AI Drafter 
TaxTMI 
TaxTMI 
2025 (4) TMI 643
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....orders of the ld. CIT (A) dated 06.11.2015, 16.09.2016, 29.06.2018 & 29.06.2018 for AYs 2006-07, 2012-13, 2014-15 & 2015-16. 2. Since the issues are common and the appeals are connected, therefore, the same are heard together and being disposed off by this common order. These appeals involving common issues are for Assessment Years 2003-04, 2006-07, 2011-12 to 2005-16. 3. With the consent of both the sides, we first take up ITA No.6300/Del/2015 for AY 2003-04. 4. The assessee is aggrieved by the order of ld. CIT(A) dated 08.09.2015. Brief facts of the case are that the assessee filed its return of income on 06.11.2003 declaring loss of Rs. 75,41,05,090/-. The case was selected for scrutiny and vide assessment order dated 20-02-2006, the Assessing Officer has assessed the Total Loss of the assessee for AY 2003-04 at a sum of Rs. 5,87,77,750/-. 5. Aggrieved, the assessee filed an appeal before ld CIT(A)who has partly allowed the appeal. 6. Aggrieved with the order of ld. CIT (A), the assessee has come up in appeal before raising following grounds of appeal :- "1. That on facts and in law the orders passed by both the Assessing Officer {hereinafter referred to ....
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....rt approving the Scheme of Arrangement. 5. Without prejudice, on facts and in law the AO / CIT(A) erred in making / upholding the disallowance of interest cost @ 15% which is high and excessive." 7. Ground No. 1 is general in nature, hence does not require any specific adjudication. 8. In grounds no.2, 2.1, 2.2 and 3, the assessee challenged the action of both the lower authorities in disallowing claim for loss under the head "Capital Gains" on transfer of land to M/s Shivaji Marg Properties Limited and investments to M/s Siel Holdings Limited pursuant to a Scheme of Arrangement sanctioned under sections 391 to 394 of the Companies Act 1956. Relevant facts in this regard are that in the original return filed on 06.11.2003, the assessee had claimed long term capital loss of Rs. 42,22,93,246/- on investments stated to have been transferred to M/s Siel Holding Ltd.. However, in the revised return filed on 31.10.04, in addition to capital loss as mentioned above, the assessee claimed long term capital loss of another amount of Rs. 3,31,99,713/- on land at 15 Shivaji Marg, New Delhi stated to have been transferred to wholly owned subsidiary company namely M/s Shivaji Marg....
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....Properties Limited along with the same amount of debt (Rs.65 crores) from the sale of the said land, the corresponding debt was to discharged i.e., M/s Shivaji Marg Properties Ltd. was a self liquidated company. (f) The investments valued at Rs. 35 crores were assigned to M/s Siel Holding Limited along with equivalent amount of debt and the said debt was to be discharged by selling the said shares i.e., Siel Holding Ltd. was also a self-liquidated company. (g) The two sugar units (supra) of the assessee company were vested in M/s Siel Sugar Limited for which the shareholders of the assessee company were granted the shares of M/s Siel Sugar Limited in the ratio mentioned in the order of the High Court. (h) M/s Siel Limited i.e., the assessee was to continue to operate the residual business of Chemicals and Vegetable Oils. 11.1 As a result of above exercise, the debt of 100 crores (65 + 35) was discharged while the remaining debt was to be discharged with a period of seven years by the operation of M/s Siel Limited and M/s Siel Sugar Limited. In other words, the debt of lenders who exercised option 'A' and 'B' was to be discharged by sale of assets....
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....tion, I am of the firm opinion the assessee has not been able to justify its claim for different treatment to the assets stated to have been transferred to different demerging units, as no satisfactory explanation in this regard has been filed nor any material in support of its claim has been filed by the assessee company. In view of the clear cut provisions in clause 1 of Part II of schedule -1 of the scheme of arrangement (SOA) stating that Siel i.e., Assessee company will be de- merged/hived off into four different entities, I hold that the transfer of assets to such entities falls under the category of demerger only. This shall, therefore, be treated as transaction, not regarded as transfer under clause (vib) of section 47 of I.T. Act. Since these transactions are not treated as transfer within the meaning of sec.47(b), there is no question of any capital loss being computed and allowed in the hands of assessee company for the assessment year under consideration. As a result of this, the assessee's claim of long term capital loss on the basis of original as well as the revised returns filed by the company shall not be considered in computing the total income/loss." 8. Ld CIT....
