GHCL Limited, Ahmedabad V. The ACIT., Circle-4, Ahmedabad

ITA 696/AHD/2007

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 8977 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 11 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-02-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 28-01-2010
• Assessment Year: 2003-2004
• Appeal Filed On: 13-02-2007
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAJEEV AGARWAL
• Keywords: Capital asset; Depreciation; Transfer pricing; Opportunity of being heard; Question of law; Scheme of amalgamation; Revised return
• Section: 80HHC; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, AHMEDABAD A BENCH, BEFORE SHRI BHAVNESH SAINI, J.M. AND SHRI D.C.AGRAWAL A.M. ITA NO.696/AHD/2007 ASSESSMENT YEARS: 2003-2004 GHCL LIMITED GHCL HOUSE, OPP. PUNJABI HALL, NAVRANGPURA, AHMEDABAD-380 009. V/S ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE-4, NAVJIVAN TRUST BUILDING, NAVJIVAN PRESS, AHMEDABAD-380 009. PAN NO. AAACG5609C (APPELLANT) (RESPONDENT) FOR ASSESSEE: SHRI S.N.SOPARKAR FOR DEPARTMENT: SHRI RAJEEV AGARWAL, CIT.DR O R D E R PER SHRI BHAVNESH SAINI, J.M. THIS APPEAL BY ASSESSEE IS DIRECTED AGAINST THE ORD ER OF LEARNED CIT(APPEALS)-III, AHMEDABAD DATED 28.12.2006 FOR A. Y. 2003-2004. 2. WE HAVE HEARD LEARNED REPRESENTATIVES OF BOTH TH E PARTIES, PERUSED THE FINDINGS OF AUTHORITIES BELOW AND CONSI DERED THE MATERIAL AVAILABLE ON RECORD. 3. LEARNED COUNSEL FOR ASSESSEE DID NOT PRESS GROUN D NO.1.1 AND 1.2. THESE GROUNDS ACCORDINGLY DISMISSED BEING NOT PRESSED. 4. THE ASSESSEE HAS TAKEN ADDITION GROUND OF APPEAL WHICH READS AS UNDER: 2 THE LEARNED ASSESSING OFFICER HAS GROSSLY ERRED IN LAW AND IN FACTS IN LEVYING INTEREST OF RS.30,02,447/- UNDER S ECTION 234D OF THE INCOME TAX ACT IGNORING THE FACT THAT THE SAID SECTION WAS INTRODUCED W.E.F. 01-06-03 AND THE SAME IS APPLICAB LE FOR INCOME ASSESSABLE FOR A.Y. 2004-05 AND NOT FOR EARLIER ASS ESSMENT YEAR AS PER THE LAW LAID DOWN BY DELHI SPECIAL BENCH IN THE CASE OF ITO VS. EKTA PROMOTERS (P.) LTD. IN 113 ITR 719. 5. LEARNED COUNSEL FOR ASSESSEE SUBMITTED THAT IT I S THE LEGAL ISSUE AND MAY BE ADMITTED FOR HEARING. LEARNED DEPA RTMENTAL REPRESENTATIVE DID NOT DISPUTE THE ABOVE FACTS. CON SIDERING THE ABOVE, AND THAT THE ISSUE IS LEGAL IN NATURE AND AP PARENTLY COVERED BY THE DECISION OF ITAT SPECIAL BENCH IN THE CASE O F EKTA PROMOTERS PVT. LTD. (SUPRA), WE ADMIT THE ADDITIONAL GROUND F OR HEARING. ON CONSIDERATION OF ABOVE, WE FIND THAT ASSESSING OFFI CER HAS NOWHERE MENTIONED ABOUT CHARGING OF INTEREST UNDER SECTION 234D OF THE INCOME TAX ACT, 1961 IN THE BODY OF THE ASSESSMENT ORDER THEREFORE, IT WILL BE REASONABLE AND APPROPRIATE TO RESTORE TH IS ISSUE TO THE FILE OF ASSESSING OFFICER WITH A DIRECTION TO VERIFY THE CH ARGING OF INTEREST UNDER SECTION 234D OF THE INCOME TAX ACT, 1961 AND IN CASE THE SAME IS CHARGED, THE ASSESSING OFFICER SHALL DECIDE THE LEVY OF INTEREST UNDER SECTION 234D OF THE INCOME TAX ACT, 1961 AS PER DECISION OF SPECIAL BENCH IN THE CASE OF EKTA PROMO TERS PVT. LTD. (SUPRA). WE DIRECT THE ASSESSING OFFICER ACCORDINGL Y. ASSESSING OFFICER SHALL GIVE OPPORTUNITY OF BEING HEARD TO TH E ASSESSEE. AS A RESULT, ADDITIONAL GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 6. GROUND NO.2.1 AND 2.2 OF APPEAL OF THE ASSESSEE READS AS UNDER: 2.1 THE LEARNED CIT(A) ERRED IN LAW IN CONFIRMING THAT BROUGHT FORWARD BUSINESS LOSS AND BROUGHT FORWARD DEPRECIAT ION ALLOWANCE HAVE TO BE SET OFF FROM THE PROFITS OF B USINESS OF THE PREVIOUS YEAR TO WORK OUT DEDUCTIONS UNDER SECT ION 80HHC AND SECTION 80HHE FOLLOWING HON. APEX COURT JUDGEMENT IN THE CASE OF IPCA LABORATORIES 266 ITR 521 (SC). 