Appeal details
Counselvise Citation
[2021] 108 COUNSELVISE.COM (IT) 2723 (ITAT-CHENNAI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
1 year(s) 8 month(s) 26 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
21-06-2021
Appeal Filed By
Assessee
Order Result
Dismissed
Bench Allotted
B
Assessment Year
2014-2015
Appeal Filed On
26-09-2019
Judgement Text
, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, CHENNAI . , ! , , ! BEFORE SHRI DUVVURU RL REDDY, JUDICIAL MEMBER AND SHRI S. JAYARAMAN, ACCOUNTANT MEMBER /. I.T.A. NO: 2767/CHNY/2019 / ASSESSMENT YEAR : 2014-15 ROCA BATHROOM PRODUCTS PVT. LTD., THE HERITANCE, 41, HADDOWS ROAD, NUNGAMBAKKAM, CHENNAI 600 006. [PAN: AAACE 9982E] VS. DEPUTY COMMISSIONER OF INCOME TAX, LARGE TAXPAYER UNIT -1, CHENNAI. ( / APPELLANT) ( / RESPONDENT) () / APPELLANT BY : SHRI. N.V. BALAJI, ADVOCATE ,-() / RESPONDENT BY : SHRI. G. JOHNSON, ADDL. CIT ) /DATE OF HEARING : 24.03.2021 ) /DATE OF PRONOUNCEMENT : 21.06.2021 / O R D E R PER S. JAYARAMAN, ACCOUNTANT MEMBER: THE ASSESSEE FILED THIS APPEAL AGAINST THE CONS OLIDATED ORDERS OF THE COMMISSIONER OF INCOME TAX (APPEALS)- 9, CHENNAI, PARTICULARLY AGAINST THE ORDER IN ITA NOS.170/17-18 DATED 31.07.2019 FOR TH E ASSESSMENT YEAR 2014-15. :-2-: ITA NO: 2767/CHNY/2019 2. WHILE MAKING THE ASSESSMENT FOR THE ASSESSMENT Y EAR 2014-15 IN THE CASE OF THE ASSESSEE, M/S ROCA BATHROOM PRODUCTS PV T. LTD., THE A O NOTICED FROM THE PROFIT AND LOSS ACCOUNT THAT THE ASSESSEE HAS CLAIMED SET OFF OF ACCUMULATED UNABSORBED LOSSES OF M/S. ESPIERN PLAS TICS LIMITED TO THE EXTENT OF RS.7,04,94,282. FROM THE NOTE 30 TO THE FINANCIA L STATEMENT TITLED AS AMALGAMATION OF ESPIEM PLASTICS LIMITED WITH THE C OMPANY , THE A O NOTED THAT THE CONSIDERATION FOR 74% OF THE EQUITY SHA RE CAPITAL OF THE TRANSFEREE COMPANY HELD BY EX-PROMOTERS WAS DISCHARGED ON 12. 02.2014 ONLY. SINCE THE ASSESSEE COMPANY WAS HOLDING ONLY 26% PERCENT OF EQUITY SHARES AS ON 01.04.2013 WHICH IS THE APPOINTED DATED AS PER THE SCHEME APPROVED BY THE HONBLE HIGH COURT OF MADRAS ON 28.4.2014, THE A O HELD THAT IT IS EVIDENT THAT THE PRECONDITION FOR AMALGAMATION , I.E. SHARE HOLDERS HOLDING OF NOT LESS THAN THREE-FOURTHS IN VALUE OF THE SHARES IN THE AM ALGAMATING COMPANY BECOMING SHAREHOLDERS OF THE AMALGAMATED COMPANY WA S NOT SATISFIED. AS THE REQUIREMENTS LAID DOWN IN SEC. 2(1B) WERE NOT F ULLY SATISFIED ON THE COURT APPOINTED DATE OF 01.04.2013, THE AO HELD THAT THE ASSESSEE IS NOT ENTITLED TO THE CLAIM OF CARRY FORWARD AND SET OFF OF LOSS U/S SEC. 72A OF THE INCOME TAX ACT, 1961 AND HENCE