TaxTMI 
TaxTMI 
2026 (8) TMI 484
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....s engaged in the generation of wind power and the manufacture of nuts, bolts, screws and other similar metal products. 4. The petitioner company was demerged under Section 232 of the Companies Act, 2013 by the Scheme of Amalgamation and Arrangement (Demerger) as per the Common Order dated 04.03.2021 in C.P.Nos.208 to 211 of 2020 in C.A.Nos.1211 to 1214 of 2019 sanctioned under Sections 230 to 232 of the Companies Act, 2013. 5. By virtue of the aforesaid demerger, the Nut Division has been hived off and merged with a resulting company viz., Fastenex Private Limited. As per the sanctioned scheme of demerger, the effective date of the demerger was 01.04.2019. 6. The assessment order dated 30.09.2022 was passed in response to a revised Return of Income filed by the petitioner company on 31.03.2021. However, the due date for filing the revised Return of Income had already expired on 15.02.2021. 7. While the petitioner was required to file their tax audit report by 15.01.2021, they filed it only on 31.03.2021 i.e., the same day the revised return was submitted. Thus, in the assessment order itself, it has been stated that the petitioner was to be separately proceeded under Se....
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.... at what values they are transferred to the resultant company. 4. Explain the depreciation schedule for the financial year 2019- 20. What is the WDV of the assets of the existing company and WDV of assets transferred in the demerged company? 5. Details of 80 IA deductions claimed with supporting documents. 6. Reasons for large claim of refund. 7. Give reasons of loss from currency fluctuations if any. 8. Copy of GSTR return furnished during the financial year 2019-20. Explain the difference in turnover if any. 9. Give reasons for the mismatch in purchases and import data as per ITR and CBEC date and reconcile the same. 10. What is the stock held by the company before and after the demerger and explain the differences in closing and opening stock during the FY 2019-20?" 12. It is noticed that the petitioner had responded to the same in its reply dated 23.02.2022. As far as Serial No.3 in the Section 142(1) notice dated 11.02.2022 is concerned, the petitioner had given the following details: "3. Give details of schedule of assets and liabilities before and after the demerger and at what values they are transfe....
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....r their business along with all assets, liabilities, profits and losses, etc. In view of the provisions of Section 170(1) of the Income Tax Act, the Department is required to assess the income of the appellants after taking into account the revised returns filed after amalgamation of the companies. 19. The said case dealt with a demerged resulting company. The logical corollary flowing from the above position is that even the demerged company will have to file a revised return after the profit and loss account is prepared based on the audited balance sheet. 20. Section 139(5) and Section 170 of the Income Tax Act, 1961, are reproduced below:- Section 139(5) Section 170 If any person, having furnished a return under sub-section (1) or subsection (4), discovers any omission or any wrong statement therein, he may furnish a revised return at any time [before three months prior to the end] of the relevant assessment year or before the completion of the assessment, whichever is earlier. (1) An assessee shall make a secondary adjustment in every case where primary adjustment of one crore rupees or more to the transfer price- (a) has been made by the assessee on his ow....
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....etween the arm's length price determined in primary adjustment and the price at which the international transaction has actually been undertaken; (c) "primary adjustment" to a transfer price, means the determination of transfer price as per the arm's length principle resulting in an increase in the total income or reduction in the loss, as the case may be, of the assessee; (d) "secondary adjustment" means an adjustment in the books of account of the assessee and its associated enterprise to reflect that the actual allocation of profits between the assessee and its associated enterprise are consistent with the transfer price determined as a result of primary adjustment, thereby removing the imbalance between cash account and actual profit of the assessee. 21. In this background, Section 263 notice dated 05.03.2025 was issued to the petitioner to revise the assessment order dated 30.03.2025 passed by the 2nd respondent. 22. In my view, Section 263 notice dated 05.03.2025 has noted the discrepancies arising out of the revised Return of Income filed on 31.03.2021. In Paragraph No.3 of the said notice, it has been inadvertently stated that pursuant to demerger order,....
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.... cost of acquisition of shares in the demerged company was calculated at Rs. 106. 28. The above calculations have been explained in Paragraph No.5 of the said show cause notice dated 05.03.2025, which is reproduced below: "5. In this connection it is observed that in as much as the conditions stipulated in sec.2(19AA) are not complied with, the transfer is not eligible for exemption u/s. 47(vib) and thus the shareholders of the demerged company are required to be taxed with capital gains tax for the shares allotted to them in consideration for the transfer of their shares in the demerged company. Original cost of shares of the demerged company = 100 Net book value of the assets transferred to the resulting company = Rs.336,70,09,062 Net worth of the demerged company before demerger = Rs.317,95,35,034 Cost of acquisition of shares in the resulting company = Rs.106 Calculation of Capital gains: Consideration value = Rs.725,02,87,314 (5163*1404278) Cost = Rs.14,88,53,468 (106*14042278) Capital gains = Rs.710,14,33,846 (to be shared b/w the shareholders in the ratio of 94.8 and 5.2%) 29. It is in this b....