TaxTMI 
TaxTMI 
2025 (6) TMI 383
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....iture incurred on interest by applying an adhoc rate of interest on the advances to wholly owned subsidiaries and group companies outstanding at the end of financial year 2017-18 relevant to assessment year 2018-19 u/s 36(1)(iii) of the Act. 1.1. That the learned Commissioner of Income Tax (Appeals) has failed to appreciate that once identical claim of deduction stood allowed in preceding years, the disallowance so made and, upheld was contrary to principles of consistency and thus untenable. 1.2. That the learned Commissioner of Income Tax (Appeals) has failed to appreciate that total borrowings from banks and other financial institutions at the close of instant year had fallen from Rs. 992.03 crores to Rs. 879.42 crores and, thus once interest on such borrowings had been allowed in previous financial year then no disallowance could be upheld on account of interest u/s 36(1)(iii) of the Act even in instant year. 1.3. That while upholding the aforesaid disallowance the learned Commissioner of Income Tax (Appeals) has failed to appreciate that once interest free funds were available with the appellant company, which was far in excess to the advances to wholly owned subsidia....
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....s untenable and unwarranted. 1.9. That the learned Commissioner of Income Tax (Appeals) has failed to appreciate that revenue cannot justifiably claim to put itself in the armchair of a businessman or in the position of the board of directors and assume the said role to decide that manner and mode of business. 1.10. That learned Commissioner of Income Tax (Appeals) even otherwise failed to establish in absence of any nexus during the year that advances to wholly owned subsidiaries and group companies are out of interest bearing funds by any positive material much less any evidence, disallowance upheld is otherwise not in accordance with law. 1.11. That learned Commissioner of Income Tax (Appeals) has failed to appreciate that once in the year of advance, it has been accepted that advance was on account of commercial expediency then revenue cannot take a somersault and adopt an inconsistent stand in the instant year so as to uphold the instant arbitrary unjustified disallowance out of interest eligible as expenses u/s 36(1)(iii) of the Act. 1.12. That the learned Commissioner of Income Tax (Appeals) has erred both in law and on facts in recording various adverse inferenc....
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....nd appeal of the appellant company may kindly be allowed." 3. The Grounds of Appeal raised by the Revenue in the cross-appeal read as under:- 1. "Whether the Ld. CIT(A) is right in restricting the addition of Rs. 179,53,12,500/- made by the AO on account of disallowance of interest u/s 36(1)(iii) of the Act to the extent of Rs. 125,29,80,000/- without giving any cogent reason for holding that the assessee has used interest bearing funds to the extent of Rs. 835.32 Crores only for the purpose of giving interest free advances to its subsidiaries/group concerns? 2. Whether the Ld. CIT(A) is right in restricting the addition of Rs. 179,53,12,500/- made by the AO on account of disallowance of interest u/s 36(1)(iii) of the Act to the extent of Rs. 125,29,80,000/- by applying rate of interest @ 15% instead of 18.75% without giving any concrete reasoning? 3. Whether the Ld. CIT(A) is right in deleting addition of Rs. 155,71,00,407/- u/s 115JB of the Act on account of impairment of goodwill by not considering the ratio laid down by the Hon'ble Supreme Court in the case of Rama Synthetic Pvt.Ltd. vs. CIT [196 Taxman 539 (SC)? 4. Whether the Ld. CIT(A) is right in deleting a....
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.... Disallowance representing cost debited and claimed as expenditure while computing income under percentage of completion method of accounting adopted by the appellant company; and accepted in the impugned order of assessment by the learned Assessing Officer. 1,01,12,775 v) Addition representing alleged on money received on booking of flats/units by appellant company 50,00,000 vi) Disallowance representing expenditure on account of construction of road on the property owned by M/s Mikado Realtors Ltd. eligible for deduction while computing income of appellant for instant year. 1,40,00,000 5. Aggrieved by such additions/disallowances and adjustments in 'book profit' under s. 115JB etc., the assessee preferred appeal before the CIT(A). 5.1. In the first appeal, detailed submissions were placed before the CIT(A) by the assessee to defend its stance taken in the Return of Income. Oral and written submissions made in the course of appellate proceedings were extracted in the first appellate order. The CIT(A) however granted partial relief to the assessee. 5.2 The CIT(A) scaled down the disallowance towards interest expenditure under s. 36(1)(iii) of the Act from INR 179,53,12,5....