DISALLOWED THE ASSESSEES CLAI M AND COMPLETED THE ASSESSMENT . AGGRIEVED, THE ASSESSEE FILED AN APP EAL BEFORE THE CIT (A). THE LD. CIT(A) RELYING THE SUPREME COURT DECISION I N THE CASE OF SMT. TARULATA SHYAM AND OTHERS V. CIT, WEST BENGAL (197 7) 108 ITR 345 (SC) HELD THAT THE AO IS RIGHT IN STRICTLY INTERPRETING THE PROVISIONS OF THE ACT AS THE :-3-: ITA NO: 2767/CHNY/2019 APPELLANT HAS NOT SATISFIED THE PRESCRIBED CONDITIO N U/S. 2(1B) R.W.S. 72A OF THE ACT AND DISMISSED THE APPEAL. AGGRIEVED AGAIN ST THE ORDER OF THE LD. CIT(A), THE ASSESSEE FILED THIS APPEAL. THE CONCI SE GROUNDS OF APPEALS FILED BY THE ASSESSEE ARE EXTRACTED AS UNDER: 1. THE ORDER OF THE COMMISSIONER OF INCOME TAX (A PPEALS) [ CIT(A)] IS ERRONEOUS AND CONTRARY TO THE PRINCIPLES OF NATURAL JUSTICE A ND BAD IN LAW. 2. THE CIT (A) ERRED IN LAW AND ON FACTS IN NOT CON SIDERING SET-OFF OF ACCUMULATED LOSSES AND UNABSORBED DEPRECIATION AMOUNTING TO INR 70,494,282 UNDER SECTION 2(1B) READ WITH SECTION 72A OF THE INCOME-TAX ACT W ITHOUT APPRECIATING THE FACT THAT 3. THE CIT (A) IN LAW AND ON FACTS IN FAILING TO AP PRECIATE THAT CONDITIONS STIPULATED UNDER THE PROVISIONS OF SECTION 2(1B) OF THE ACT WE RE SATISFIED UPON AMALGAMATION OF WS. ESPIEM PLASTICS LIMITED (AMALGAMATING COMPANY ) WITH THE APPELLANT. 4. THE CIT (A) ERRED IN CONSIDERING THE APPOINTED DATE INSTEAD OF THE DATE ON WHICH THE SCHEME BECOMING EFFECTIVE (EFFECTIVE DAT E), FOR CONCLUDING THE NON- COMPLIANCE OF CONDITIONS SPECIFIED IN SECTION 2(1B) (III) OF THE ACT. 5. THE CIT (A) ERRED IN DISREGARDING THE SCHEME OF AMALGAMATION WHICH INTER-ALIA SANCTIONED THE VESTING OF AND CARRY FORWARD OF LOSS BY APPELLANT WHICH IS BINDING ON THE STATUTORY AUTHORITIES INCLUDING INCOME-TAX AUTH ORITIES. 6. THE CIT (A) COMMISSIONER OF INCOME-TAX (APPEALS) ERRED BY UPHOLDING THE DENIAL OF CARRY FORWARD OF LOSS AND UNABSORBED DEPRECIATIO N MADE BY THE LEARNED AO, STATING THAT THE TAXING STATUTE BE INTERPRETED STRI CTLY, WITHOUT HAVING REGARD TO THE LEGAL POSITION APPLICABLE TO THE FACTS IN HAND. 7. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND, MODIFY ALL OR ANY GROUNDS OF APPEAL AT OR BEFORE THE HEARING OF APPEAL. 3. THE CASE WAS HEARD THROUGH VIDEO CONFERENCING. THE LD. AR SUBMITTED THAT AS ON 01.04.2013, ONLY 26% OF SHARES WERE HELD BY THE ASSESSEE COMPANY WITH ESPIEM PLASTICS LTD . ON 10.0 2.2014, THE BALANCE 74% OF SHARES WERE BOUGHT AND ON THE SAME DAY IE ON 1 4.02.2014 ITSELF ESPIEM :-4-: ITA NO: 2767/CHNY/2019 PLASTICS LTD., THE TRANSFEROR COMPANY AND THE ASSES SEE TRANSFEREE COMPANY, ROCA BATHROOM