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....towards the SOA which is at pages 21 to 54 of PB. Referring to page 29 of the paper book, ld AR accepted that the scheme uses the words "de-merger" for transactions as under: "1. With effect from the appointed date, seal will be demerged/Hyde into four entities in the following manner: (a) SPL comprising of special purpose vehicle 1 (SPV 1) to leverage the Land situated at 15, Shivaji Marg, New Delhi - 110015 The Land with an estimated realizable value of Rs 6500 lacs (net cost of sales) shall be vested in SPL upon sanction of the scheme. The liabilities of lenders to extent of Rs 5453 lacs and liabilities of Siel of Rs 1042 lacs will also be vested in SPL. The detailed break-up of the liabilities of individual lenders to be transferred to SPL will depend upon the Option exercised by the respective lenders. The realization from SPL will be assured within 24 months of the Cut-off Date and will be utilised towards payment of its liabilities. .... .... (b) SHL comprising of Special purpose Vehicle 2 (SPV 2) to leverage the investments. The "Investments" or any proceeds, realised therefrom after the Cut-off date up to Effective date....
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....ets. (ii) Moreover, it was submitted that condition of clause (v) to section 2(19AA) are also not satisfied as no shares are issued by M/s Shivaji Marg Properties Limited and M/s Siel Holdings Limited to the assessee pursuant to vesting of land and investments." 11. Ld AR therefore submitted that "transfer" of land and investments to M/s Shivaji Marg Properties Limited and M/s Siel Holdings Limited is not a "demerger" u/s 2(19AA) so as to attract exemption provisions of section 47(vib). It was submitted that were condition of section 2(19AA) were satisfied i.e. in case of vesting of Sugar units in M/s Siel Sugar Limited the Tribunal has upheld the same. In this regard our attention was drawn towards copy of decision of co-ordinate bench in case of M/s Mawana Sugar Ltd order dated 04-12-2015 in ITA no. 820/Del/2010 copy at pages 576 to 585 of paper book. Ld AR thereafter referred to provisions of section 394 of the Companies Act, 1956. It was submitted that u/s 394 the Company Court has vide powers to approve "transfer to the transferee company of the whole or any part of the undertaking, property or liabilities of any transferor company". Sub-section 4 of section 394 fu....
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....rs as required under the provision of Section 180 of the Companies Act, 2013, which is parimateria to Section 293 of the Companies Act, 1956. Another company which is identically situated enters into a similar arrangement, however, follows a different route and instead of directly approaching its shareholders, files a scheme of arrangement before the Company Court and makes an application for the requisite meetings to be convened. The Court gives directions for holding of the meetings and the entire transaction (the scheme) is placed before the members and creditors for obtaining their approval. After following the prescribed procedure, the Company Court sanctions the scheme. In either case, the nature of the transaction essentially remains the same. In the first case, it is effected by means of an agreement, which is binding and in the later case, it is effected under the scheme of arrangement which too is binding under the provisions of the Companies Act, 1956 (or the Companies Act 2013). In our view, there would be no difference as to the incidence of taxation on the sale effected through the two modes." 13. Ld AR referring to the case made out by the Ld CIT(A), it was submit....
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.... He submitted that the AO and Ld CIT(A) has elaborately discussed the issue under consideration and dealt with the issue in accordance with the consequence of scheme of amalgamation. He relied on the findings of the lower authorities. 16. Considered the rival submissions and material placed on record. We observed that Hon'ble High Court has approved the scheme of arrangements for demerger and hive off of certain assets with the four methods of restructuring the debts and to address the revival of the assessee company. Accordingly, they have agreed to create two SPVs to address the repayment of Debts of 6500 lakhs thru Shivaji Marg Properties Ltd (SMPL) by transferring the equal amount of land to them and Another SPV of Siel Holdings Ltd (SHL) by transferring the Investments of Rs. 3500 Lakhs with equivalent Debts. These SPVs will discharge the liabilities after liquidating the assigned assets, it will dissolve themselves. The assessee had claimed long-term capital losses against the above transfer of assets to the SPVs and adjustment towards the repayment of loans/debts. The AO has raised the issue under consideration is that the scheme of arrangement gives four options to addre....
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.... and liability at the same cost, that means the assets were transferred at zero, therefore, there is no loss or gain to the assessee. Further, he observed that the lenders had waived the interest, therefore, provisions of section 41(1) of the Act are applicable. He has missed the point of commercial aspect in these transactions, the assessee recorded the value of the assets at cost in its Balance Sheet and transferred the assets at fair market value, i.e., Value of land on the date of transfer was Rs. 15,28,41,099/- and transferred at the value of Rs. 65,00,00,000/- and liquidated the liabilities to that extent. On the date of transfer the indexed cost of the land was Rs. 68,31,99,113/-. That means the assessee has settled the value of liabilities of Rs. 65 crores at the cost of Rs. 68.32 crores. How can we say that the assets were transferred at zero cost. It lakes commercial understanding. 19. Similarly, for the transfer of shares, the book value of shares were Rs. 53.95 crores and its indexed cost was Rs. 77.23 crores on the date of transfer and settled the liabilities worth Rs. 35 crores. Therefore, the transactions of transfer of assets and liabilities to its SPVs with the ....
