to Dadha Group till the date of search in December 1998 and interest were charged on the defaulted installments. 13. It is submitted that there was absolutely no need of any payment as per the Amalgamation Scheme. Many of the correspondence between the Dadha Group and Sun Group were subsequent to the High Courts' order indicates that over and above the Scheme of Amalgamation was approved by the High Courts, the cash payments as mentioned in the agreements were made for the share transfer. 14. It is submitted that the Tribunal erred in holding that the amounts cannot be ....
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....i.Commissioner of Income Tax-II, Ahmedabad Vs. Mastek Ltd., [2013] 358 ITR 252 (SC). 16. Per contra, in so far as T.C.A.No.648 of 2009, the learned counsel for the respondent [S.Mohanchand Dadha (Indl)] submits that the Assessment Order dated 19.06.2001 was passed for the block period 01.04.1988 to 15.12.1998. It is submitted that in the Assessment Order dated 19.06.2001, the following additions were made:- Undisclosed income for the block period Rs. 47,56,638/- Addition made by way of protective assessment Rs.1,33,50,000/- Rs.1,81,06,638/- 17. It is submitted that the respondent had filed an appeal before the Appellate Commissioner in Appeal No.CIT(A)C.VIII/DCCC.32/I.T.100/ 2001-02 against the above addition. The said appeal was partly allowed by deleting the both undisclosed income and protective assessment. The protective assessment was deleted on the ground that same was disclosed in the block Rate of Interest filed by the Sun Pharma India Ltd. (SPIL) as undisclosed income. 18. It is submitted that against the said order of the Appellate Commissioner, the appellant Revenue has filed an appeal before the Tribunal in I.T.(SS) A.No.180/Mds/2002 wh....
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....n for registration of transfer of shares. 24. The share certificates along with their distinctive numbers should be surrendered to the company along with the transfer forms duly executed by the transferor and the transferee in the office of the company. It is submitted that there were no such transfer forms duly executed by purchaser and seller were submitted to M/s.Tamil Nadu Dadha Pharmaceuticals Ltd. (TNDPL). 25. It is submitted that the Assessing Officer concluded that the funds were received by the Dadha Group from Sun Pharma Group through its various companies for sale of shares or the interest on delayed payments, but, only the amount of Rs.3 Crores was received from Aditya Medi Sales Ltd. (AML) which is one of the companies of the Sun Pharma Group for construction of godown which was later refunded to the Aditya Medi Sales Ltd. (AML) as the construction of godown could not be feasible owing to the new guidelines issued by the Chennai Metropolitan Development Authority (CMDA). 26. It is submitted that any interested party or any shareholder whose rights would have been affected by such take over did not lodge any complaint before the SEBI. SEBI has also not taken an....
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.... 2008 33. Similarly, an Assessment Order dated 30.07.2003 was passed by the Assessing Officer against M/s.Dadha Pharma Pvt. Ltd., the respondent herein. 34. Against the said order dated 30.07.2003, M/s.Dadha Pharma Pvt. Ltd., the respondent herein filed an appeal before the Appellate Commissioner in ITA No.65/04-05. The said appeal was partly allowed by the Appellate Commissioner vide order dated 28.03.2006. 35. Challenging the same, the Assistant Commissioner of Income Tax filed I.T.(SS) A.No.150/Mds/2006 before the Tribunal. The said appeal was dismissed by the Tribunal vide impugned order dated 16.11.2007. 36. In fact, all the members of the Dadha Group had filed similar appeals and the issue came for consideration before the Tribunal. Details of the appeals filed before Tribunal are as under:- Sl. No Appeal No. / Cross Obj.No. Name of the appellant Name of the respondent Nature of Disposal 1 I.T(SS).A.No.172/Mds/2005 Estate of late Balu Bai Dadha, by executor S.Mohanchand Dadha Deputy Commissioner of Income Tax Partly Allowed 2 I.T(SS).A.No.173/Mds/2005 Pradeep Dadha Partly Allowed 3 I.T(SS).A.No.174/Mds/2005 Kanta ....