PRODUCTS PVT LTD., APPLIED FOR AMALGA MATION. ON 28.04.2014, THE HONBLE HIGH COURT OF JUDICATURE AT MADRAS SAN CTIONED THE SCHEME OF AMALGAMATION WITH EFFECT FROM 01.04.2013. RELYING THE DECISION IN THE CASE OF ITO VS. PURBANCHAL POWER CO. LTD., IN ITA NO. 20 1/KOL/2010 DATED 17.07.2014 FOR THE AY 2006-07, OF ITAT KOLKATA BENC H AND INVITING OUR ATTENTION TO THE PAPER BOOK , WHEREIN THE COPY OF E XTRACT OF RESOLUTION PASSED ON 10.02.2014 AND PARA 11 TITLED AS CONSIDERATION OF THE COPY OF SCHEME OF AMALGAMATION ARE PLACED , THE LD. AR SUBMITTED TH AT SHAREHOLDERS OF AMALGAMATING COMPANY WOULD BE VESTED WITH THE RIGHT /INTEREST ARISING FROM THE SCHEME OF AMALGAMATION ONLY UPON SCHEME BECOMIN G EFFECTIVE AND PLEADED THAT FOR COMPLIANCE OF CONDITIONS SPECIFIED IN SECTION 2 (1B)(III) OF THE ACT, THE EFFECTIVE DATE BE REGARDED. PER CONTRA, THE LD. DR REITERATING THE FACTS BROUGHT BY THE LOWER AUTHORITIES SUBMITTED TH AT WHEN THE PROVISIONS OF THE ACT ARE CLEAR, THERE IS NO CASE FOR ANY AMBIGUI TY AND HENCE THE INTERPRETATION MADE BY THE LOWER AUTHORITIES ARE IN ACCORDANCE WITH LAW AND HENCE PLEADED THAT THE ORDERS OF THE LOWER AUTHOR ITIES BE UPHELD. 4. WE HEARD THE RIVAL SUBMISSIONS AND GONE THROU GH THE RELEVANT MATERIAL. IT IS SEEN FROM THE PAPERBOOK THAT ES PIEM PLASTICS LTD., THE TRANSFEROR COMPANY, AS WELL AS ROCA BATHROOM PRODUC TS PVT. LTD., THE TRANSFEREE COMPANY, SOUGHT THE SANCTIONING THE SCHE ME OF AMALGAMATION :-5-: ITA NO: 2767/CHNY/2019 BEFORE THE HONBLE HIGH COURT OF JUDICATURE AT MAD RAS SO AS TO BE BINDING ON ALL THE EQUITY SHAREHOLDERS OF THE TRANSFEROR/TRANS FEREE COMPANY W.E.F. 01.04.2013. THE HONBLE HIGH COURT OF JUDICATURE I N COMP. PETN NO. 111 AND 112 OF 2014 DATED 28.04.2014 SANCTIONED THE SCHEME OF AMALGAMATION W.E.F. 01.04.2013 AND DECLARED THAT IT IS BINDING ON AL L THE EQUITY SHAREHOLDERS OF THE SAID COMPANIES W.E.F. 01.04.2013. THUS, THE A PPOINTED DATE FOR AMALGAMATION IS 01.04.2013. THE ASSESSEE HAS NOT D ISPUTED THE FACT THAT AS ON 31.03.2013, THE ASSESSEE WAS HOLDING ONLY 26% OF EQUITY SHARES IN THE TRANSFEROR COMPANY. SINCE, THE ASSESSEE IS RELYING THE CASE OF PURBANCHAL POWER CO. LTD., LET US EXAMINE THE FACTS IN BRIEF. IN THAT CASE, FOUR COMPANIES VIZ PREETAM MARKETING PVT LTD AND XENITH EXPORTS PVT LTD WERE AMALGAMATED W.E.F. 31.03.2004 AND THE OTHER TWO COM PANIES VIZ BURMAN TREXIM PVT LTD AND VARSHA FABRICS LTD WERE AMALGAMA TED W.E.F. 31.03.2005, WHILE MAKING THE ASSESSMENT FOR THE ASSESSMENT YEAR 2006-07 IN THE CASE OF PURBANCHAL POWER CO. LTD., THE AO NOTICED THAT THE SHARE CAPITAL OF