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....p Companies. The CIT(A) in first appeal has upheld the disallowance to the extent of Rs. 125,29,80,000/-. The assessee as well as Revenue have agitated the action of CIT(A) granting part relief. 9.1. The relevant facts necessary for adjudicating the issue as emerging from the case records and adverted in the course of hearing are capsuled here under. 9.2. During the FY 2017-18 relevant to AY 2018-19 under consideration, the assessee incurred interest expenditure of INR 403.24 crore on borrowings received in the shape of overdraft facilities/cash credit limits from bank and financial institutions. Out of aforesaid interest expenses of INR 403.24 crore, the assessee claimed interest expenditure of INR 361.31 crore in the Profit & Loss Account. The assessee claimed to have attributed INR 47.07 crore to construction work in progress ("WIP") and taken into account while computing the income under PoCM. In essence, the assessee claimed interest expenditure to the tune of INR 361.31 crore as revenue expenses for the purposes of determination of taxable income. The AO observed that the assessee has given certain interest free advances to its wholly subsidiary companies (Rs. 442.26 crore)....
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....pediency claimed to be ingrained while providing interest free funds to wholly owned subsidiaries and group companies. The CIT(A) however simultaneously adopted the average of interest free advances to various subsidiary and group companies computed at INR 835.32 crore (being average of INR 957.54 crore as on 31.03.2018 & INR 713.14 crore as on 31.03.2017). The CIT(A) thus took average of the opening balance and the closing balance of money advanced being INR 835.32 as the base for estimation of proportionate interest disallowance. The CIT(A) also accepted the effective weighted interest rate 11.67% demonstrated by the Assessee rather than 18.75% adopted by AO. The CIT(A) thus re-estimated interest disallowance on average advances to subsidiary/group companies by applying interest rate of 15% after taking cognizance of associated costs for procurement of borrowings. The CIT(A) thus computed the disallowance @ 15% of the average advance to subsidiary/group companies of INR 835.32 crore. Consequently the additions/disallowances out of expenditure incurred on interest under s. 36(1)(iii) of the Act was scaled down to INR 1,25,29,80,000/-[ 835.32*15%]. 10. The relevant facts concernin....
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....om Propbuild (P) Ltd. During FY 13-14 7,00,00,000 7,00,00,000 vii) Roshni Builders (P) Ltd. During FY 16-17 18,39,00,000 18,39,00,000 viii) Generous Realtors (P) Ltd. During FY 12-13, & FY 14-15 14,55,00,000 14,55,00,000 ix) Bonus Builder (P) Ltd. Prior to FY 10-11 7,10,00,000 7,10,00,000 x) Gama Buildwel (P) Ltd. Prior to FY 10-11 10,67,00,000 10,72,00,000 xi) Zenith Realtech (P) Ltd. Prior to FY 10-11 10,66,00,000 10,66,00,000 xii) Morgan Propbuild (P) Ltd. During FY 15-16 & FY 16-17 79,65,00,000 79,65,00,000 xiii) Garden Realtech (P) Ltd. During FY 16-17 7,97,00,000 7,97,00,000 xiv) Zarf Buildcon (P) Ltd. During FY 15-16 71,60,00,000 71,61,50,000 xv) Supreme Propbuild (P) Ltd. During FY 17-18 NIL 10,00,00,000 xvi) Benchmark Infotech (P) Ltd. During FY 17-18 NIL 31,13,07,050 xvii) Nice Realcon (P) Ltd. During FY 12-13 to FY 17-18 47,04,00,000 58,00,00,000 Total 312,15,10,978 442,25,89,083 (f) Party-wise break-up of advances to group companies: Sr.No. Particulars Year of advance As on 31.03.2017 (Rs.) As on 31.03.2018 (Rs.) i) Manglam Multiples (P) Ltd. From FY 15-16 to FY 17-18 71,31,15,152 14....