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.... Name of the members / concerns of SMD Group Shares held in TNDPL Dadha Pharma Pvt. Ltd. * 127,500 Balu Bai 14,790 Kanta Kavar Dadha 3,750 Pradeep Dadha 18,750 S.Mohanchand Dadha (HUF) 12,030 Subhagmal Mohanchand 15,000 S.Mohanchand Dadha (IND) # 15,000 Total 2,06,820 * The respondent in T.C.A.No.1925 of 2008 # The respondent in T.C.A.No.648 of 2009 42. It emerges that M/s.Tamil Nadu Dadha Pharmaceuticals Ltd. (TNDPL) was incorporated as a Joint Venture between the said Dadha Group (DG) at Chennai and M/s.Tamil Nadu Industrial Development Corporation Ltd. (TIDCO). 43. About 25 % of the shares in M/s.Tamil Nadu Dadha Pharmaceuticals Ltd. (TNDPL) were held by Dhadha Group (DG). 26% of the shares numbering 4,29,178 were held by M/s.Tamil Nadu Industrial Development Corporation Ltd. (TIDCO) in M/s.Tamil Nadu Dadha Pharmaceuticals Ltd. (TNDPL). 44. M/s.Sun Pharma Industries Limited (SPIL) was apparently interested in acquiring the shares in M/s.Tamil Nadu Dadha Pharmaceuticals Ltd. (TNDPL). It appears that as per Memorandum of Understanding (MOU) between the co-promoters viz., Dadha Group, Chennai and M/s.Tam....
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....ns of SMD Group Shares already held in TNDPL Shares purchased from TIDCO Total shares held in TNDPL Dadha Pharma Pvt. Ltd. * 127,500 143,393 270,893 Balu Bai 14,790 13,300 28,090 Kanta Kavar Dadha 3,750 3,400 7,150 Pradeep Dadha 18,750 16,800 35,550 S.Mohanchand Dadha (HUF) 12,030 37,700 49,730 Subhagmal Mohanchand 15,000 NIL 15,000 S.Mohanchand Dadha (IND) # 15,000 NIL 15,000 Total 2,06,820 2,14,593 4,21,413 * The respondent in T.C.A.No.1925 of 2008 # The respondent in T.C.A.No.648 of 2009 51. S.Mohandchand Dadha Group (SMD Group), to which the respective respondents belong, held about 2,06,820 shares before the acquisition of shares of M/s.Tamil Nadu Industrial Development Corporation Ltd. (TIDCO). 26% of the shares held by M/s.Tamil Nadu Industrial Development Corporation Ltd. (TIDCO) was about 4,29,178 shares as per the assessment order. 52. Mohandchand Dadha Group (SMD Group), to which the respective respondents belong, held about 2,06,820 shares before the acquisition of shares of M/s.Tamil Nadu Industrial Development Corporation Ltd. (TIDCO).....
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.... 84282600 42140000 42139400 168562000 56. Apart from the above payments of Rs.16,85,62,000, for delayed payments, Dadha Group (DG) were also paid interest by M/s.Sun Pharma Industries Limited (SPIL) and group of companies. SMD Group received a sum of Rs.94,64,606/- towards interest for the delayed payments. Out of the above, Rs.3,36,888/- was notionally apportioned to the respondent in T.C.A.No.648 of 2009. Relevant portion of the Assessment Order dated 19.06.2001 reads as under:- Interest: As regards the interest on installments due to the assessee, the details are as per page 174 & 175 of annexure A6 of panchanama dated 7.12.1998 as per which the interest upto 01.10.1998 works out to Rs.88,38,815/-. The corresponding interest for the period 01.10.1998 to 15.12.1998 @ 13.5 on the amount outstanding of Rs.3,67,81,600/- is Rs.6,25,791/-. Hence, the total interest due to the MMD* group in the block period works out to Rs.94,64,606/-. SMD (Ind.) holds 15,000 out of total shares held by the group of 4,21,413 i.e., 3.56% of the group holding. Hence, the interest attributable to SMD (Ind.) on prorata basis works out to Rs.3,36,888/-. This amount is taxed as undiscl....