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.... - - 1324.50 Jay Engg Works 1077.00 - - 1077.00 Total 2802.38 2802.38 22. Further, the AO observes that while completing assessment for the year 2002-2003, his predecessor has discussed the matter in detail and held that deployment of borrowed funds to the extent of investment made in JEW and loans and advances given free of interest to sister/subsidiaries companies were not called for. Applying a rate of 15% as in the earlier assessment years, the disallowance out of interest on account of interest free loans to SFSL & SFSLIL has been worked out to Rs. 2,58,80,700/-. 23. Aggrieved, the assessee filed appeal before Ld CIT(A) and before Ld CIT(A) it was submitted that the disallowances made by the AO in preceding years have been deleted by the Tribunal. Assessee relied upon orders of Ld CIT(A) and Tribunal in its case for earlier years. However, the Ld CIT(A) has confirmed the disallowance by observing as under:- "14.4 As discussed earlier, in the scheme of arrangement for debts restructuring various investments in subsidiary companies including investment in Jay Engineering Works have been transferred to Siel Holdi....
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....006, establish that the entire funds of the assessee formed common Hotchpot. Restructuring proposals acknowledged this fact. Regular losses and restricting wiped out the basis of orders for A.Y.98-99 and A.Y. 99-00. This can be explained by an example. An assessee may have interest free funds of Rs. 100/- and interest bearing funds of Rs. 100/-. He invests Rs. 100/- in business assets and Rs. 100/- in interest free advances / shares of subsidiaries. He makes a loss of Rs. 100/- in the next year in business. This wipes out his availability of funds by Rs. 100/-. He cannot claim in next year that interest free advances and shares in subsidiaries are still from interest free funds. 15.1 In view of these new facts on record and in view of the order of Hon'ble High Court, it cannot be held that interest paid in A.Y.03-04 cannot be disallowed to the extent of corresponding interest in respect of free advances and investments in subsidiaries. Since, the order of Hon'ble High Court was not available before the ITAT when it gave decision for A.Y. 98- 99/99-00, the issue of disallowance in the present assessment year, is not covered by that decision. Therefore, the interest pertaini....
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....473) the CIT(A) deletes this disallowance - relevant at page 471, para 3 and 3.1. CIT(A) deletes the disallowance taking into consideration ITAT orders for earlier years and appeal effect orders passed thereon by the AO. AY 2003-04 Year under consideration AY 2004-05 In assessment order dated 28-12-2006 passed for AY 2004-05 (copy enclosed at pages 474 to 482 of PB) again a cumulative disallowance of Rs 3,36,29,000/- is made by the AO on this issue. Vide appellate order dated 26-12-2013 (copy enclosed at pages 483 to 493 of PB) the CIT(A) deletes this disallowance - relevant at page 491, para 6. CIT(A) deletes the disallowance taking into consideration ITAT orders for earlier years and appeal effect orders passed thereon by the AO. AYs 2005-06 to 2007-08 (M/s Mawana Sugar Limited) It is also relevant to note that in case of Mawana Sugars Limited for AYs 2005-06 to 2009-10 identical issue has been decided in favor of the 'A' - Copy of ITAT order dated 28-05-2018 passed in case of M/s Mawana Sugars Limited is enclosed at pages 494 to 521 of the PB. ITAT decides this issue at pages 504 to 508. Disallowances made by AO are deleted by ITAT (i) holding that no disallowa....
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....herein it was said: (Radhasoami Satsang case, SCC pp. 665-66, para 14) "14. ... Parties are not permitted to begin fresh litigations because of new views they may entertain of the law of the case, or new versions which they present as to what should be a proper apprehension by the court of the legal result either of the construction of the documents or the weight of certain circumstances. If this were permitted, litigation would have no end, except when legal ingenuity is exhausted. It is a principle of law that this cannot be permitted and there is abundant authority reiterating that principle. Thirdly, the same principle, namely, that of setting to rest rights of litigants, applies to the case where a point, fundamental to the decision, taken or assumed by the plaintiff and traversable by the defendant, has not been traversed. In that case also a defendant is bound by the judgment, although it may be true enough that subsequent light or ingenuity might suggest some traverse which had not been taken.' (Hoystead case, AC pp. 165-66)" 26. Reference was also made to Parashuram Pottery Works Co. Ltd. v. ITO and then it was held: (Radhasoami Satsang case, SCC p. 666, ....