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....191.70 18 210.01 20 320 19 394.24 22 528.87 ii) Group Companies 2 99.93 6 359.94 27 1363.55 15 420.33 15 516.21 Total(C)=(A+B) 19 291,63 24 569.55 47 1665.55 34 814.47 37 1045.08 10.5. As previously noted, the AO has treated aggregate advance given to subsidiary/group companies of INR 957.54 crore [para 10(1)(d) supra] as non business purpose as against aggregate advance of INR 1115.36 crore [Para 10(c) supra] given to such companies as on 31.03.2018. The AO was thus satisfied with the use of advance for business purposes insofar as the interest free advance of INR 157.86 crore is concerned. The AO has proceeded to draw adverse inference of non business purpose advance in respect of interest free advances to the extent of INR 957.50 crore standing as on 31.03.2018. The CIT(A), in turn, has taken the average figure of the outstanding advance as on 31.03.2017 & 31.03.2018 and adopted a median figure of INR 835.32 crore for the purposes of modification in computation of estimated disallowances out of interest expenditure. 11. In this factual backdrop, it is contended on behalf of the assessee that advances given to the 'wholly owned subsidiary ....
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....ced and purpose of business is clearly established. As contended, the 'purpose of business' as emphasized by the Hon'ble Supreme Court in the case of S.A. Builders, need not necessarily be the business of the assessee itself as long as such advance given, has the potential to generate commercial benefit to the assessee directly or indirectly. The expression 'for the purpose of business' under s. 36(1)(iii) is far wider than 'for the purpose of making or earning such income' employed in s. 57(iii) of the Act. 11.3 The assessee thus contends in summation that there can be no quarrel on the use of funds advanced to subsidiary cos. to be for 'the purpose of business'. 12. Besides, the assessee also contends in the alternative that apart from the fulfillment of test of commercial expediency on advances made to subsidiaries, the interest cannot be proportionately disallowed on such advances having regard to substantial interest free funds available at the disposal of the assessee which apparently is in excess by multiples. This apart, majority of funds have been advanced in the earlier years. Hence, for multiple reasons, proportionate disallowance towards such advances cannot be made w....
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....arlier years; and (d) the interest free funds available at the disposal of the assessee far exceeds and surpasses interest free advance and therefore, presumption of utilization of funds towards interest free advances would arise out of interest free funds. 16. The Revenue strongly objects to various plea raised on behalf of the assessee which is summarized as under:- Firstly, it contends that the plea of the assessee that no disallowance under s. 36(1)(iii) has been made in earlier years despite the fact that the most of the advances have been continuing from earlier years do not carry much weight for the reason, no regular assessment was carried out in the earlier years. The assessee for AYs 2011-12 to 2017-18 carried out pursuant to search and seizure actions under s. 132 of the Act were subjected to Settlement Commission. Thus principles of res judicata shall not apply. Secondly, the contention of the assessee that interest free loans and advances were advanced out of interest free funds is improper. The share premium of INR 2675 crore appearing in the balance sheet has solely arisen amalgamation in FY 2011-12 purely as an accounting entry without actual inflow of funds.....
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....d. Under s. 36(1)(iii) of the Act, any amount paid on account of interest becomes admissible deduction if the interest was paid on the capital borrowed by the assessee and this borrowing was for the 'purpose of business or profession'. This concept is wider and thus needs to be viewed in larger context. There is no requirement in s. 36(1)(iii) that utilisation of such loans must necessarily result in some pecuniary profits as long as such money have been utilised for the purposes of business. 19. When the assessee borrows money carrying interest cost and lends the same to sister concern without interest, the interest paid/payable on borrowings cannot be disallowed if the lending is on the grounds of commercial expediency as held in S. A. Builders Ltd. (supra). Similarly, when holding company advances money to its subsidiary companies which incurs losses, such advance is meant to protect its deep interest in the subsidiary. Hence interest on amount borrowed is eligible for deduction though it was advanced interest free to the subsidiary company. The expression 'commercial expediency' was explained in S.A. Builders Ltd. case'. The Hon'ble Supreme Court observed that the expression '....
