TaxTMI 
TaxTMI 
2024 (10) TMI 1785
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....itesh Engineers Pvt Ltd and M/s Shruti Engineers Pvt Ltd, on amalgamation in M/s Rajoo Engineers Ltd. (2) On the facts of the case, the Ld. CIT(Appeals), NFAC, Delhi ought to have upheld the order of the Assessing Officer. (3) That the revenue craves leave to add, amend, alter or withdraw any grounds of appeal." 3. The relevant material facts, as culled out from the material on record, are as follows. The assessee, before us, is an individual, and filed her return of income for assessment year(A.Y.) 2014-15, on 31/07/2014, declaring total income of Rs. 88,785/- In the assessee`s case, no scrutiny assessment was made on the basis of the return of income filed by the assessee. Subsequently, the case was re-opened, following the information received from the DCIT, Junagadh Circle, Junagadh to the effect that during the Financial Year(F.Y.) 2013-14, relevant to the assessment year under consideration, the assessee was one of the share holders of M/s Hitesh Engineers Pvt Ltd and M/s Shruti Engineers Pvt. Ltd, which were merged with M/s Rajoo Engineers Ltd on amalgamation. As per the information, the assessee was holding 12,950(3.24%) and 45,500(30.33%) shares of M/s....
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....essment order of the assessee, vide para No.4 of the assessing officer. Therefore, the assessing officer added the amount of Rs. 18,74,73,500/- as excess value, transferred to beneficiary, related parties, on protective basis, in the assessment order of M/s. Rajoo Engineers Ltd. for A.Y.2014-15. 6. This information regarding beneficiaries of excess consideration given by M/s Rajoo Engineers Ltd, was passed on, to the assessing officer, in the case of Smt. Kruti Rajeshbhai Doshi, who was holding shares of M/s Hitesh Engineers Pvt Ltd and M/s Shruti Engineers Pvt Ltd, in proportion of 3.24% and 30.33%, respectively, on the day of amalgamation, of M/s Hitesh Engineers Pvt Ltd, and M/s Shruti Engineers Pvt Ltd, with M/s Rajoo Engineers Ltd. After due verification of the assessce's return of income, filed for A.Y.2014-15, the case of the assessee was reopened by recording reasons and obtaining the approval of Joint, CIT Range-2(1), Rajkot. In view of above position, vide letter dated 19/11/2019, final show cause notice was issued to the assessee. The Assessee was asked, as to why the undisclosed income of Rs. 1,97,92,355/- should not be added back to the total income of the asses....
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....lgamating company and therefore, there is no tax implication. The ld. CIT(A) also relied on the judgement of Hon'ble High Court of Gujarat in the case of PCIT vs. Jigar Jashwantlal Shah [203] 154 taxmann.com 568 (Gujarat), where init was held as follows: "18. In view of the above, the provisions of sec.56(2) would not be applicable to the issue of new shares which is also submitted by the explanatory notice to the Finance Bill, 2010, wherein, it is clarified that sec.56(2) (vii)(c) of the Act ought to be applied only in the case of transfer of shares. It is trite law that allotment of now shares cannot be regarded as transfer of shares. Therefore, in order to apply the provisions of sec.56(2)(vii) (c), there must be an existence of property before receiving it. As per advanced Law Lexicon Dictionary, the term "receive" has been defined as " To receive means to get by a transfer, as to receive a gift, to receive a letter or to receive money and involves an actual receipt." Issue of new shares by company as a right shares is creation of property and merely receiving such shares cannot be considered as a transfer under sec. 56(2(vii)(c) and accordingly, such provision wou....
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.... 11. On the other hand, Ld. Counsel for the assessee argued that the assessee company has issued the shares in the scheme of amalgamation and the amalgamated company issued the shares to the shareholdings amalgamating company in pursuance to the amalgamation scheme. However, the assessing officer made the addition u/s.56(2)(vii)(c)(ii) of the Act without considering the fact that this is not a transfer as per the definition given in Section 47(vii) of the Act because the amalgamated company had issued the shares to the share holders of the amalgamating company, that is, the transferee company in case of the amalgamation issued shares to the share holders of the transferor company and such transaction is not regarded as transfer u/s.47(vii) of the Act. Hence, there is no question of taxing the transaction in the hands of the individual assessee, where the assessee received the shares in the scheme of amalgamation. Since, the transaction is not regarded as a transfer, hence, the question of capital gain does not arise as it is settled law that in order to compute capital gain, there must be transfer. Therefore, such transaction should not be taxable u/s. 56(2)(vii)(c)(ii) of the Ac....
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.... Pvt. Ltd.) is exchanged for 304 Equity Shares each having paid-up value Re.1 per share of Transferee Company (Rajoo Engineers Ltd.) on amalgamation. Similarly, 10 Equity Shares each having paid-up value Rs. 10 per share of Transferor Company No. 2 (Shruti Engineers Pvt. Ltd.) is exchanged for 411 Equity Shares each having paid-up value Re.1 per share of Transferee Company (Rajoo Engineers Ltd.) on amalgamation. However, the Assessing Officer has valued the share of Transferor Company No.1 (Hitesh Engineers Pvt. Ltd.) at Rs. 55.39 and Transferor Company No.2 (Shruti Engineers Pvt. Ltd) at Rs. 74.86 and the value of the share of Transferee Company (Rajoo Engineers Ltd.) at Rs. 10.65 having paid-up value Rs.1/- per share. 13. As per ld Counsel, the shares of Transferee Company are not issued at discount as explained in the following tabular presentation, before the assessing officer: Sr. No. Particulars Rajoo engineers Ltd. Hitesh Engineers Pvt. Ltd. Shruti Engineers Pvt. Ltd. 1 Paid-up value per share 1 10 10 2 FMV per share (As per Scheme of Amalgamation) 1.82 55.39 74.86 3 FMV of share at Rs.10 Paid-up value 18.20 55.39 ....
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....ndu Undivided Family receives, in any previous year, from any person or persons on or after the 1" day of October, 2009: Clause-C-Any property, other than immovable property, (i) Without consideration, the aggregate fair market value of which exceeds fifty thousand rupees, the whole of the aggregate fair market value of such property. (ii) For consideration which is less than the aggregate fair market value of the property by an amount exceeding fifty thousand rupees, the aggregate fair market value of such property as exceeds such consideration" We find that the shareholders of Hitesh Engineers Pvt. Ltd. and Shruti Engineers Pvt. Ltd. have not received consideration, (as per the scheme approved by the hon`ble High Court,) which is less than aggregate fair market value of their shares and therefore, provisions of Sec. 56(2)(vii)(c) are not attracted. Similarly for rationalization of section 56 the Income Tax Act, 1961 and with a view to bring uniformity in tax treatment, the Finance Act, 2016, proposed to amend the Act, so as to provide that any shares received by Individual or HUF, as a consequence of demerger or amalgamation of a company, shall not attract th....