THE ASSESSEE COMPANY AS ON 31.03.2005 AND 31.03.2006 WA S AT RS. 5,04,600/-, NO SHARES WERE ALLOTTED TO THE SHAREHOLDERS OF THE AMALGAMATING COMPANY IN LIEU OF THE TRANSFER OF SUBSTANTIAL UNDERTAKING IN THE AMALGAMATED COMPANY AND OVERRULING ASSESSEES EXPLANATION ETC, THE AO A SSESSED RS. 69,64,39,089/- CREDITED AS AMALGAMATION RESERVE IN THE ACCOUNTS OF THE ASSESSEE U/S. 68 AS UNEXPLAINED CREDIT AND HELD THAT THE AMALGAMATION I S A COLOURABLE DEVICE TO EVADE THE TAX BY AMALGAMATING COMPANIES AND HELD TH AT THE REQUIREMENT U/S. :-6-: ITA NO: 2767/CHNY/2019 2(1B) OF THE ACT HAS NOT BEEN MET. FROM THE MATERI AL AND EXPLANATION FURNISHED BEFORE THE AO ETC., THE HONBLE TRIBUNAL FOUND THAT THE AMALGAMATION RESERVES CREDITED TO THE ACCOUNTS OF R S. 64,69,73,480/- APPEARED IN THE AUDITED ACCOUNTS OF THE FOUR COMPAN IES TILL 31.03.2004 AND 31.03.2005, RESPECTIVELY, AND THE BALANCE AMOUNT IS ON ACCOUNT OF INTER SE DEBIT BALANCE OF THE TRANSFER COMPANY. THE SHARES BEING HELD BY THE TRANSFEROR COMPANIES BETWEEN THEMSELVES, INTER SE, WAS MORE THAN 3/4 TH AND THEREFORE THE PROVISIONS OF SECTION 2(1B) HAVE NOT BEEN VIOLATED. THUS, ON THE FACTS, THIS CASE LAW OFFERS NO HELP TO THE ASSE SSEE. IN THIS CASE, THE SCHEME OF AMALGAMATION HAS BEEN APPROVED BY THE HON BLE HIGH COURT OF JUDICATURE AT MADRAS UNDER THE COMPANIES ACT, 1956 W.E.F. 01.04.2013. IT IS SETTLED LAW THAT ONCE AMALGAMATION IS APPROVED, THE AMALGAMATING COMPANY CEASING TO EXIST, IT CANT BE REGARDED AS A PERSON U/S. 2(31) OF THE ACT AGAINST WHOM ASSESSMENT PROCEEDINGS CAN BE INITIATED OR AN ORDER OF ASSESSMENT PASSED. THEREFORE, APPOINTED DATE, 01.04.2013, IS C RUCIAL IN THIS CASE. AS ON 31.03.2013, THE ASSESSEE COMPANY HAD ONLY 26% OF EQUITY SHARES IN THE TRANSFEROR COMPANY, AND THEREFORE, THE PROVISIONS O F SECTION 2 (1B) R.W.S 72A OF THE INCOME TAX ACT HAVE NOT BEEN COMPLIED WITH BY THE ASSESSEE. SINCE, THE ASSESSEE COMPANY DID NOT HAVE 3/4 TH OF THE SHARES OF THE TRANSFEROR COMPANY AS ON 31.03.2013, THE APPOINTED DATE BEING 01.04.2013, THE ASSESSEE IS NOT ENTITLED TO THE CLAIM OF CARRY FOR WARD AND THE SET OFF OF LOSS OF :-7-: ITA NO: 2767/CHNY/2019 THE TRANSFEROR COMPANY AS ON 31.03.2013. THE COR RESPONDING GROUNDS OF THE ASSESSEE FAIL. 5. IN THE RESULT, THE ASSESSEES APPEAL IS DISMI SSED. ORDER PRONOUNCED ON 21 ST JUNE, 2021 AT CHENNAI. SD/- ( . ' ) (DUVVURU RL REDDY) $% /JUDICIAL MEMBER SD/- ( ) (S. JAYARAMAN) % /ACCOUNTANT MEMBER /CHENNAI, 2 /DATED: 21 ST JUNE , 2021 JPV ),4565 /COPY TO: 1. ( / APPELLANT 2. ,-( /RESPONDENT 3. 7 ) ( /CIT(A) 4. 7 /CIT 5. 5, /DR 6. : /GF