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....ad also taken note of the fact that there was sufficient funds available with the assessee respondent on which there was no interest liability that had been incurred. In such circumstances, relying on the case of Torrent Financiers Ltd. (supra), it found that the disallowance was not justifiable. The Tribunal on noting these details, in terms held that there was nothing contrary that could be brought on record by the Department. The assessee's equity share capital Rs. 3.85 cores and reserve and surplus of Rs. 5.52 crores also were noted by the Tribunal. It found that the interest free fund available with the assessee was far greater than the loan advanced to the sister concerns and as a corollary to that, it concluded that the borrowed money was not utilized for the purpose of advance to the sister concerns, as had been noted by the Assessing Officer. What had weighed with the Tribunal is the fact that the entire interest free funds included owner's own capital and accumulated profits and other interest free credits and loans and if the total interest free advances including the debit balance of the partners did not exceed the total interest free funds available with the assessee, ....
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....t itself in the arm chair of the businessman or in the position of the Board of Directors and assume the role to decide how much is reasonable expenditure having regard to the circumstances of the case. The Revenue authorities must put themselves in the shoes of the assessee and see how a prudent businessman would act. In the instant case, the interest bearing funds have been lent to the wholly owned subsidiary company and group concerns, a major amount of which was lent in several earlier years. It is the uniform stance of the assessee that the money was lent to such wholly and subsidiary companies and group concerns to advance & build long term business prospects in real estate business. The assessee claims that the money has been lent for which MoU has been entered for sharing profits which is to arise on adverse development of the project in future years. There is no finding to the effect that money lent by the assessee company to its subsidiary company or to the group concerns has been diverted for non-business purpose or for personal benefit of the assessee or the Directors. The expression 'for the purpose of business implied in s. 36(1)(iii) of the Act must be viewed in the ....
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....ears fallacious on the face of it. The availability of sufficient interest free funds itself transcends other consideration. This apart, the amount advanced to wholly owned subsidiary company for the furtherance of its business is nothing but furtherance of the business of the assessee company itself. Thus advances to subsidiary companies clearly attracts onus of far lower pedestal to establish the requirement of 'for the purpose of business'. The plea of the assessee that the advance to group concerns is for the purpose of business is fortified by MoU and staggering profit in the later years by atleast one of the many companies to whom the advances made. As long as the aim and object of the money advanced is for furtherance of business, actual yield in the subsequent years, although desirable is not wholly necessary. The money advanced to subsidiary companies and group concerns are sufficiently supported to be for the purpose of business. Thus merely because the money has been advanced to such subsidiaries/group companies would by itself cannot entitle the assessee to claim deduction towards interest expenditure. Thus, on both counts, namely availability of surplus funds as well a....
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....e are the expenditure being part of audited books of accounts as part of work in progress. Once the genuineness of the expenditure is not doubted in the part, mere fact that the project did not materialize or abandoned is not a valid basis to disallow legitimate expenditure incurred. 29.3 In the light of judgement of Hon'ble Punjab & Haryana High Court rendered in the case of CIT vs Majestic Auto Ltd. 315 ITR 445 (P&H) and the judgement of Hon'ble Delhi High Court rendered in the case of ONGC Videsh Ltd. vs DCIT 127 TTJ 497 (Del.), such abortive expenditure incurred by the assessee is allowable business expenditure under s. 37(1) of the Act. We thus reverse the action of the CIT(A) and direct the AO to delete the additions. 29.4. Ground No.3 of the assessee's appeal is thus allowed. 30. Ground No.4 concerns disallowance of INR 1,40,00,000/- representing expenditure incurred on obtaining approval for construction of road on the property owned by M/s. Mikado Realtors Ltd. eligible for deduction while computing income of the assessee for instant year. 30.1 The facts as emerging from record concerned the issue extracted hereunder:- 24.2. "That assessee acquired share of M/s. Mika....