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.... submitted that they are still outstanding as on last day of the financial year in the books of accounts of the assessee. In this regard Ld AR relied upon details submitted before lower authorities at pages 183 and 187 of the paper book. It was therefore submitted that there is no relevance of SOA to the issue under consideration. Lastly it was submitted that without prejudice the quantum of disallowance requires a fresh consideration. In this regard reliance is placed upon order passed by Ld CIT(A) for AY 2006-07. 27. On the other hand, Ld DR relied on the findings of lower authorities. 28. Considered the rival submissions and material placed on record. We observed that the issue under consideration is concern, the disallowance of notional interest on the loans given to its sister concerns out of interest free and owned funds, it is brought to our attention that the issue under consideration is settled in favour of the assessee by the Coordinate benches and orders of CIT(A) in the earlier assessment years. The Ld AR submitted a chart, as per which the issue of notional interest was disallowed in AY 1998-99 and subsequent AYs, the coordinate bench has remanded the matter to A....
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....ssee. 33.2 Ground No.6 is not pressed by the assessee, hence dismissed. 33.3 Accordingly, appeal being No.6301/Del/2015 for AY 2011-12 is partly allowed. 33. Grounds No.1, 2, 2.1 & 2.2 of assessee's appeal in ITA No.5830/Del/2016 for AY 2012-13 is covered in favour of the assessee by our decision in the earlier part of the order. Ground No.3 is not pressed by the assessee, hence dismissed. Accordingly, appeal being ITA No.5830/Del/2016 for AY 2012-13 is partly allowed. 34. Grounds No.1 & 1.1 of assessee's appeal in ITA Nos.5489/Del/2018, 5490/del/2018 & 5491/Del/2018 for AYs 2013-14, 2014-15 & 2015-16 are covered in favour of the assessee by our decision in the earlier part of the order. Grounds No.2 & 3 are general in nature, hence not adjudicated. Accordingly, appeals being ITA Nos.5489/Del/2018, 5490/del/2018 & 5491/Del/2018 for AYs 2013-14, 2014-15 & 2015-16 are allowed. 35. With regard to Department's appeal in ITA No.516/Del/2016 for AY 2006-07, at the time of hearing, ld. Counsel for the assessee has submitted that the tax effect in the appeal filed by the Revenue is below Rs. 60 lakhs. The CBDT in its Circular No.09/2024 dated 17.09.2024 has recently revised ....
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.... during the year under consideration, therefore, section 14A is not applicable. He relied on the findings of the ld. CIT (A) and also relied on the decision of Hon'ble Delhi High Court in the case of PCIT vs. Era Infrastructure India Ltd. reported in 448 ITR 674 (Del.). 44. Considered the rival submissions and material available on record. We observed that this issue is squarely covered in favour of the assessee by the decision of Hon'ble jurisdictional High Court in Cheminvest Ltd. (supra), relied on by the ld. CIT (A) and also in the case of PCIT vs. Era Infrastructure India Ltd. (supra), relied on by the assessee. The Hon'ble Courts have categorically held that where the assessee has not earned any dividend income forming part of the total income during the year under assessment, section 14A read with Rule 8D is not attracted. So, finding no illegality or perversity in the order of the ld. CIT (A), we hereby dismiss the ground taken by the Revenue. 45. Accordingly, the grounds involving deletion of addition u/s 14A read with Rule 8D in all the three Revenue's appeal for AYs 2012-13, 2014-15 & 2015-16 are dismissed. 46. Ground No.2 of Revenue's appeal for AYs 2014-15 & 2....
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....by the Assessing Officer by observing as under :- "7.2 I have carefully gone through the finding of the AO, submission of the appellant and case laws relied upon by the Ld. AR. On the one hand the AO has disallowed certain percentage of the expenses, stating that it has not been established that these expenses were made during the course of business for earning business profit. Against this the Ld. AR argued that these are purely business expenses and allowable u/s 37 of the Act and it is for business expediency to take care the employees. The other argument of the AO through which the AO has questioned prudency of appellant that despite huge loss, the appellant is incurring these expenses. For this the Ld. AR relied upon several case laws and argued that business expediency of expenses has to be decided by the assessee not the AO. Considering .the assessment order and submission of Ld. AR "I am of the view that the AO had made any definite observation in regard to particular expense that the same is not business expenditure. Taking the arguments in totality I am inclined to accept the argument of the Ld. AR and of the view that disallowance without specific finding is not....