TaxTMI 
TaxTMI 
2025 (7) TMI 751
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....he other. Ground No. 1 - Validity of the proceedings 1.1 That on the facts and circumstances of the case and in law, despite the department put to notice of the factum of the amalgamation during assessment proceedings, the assessment notices and the consequent assessment order dated 27 December 2018, being issued under section 142(1) [scheme became effective after notice issued under section 143(2)] and made under section 143(3) by the Deputy Commissioner of Income tax, Circle 14(2)(1) (learned AO) in the name of non-existent/ amalgamating company are bad in law. 1.2 That on the facts and circumstances of the case and in law, the proceedings are bad in law as the assessment is framed in the name of the amalgamating company, which was not in existence. 1.3 That the appellant in response to the appeal hearing Notice dated 26 June 2023 has filed additional submissions on 11 July 2023 vide reply dated 10 July 2023. However, the learned CIT(A) in Para 3, page 10 of the order has stated in the remarks column that no reply was filed. Accordingly, the learned CIT(A) without considering the said reply has decided the appeal against the appellant. Thus, th....
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....with Lupin Investments Private Limited from 01/10/2016. Again vide letter dated 04/05/2018, the assessee reiterated that the assessee is subsequently merged with Lupin Investments Private Limited w.e.f. 01/10/2016 and yet the AO framed the assessment order dated 27/12/2018 in the name of Zyma Laboratories Limited, a non-est company. It has been further pointed out that subsequent assessment order was also passed bearing the same order number and the same date in the name of Lupin Investments Private Limited as successor to Zyma Laboratories Limited. It is the say of the ld. Counsel for the assessee that the AO could not have passed the second assessment order unless the first order was withdrawn. 4. We have given a thoughtful consideration to the submissions of the ld. Counsel. Insofar as, the first order which is in the name of a nonest company is concerned, we find that the order is unsigned and, therefore, it is non-est in the eyes of law. The second order which is in the name of Lupin Investments Private Limited, is successor to Zyma Laboratories Limited, is a valid order physically signed by the AO. Therefore, we do not find any force in the contentions raised vide Ground N....
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....50 taxmann. Com 523 (Chennai- Trib.); DCIT vs. Globe Capital Market Ltd. [2023] 156 taxmann.com 620 (Delhi-Trib.) & DCIT vs. TPS Infrastructure Ltd. in ITA No. 6433/Delhi/2018, has considered identical set of facts and decided the issue in favour of the assessee and against the revenue. It would suffice if we refer to one of the decisions of the Co-ordinate Bench Mumbai in the case of Vora Financial Services (P.) Ltd. Vs. ACIT (supra). The relevant findings read as under:- "23. The last issue urged by the assessee relates to the addition of Rs. 82.89 lakhs made u/s 56(2)(viia) of the Act. The facts in brief are that the assessee, during the year under consideration, made an offer to existing shareholders for buy back of 25% of its existing share capital at a price of Rs. 26/- per share. The offer was open between 8th May, 2013 and 22nd May, 2013. One of the directors Shri Kashyap Vora offered 12,19,075 shares under the buyback scheme and accordingly the assessee bought those shares paid a consideration of Rs. 316.95 lakhs on 24.05.2013. The AO noticed that the book value of shares as on 31.3.2013 was Rs. 32.80 per share, whereas the assessee company has bought back the sha....
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....ion of consideration received. Accordingly the Ld A.R submitted that the above said provisions only deal with the case of buy back of shares and hence the AO was not correct in invoking the provisions of sec. 56(2)(viia) of the Act in the instant case. In this regard, the Ld A.R placed reliance on the Memorandum Explaining the provisions in Finance Bill, 1999 available in (1999) 236 ITR (St.) 155. 26. He submitted that the provisions of sec.56(2)(vii) were introduced as counter evasion mechanism as explained in the Memorandum Explaining the provisions in the Finance Bill, 2010 (2010)(321 ITR (St.) 110)", which is extracted below:- "B. The provisions of section 56(2)(vii) were introduced as a counter evasion mechanism to prevent laundering of unaccounted income under the garb of gifts, particularly after abolition of the Gift Tax Act. The provisions were intended to extend the tax net to such transactions in kind. The intent is not to tax the transactions entered into in the normal course of business or trade, the profits of which are taxable under specific head of income. It is, therefore, proposed to amend the definition of property so as to provide that section ....
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....recently and the same was not available before the AO. Accordingly he submitted that the above said valuation report should be ignored. He submitted that the assessee has purchased shares at Rs. 26/- per share, while the book value as per the computation of AO was Rs. 32.80 shares. Accordingly he submitted that the AO has rightly assessed the difference u/s. 56(2)(viia) of the Act. 30. We have heard rival contentions on this issue and perused the record. The provisions of sec. 56(2)(viia) reads that "where a firm or a company not being a company in which the public are substantially interested, receives, in any previous year, from any person or persons, on or after the 1st day of June, 2010, any property, being shares of a company not being a company in which the public are substantially interested" The words "firm or a company" "any property, being shares of a company" are important here. In this regard, we may refer to the Memorandum explaining the insertion of Provisions of sec. 56(2)(viia) by the Finance Act, 2010, which reads as under:- "Under the existing provisions of section 56(2)(vii), any sum of money or any property in kind which is received without con....
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....es under buyback scheme and the same has been extinguished by reducing the capital and hence the tests of "becoming property" and also "shares of any other company" fail in this case. Accordingly we are of the view that the tax authorities are not justified in invoking the provisions of sec. 56(2)(viia) for buyback of own shares." 9. On finding parity of facts, respectfully following the decision of the Co-ordinate Benches (supra), we direct the AO to delete the impugned addition. Accordingly, Ground No. 2 is allowed. 10. Underlying facts in the issues raised vide Ground No. 3 show that the assessee has shown interest income on Income-tax refund and interest income on long-term non-trade investments under the head "income from other sources". The AO was of the firm belief that the assessee company is engaged in the activities of investments in shares and securities and financing to group companies. Therefore, interest income on investments made, should be offered under the business head and accordingly, taxed the interest income on long-term nontrade investments under the heard profits and gains of business and profession. Having done so, the AO denied the claim of deduction ....