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.... that the payment of Rs. 140.77 lacs is made by the assessee Haryana Government alongwith Form GSTR- 1 930-1006 30.2 The AO observed that the expenditure has been claimed on account of construction of road on the property owned by M/s. Mikado Realtors Ltd. and there is no such condition mentioned in the MoU submitted by the assessee that the assessee company is legally bound to construct any road on the property of another company namely, M/s. Mikado Realtors Ltd. The assessee has merely sold shares of M/s. Mikado Realtors Ltd. to Tata Group of companies and incurring such expenditure is without any legal obligation. 30.3 The assessee reiterated its submissions placed before the CIT(A) in the first appeal as well to the AO in the course of assessment proceedings that the assessee has to obtain 'approval' for construction of road as per share transfer agreement. The CIT(A) however incorrectly observed that construction of road on the land owned by M/s. Mikado Realtors Ltd. has no relation with transfer of shares of M/s. Mikado Realtors Ltd. by the assessee. 30.4. The assessee before the Tribunal contends that the assessee company has incurred expenses for obtaining approval for ....
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....transfer agreement. The AO has disallowed the expenditure towards approval on the ground that no such condition is mentioned in the MoU submitted by the assessee. It is the contention of the assessee that the requirements of obtaining approval have to be seen in the natural perspective. The shares of Mikado could not be transferred by the assessee to Tata Group without obtaining approval. Thus to facilitate the transfer of shares, the expenditure for approval was incurred. Otherwise the value of land giving rise to fair price on sale of shares would have correspondingly decreased. Thus, the cost of approval incurred has a direct bearing on the sale price of Mikado shares. The shares have been transferred to party of high repute and therefore, the exigencies for incurring such expenses should be left to the wisdom of the assessee. The expenses incurred has direct relation to the value of shares transferred. 30.8. The contentions raised showing the necessity for incurring approval expenses is plausible. The expenses incurred whether voluntarily or under legal obligation is allowable as long as it is incurred in connection with the transfer of shares. The assessee would have either f....
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....book profit under MAT provision was given by the assessee. Therefore, this amount is added to the book profit of the assessee for the purpose of computation of income under MAT provision. Hence, calculation for MAT is required to be modified as under: - Profit as per part II and III of Schedule VI 116,91,80,218 Add: Income Tax u/s 40(1)(ii) 15,95,72,729 Impairment of goodwill 155,71,00,407 Total 54,74,92,918 Less : Deferred Tax Assets 7,96,00,435 46,78,92,483 Tax calculated @ 18.5 % on Book Profit is Rs. 8,65,60,109." 31.3 In the first appeal, the CIT(A) deleted the disallowance by recording finding that the impairment of Goodwill is not covered in item (a) to (k) enumerated under Explanation (1) to s. 115JB of the Act for the purposes of computation of profit. The relevant paragraph dealing with the issue by the CIT(A) reproduced hereunder:- 9. Ground of Appeal No. 8 9.1 "There was a scheme of amalgamation between M/s M3M India Ltd. (transferor), M/s Model Buildtech Pvt. Ltd. (transferor) with M/s M3M India Developers Pvt. Ltd. (transferee). The scheme of amalgamation was approved by the Hon'ble Punjab and Haryana High Court vide order date....
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....njab and Haryana High Court and goodwill impairment of Rs. 155.71 crores (debited to the profit and loss account) has been offered to tax while making the computation of income under normal provisions of the Act and same treatment has been given in various past assessments years as well. 9.3 The AO made reliance upon provision of section 43C, 43(1) (value of the assets), section 32(1) read with the proviso of section 32(1) of the Act as well as Accounting Standard 10 for the treatment to be given to the assets i.e. such revaluation amount should have been carried the same under the head revaluation reserve rather than share premium account during AY 2012-13. As per AO such revaluation of inventories should have been credited on the income side by routing the revaluation reserve through the profit and loss account. Moreover, such revaluation reserve should have been added back for the purpose of computation of MAT liability u/s 115JB of the Act by Rs. 2674.98 crore for AY 2012-13. On facts, the AO observed that the appellant did not route the revaluation reserve through the profit and loss account and therefore, such claim of Rs. 155.71 crores debited to the profit and loss accou....