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....x as transfer of shares arising out of amalgamation are not liable to tax under Section 47(vi) of the Income Tax Act, 1961. Relevant portion of Section 47(vi) of the Income Tax Act, 1961 reads as under:- Transactions not regarded as transfer. 47. Nothing contained in section 45 shall apply to the following transfers :- (i)............ ..................... (vi) any transfer, in a scheme of amalgamation, of a capital asset by the amalgamating company to the amalgamated company if the amalgamated company is an Indian company; 63. As per the sanctioned Scheme of Amalgamation, for every 4 shares held by shareholders in Transferor Company, viz. M/s.Tamil Nadu Dadha Pharmaceuticals Ltd. (TNDPL), the shareholders were entitled to one share in the Transferee Company, viz. M/s.Sun Pharma Industries Limited (SPIL). 64. Thus, members and entities under of SMD Group of Dadha Group (DG) who held shares in M/s.Tamil Nadu Dadha Pharmaceuticals Ltd. (TNDPL) came to hold a consolidated 1,05,353 numbers of shares in the Transferee Company, viz. M/s.Sun Pharma Industries Limited (SPIL) as detailed below:- Table No.4 Name of the Members and Conc....
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.... (TIDCO) in M/s.Tamil Nadu Dadha Pharmaceuticals Ltd. (TNDPL). The other persons/entities of the Dadha Group would have held about 2,06,812 [4,13,632 - 2,06,820] before acquisition. In other words, S.Mohandchand Dadha Group (SMD Group), to which the respective respondents belong, would have held about 12.51% of the shares and others in Dadha Group would have held about 12.49% in M/s.Tamil Nadu Dadha Pharmaceuticals Ltd. (TNDPL). 70. It is evident that M/s.Sun Pharma Industries Limited (SPIL) has paid amounts only to the Dadha Group for the shares held by them in M/s.Tamil Nadu Dadha Pharmaceuticals Ltd. (TNDPL) and not to other shareholders. 71. Though the Amalgamation of M/s.Tamil Nadu Dadha Pharmaceuticals Ltd. (TNDPL) with M/s.Sun Pharma Industries Limited (SPIL), pursuant to the sanctioning of the Schemes by Gujarat High Court on 19.11.1997 in C.P.No.298 of 1997 and by this Court on 04.11.1997 in C.P.No.241 of 1997 is a reality, and was outside the purview of capital gain, the fact remains that amounts were paid for acquiring 26% of shares in the transferor Company namely, M/s.Tamil Nadu Dadha Pharmaceuticals Ltd. (TNDPL) by M/s.Sun Pharma Industries Limited (SPIL) and it....
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....yes of the Income Tax Department to evade tax on the amounts transferred in cash without proper accounting. But, for the search conduced under Section 132 of the Income Tax Act, 1961 at the premises of the respective respondents and their Groups namely, Dadha Group and at the premises of M/s.Sun Pharma Industries Limited (SPIL) Group, the truth would have not came to the light. 77. The submission of the respondent in T.C.A.No.648 of 2009 that the amount involved is below the monetary policy cannot be accepted as admittedly the amount of Rs.8,42,82,600/- alone was received by the Mr.S.Mohandchand Dadha for SMD Group from the M/s.Sun Pharma Industries Limited (SPIL) and its Group of companies. There are only notional allocations based on the number of shares before and after acquisition that were held and allegedly transferred prior to the amalgamation. None of the documents relating to the allocation of shares prior to the amalgamation has been filed. Share Registers of M/s.Tamil Nadu Dadha Pharmaceuticals Ltd. (TNDPL) were also not produced before Assessing Officer. 78. Whether the amounts were individually received by the respondent in T.C.A.No.648 of 2009 or consolidated am....