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....s carried to any reserve. It was stated that reliance of the AO upon decision of Hon'ble Supreme Court in the case of Indo Rama Synthetic (supra) is not relevant. Further, it was explained that amount of Rs. 155.71 crore was not set aside as provision for diminution the value of any assets. Further, reliance was placed upon the decision of Hon'ble Supreme Court in the case of Apollo Tyres Ltd. vs. CIT 255 ITR 273 where it was held that the AO for the purpose of MAT has to accept the accounts prepared in accordance with the provisions of the Companies Act. Further, it was stated that scheme of amalgamation was made effective from AY 2012-13 and similar claims have been made in AYs 2014- 15 to 2017-18 wherein impairment of goodwill has been debited to the profit and loss account, offered to tax under normal provisions of the Act but claimed the same for the purpose of MAT liability u/s 115JB of the Act. On similar facts, Hon'ble Interim Board of Settlement-V, Mumbai vide its order dated 30.03.2023 passed u/s 245D(4) in the case of the appellant for AYs 2011-12 to 2017-18 has allowed such claim u/s 115 JB of the Act. 9.5 On consideration of facts of the case and mate....
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....pose of computation of MAT liability under the provision of section 115JB of the Act. However, the AO has increased the book profit by the said amount of Rs. 155.71 crores by making reference to Explanation 1 to section 115JB of the Act on the reason that a) The above amount of Rs. 155.71 crores was in the nature of revaluation of the inventory and therefore the same represents revaluation reserve (clause b). b) It was in the nature of amount set aside as provision for diminution in the value of any asset (clause i). 9.6 On the consideration of facts as mentioned above, in the scheme of amalgamation as approved by the Hon'ble High Court, it is very clearly mentioned in the schedule 7 that the assets / liabilities are to be recorded at the book value and no revaluation of the said assets would be carried out under the present scheme. Therefore, no amount was carried to the revaluation reserves as alleged by the AO. Further, share premium account in this case represent excess consideration discharged in the form of equity shares issued by the appellant in the pursuant to the above amalgamation scheme and the same cannot be categorized as revaluation reserve. 9.7 Furth....
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....ept the authenticity of the accounts with reference to the provisions of the Companies Act which obligates the company to maintain its account in a manner provided by the Companies Act and the same to be scrutinized and certified by statutory auditors and will have to be approved by the company in its General Meeting and thereafter to be filed before the Registrar of Companies who has a statutory obligation also to examine and satisfy that the accounts of the company are maintained in accordance with the requirements of the Companies Act. The Hon'ble Apex Court in the above decision has held that the profit as determined in the statement of profit and loss prepared in accordance with schedule III of the Companies Act is sacrosanct for the Assessing Officer as well as for the assessee subject to following conditions:- a) The accounts have been maintained by the companies in accordance with the Companies Act. b) The same have been examined and certified by the Statutory Auditors under the Companies Act. c) The accounts have been approved by the companies in its AGM. d) and thereafter filed before the Registrar of Companies. The said ratio has been re-affirmed by....
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....de is based on fundamental misconception of facts and provision of law. The AO has erroneously re-computed the book profits giving rise to inflated book profit to the extent of INR 155.71 crore without authority of law by incorrectly drawing support from clause (b) to Explanation to s.115JB of the Act which reads as under:- 31.5. The broad contentions of the assessee are extracted hereunder:- 28.2. "It is respectfully submitted that from the facts as stated above amounts debited under the head impairment of goodwill does not represent by any stretch of imagination amount carried to any 'reserve and debited to the profit and loss account and thus the basis adopted is fundamentally misconceived, misplaced and untenable, It may be added here that it is not a case that where share premium credited by the assessee company on 1.4.2011 has in any manner been reduced as increased in the year under consideration. It is submitted that the share premium as was credited of Rs. 2674.99 crores stands remain the same both outstanding of the year and close of year (page 55 of Paper Book) and in such circumstances it is not a case of amount carried to an reserve by debited the profit and los....
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....stance provision for diminution in the value of inventories. From the amounts offered in different years, it is noted that no particular methodology has been followed for determination of the amount of impairment. The amount has been arbitrarily debited without any basis in the profit and loss account for various assessment years as mentioned supra to reduce its tax liability under the provisions of section 115JB of the Act. Therefore, the same needs to be disallowed while computing the book profit as statutorily required as per section 115JB of the Act." 30. It is apparent from the aforesaid that the amount debited represents for diminution in the value of assets. On the contrary it represents an amount debited under the head impairment of goodwill, it is not a case of provisions much less a provision for diminution in value of assets. 31. It is submitted that the assessee company seeks to add here that claim of assessee is supported by the judgment of Hon'ble Apex Court in the case of Apollo Tyres Ltd. v. CIT reported in 255 ITR 273 wherein it was held, while examining the issue of making adjustments in the book profits for the purpose of MAT. it was held that the Asses....
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.... 32. Reliance is also placed on the following judgments i) 300 ITR 202 (P&H) CIT vs. Sona Woollen Mills Pvt. Ltd. ii) 384 ITR 364 (Gau) CIT v Jajodia Engineering (P) Ltd. iii) ITA No. 170/Del/2019 12.3.2019 Priapus Developers P. Ltd. vs. ACIT "17. Such a premise of the Assessing Officer cannot be approved for the reason that; * Firstly, this reserve has not been created on revaluation of asset albeit same has been acquired through amalgamation and the shares have been valued as per the purchase method for a certain price. * Secondly, it is not revaluation of any asset held by the assessee, because no such reserve has been created by the assessee on revaluation of shares Revaluation of assets takes place only when the assessee decides to revalue the asset existing in the balance sheet. * Lastly, in this case all the assets belonged to amalgamating companies, that is, the shares of IHFL originally belonged to PREPL and PPPL and appeared in their balance sheet; and these assets entered in the books of assessee by virtue of amalgamation valued on fair market value as mandated by the order of Hon'ble High Court. Thus, it would be wrong to say that there was any ....
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....e corresponding value of consideration assigned being excess of consideration paid over the net assets acquired was debited to goodwill account by the assessee company. Thus, it is the case of the assessee that no revolution of assets held by the assessee was carried out at all. The assets came to be acquired by the assessee after amalgamation. Such assets belong to the amalgamating companies prior to amalgamation. The value of assets enter in books is based on scheme of amalgamation. Thus clause (b) to Explanation (1) to s. 115JB cannot be applied as incorrectly invoked by the AO. The amount towards impairment of goodwill (being excess consideration paid for acquisition of assets) cannot be regarded as any amount carried to any 'reserve'. The judgement rendered by the Hon'ble Supreme Court in the case of Indo Rama Synthetics (I) Ltd vs C.I.T New Delhi [2011] 330 ITR 363 relied upon by the AO is with reference to completely different sets of facts which has no semblance with the facts of the present case. In that case, the assets held by the assessee were re-valued and revaluation reserve was created to recognize the substituted value of the assets. The Hon'ble Supreme Court thus u....
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....Smt. Geetika Gupta for Rs. 80,35,440/- @ Rs. 12,000/- per sq.ft. after giving discount of Rs. 27,55,487/-. The AO further mentioned certain transactions of booking where huge discount has been given. As per no. 58 of annexure A5, it was found that consideration @40% s been taken outside the books of account (60% of basic price of Rs. 8,400 has been shown in the books of account @ 5040, whereas there were certain transactions in the books of account were bookings have been made @ 8,400). In respect of such units sold for the project M3M Tee point during the year, the AO made addition of Rs.50 lakh on estimation basis for such suppression receipts for the said project. During the appellate proceedings, it was argued that in the absence of any inquiries made from the persons who have booked space, there was no corroborative evidence that sale proceeds have been suppressed. Thus there was no valid basis for the addition of Rs. 50 lakh. Moreover, books of account have not been rejected, thus the addition made was legally unsustainable. 12.2 From the facts of the case, the AO has made disallowance of Rs. 50 lakh on adhoc basis on the ground that the appellant has received on money aga....