3 2.2 IT IS SUBMITTED THAT EXPLANATION (BAA) TO SECTI ON 80HHC AND EXPLANATION (D) TO SECTION 80HHE REQUIRE THE PROFI TS OF THE BUSINESS TO BE COMPUTED IN ACCORDANCE WITH SECTION S 28 TO 44DA AND SECTION 80AB DOES NOT OVERRIDE SECTION 80H HC AND SECTION 80HHE, SO FAR THEY RELATE TO COMPUTATIO N OF THE PROFITS OF THE BUSINESS THEREUNDER. 6.1. THE ASSESSING OFFICER REWORKED THE DEDUCTION U NDER SECTION 80HHC AND UNDER SECTION 80HHE AND IN DOING SO HE MA DE THE ADJUSTMENT OF SET OFF OF BROUGHT FORWARD LOSS AND U NABSORBED DEPRECIATION. THE ASSESSING OFFICER RELIED UPON DEC ISION OF HONBLE SUPREME COURT IN THE CASE OF IPCA LABORATORIES LTD. 266 ITR 521 AND SET OFF BROUGHT FORWARD LOSSES AND DEPRECIATION IN ARRIVING AT GROSS TOTAL INCOME WITH REFERENCE TO WHICH DEDUCTIO N UNDER CHAPTER VIA WAS ALLOWED. IT RESULTED IN REDUCING THE DEDUCT ION UNDER THE ABOVE PROVISIONS. THE LEARNED COMMISSIONER OF INCOM E TAX (APPEALS) CONFIRMED THE ORDER OF THE ASSESSING OFFI CER. HIS FINDINGS IN PARA.3.1.2 IS REPRODUCED AS UNDER: I AM UNABLE TO AGREE WITH THE CONTENTION OF THE A PPELLANT. THE HONBLE APEX COURT VIDE PAGE 530-531 HAS CLEARLY HE LD THAT SECTION 80AB HAS AN OVERRIDING EFFECT OVER ALL OTHER SECTIO NS IN CHAPTER VIA; SECTION 80HHC DOES NOT PROVIDE THAT ITS PROVISIONS ARE TO PREVAIL OVER SECTION 80AB OR OVER ANY PROVISION OF THE ACT; SECTION 80HHC WOULD THUS BE GOVERNED BY SECTION 80AB; THE DECISIO NS OF HONBLE BOMBAY HIGH COURT AND HONBLE KERALA HIGH COURT (CI T V. SHIRKE CONSTRUCTION EQUIPMENTS LIMITED 246 ITR 249 & CIT V . SMT. T. C. USHA 266 ITR 497) TO CONTRARY CANNOT BE SAID TO BE A CORRECT LAW; SECTION 80AB MAKES IT CLEAR THAT THE COMPUTATION OF INCOME HAS TO BE IN ACCORDANCE WITH THE PROVISIONS OF THE ACT. IN VIEW OF THE ABOVE BINDING DECISIONS, I AM TO HOLD THAT DEDUCTION UNDE R CHAPTER VIA COULD BE WORKED OUT ONLY IN ACCORDANCE WITH THE SCH EME OF THE ACT AND NOT IN A TRUNCATED WAY BY TREATING SECTION 80HH C AS SPECIAL CODE. IN OTHER WORDS, THE ACTION OF ASSESSING OFFIC ER IN SETTING OFF THE BROUGHT FORWARD LOSSES AND UNABSORBED DEPRECIAT ION AND ALLOWING DEDUCTION WITH REFERENCE TO THE PROFITS TH ERE AFTER IS HELD AS TENABLE IN LAW. 6.2 LEARNED COUNSEL FOR ASSESSEE CONCEDED THAT THE ISSUE IS SQUARELY COVERED AGAINST THE ASSESSEE BY THE JUDGEM ENT OF HONBLE SUPREME COURT IN THE CASE OF IPCA LABORATORIES LTD (SUPRA). CONSIDERING THE ABOVE, WE DO NOT FIND ANY MERIT IN THE APPEAL OF THE 4 ASSESSEE ON THIS GROUND OF APPEAL. THE SAME IS ACCO RDINGLY DISMISSED. 7. GROUND NO.3.1, 3.2 AND 3.3 OF THE APPEAL READS AS UNDER: 3.1 THE LEARNED CIT(A) ERRED IN LAW IN HOLDING THA T HE CANNOT ENTERTAIN THE CLAIM FOR DEDUCTION OF RS.1285.89 LAC S ON MODERNISATION/REPLACEMENT OF WORN OUT AND OUTDATED MACHINERIES IN SPINNING PLANT AS REVENUE EXPENDITUR E PRIMARILY UNDER SECTION 37, SINCE THIS CLAIM WAS NO T MADE BY WAY OF A REVISED RETURN BEFORE THE LEARNED ASSESSIN G OFFICER. IT IS SUBMITTED THAT HON. APEX COURT IN GOETZE INDI A LIMITED (2006) 284 ITR 323 (SC) DOES NOT HAVE ADVERSE IMPAC T ON POWERS OF LEARNED CIT(A) UNDER SECTION 251 OR HON. ITAT UNDER SECTION 254 TO CONSIDER SUCH ADDITIONAL CLAIM OF LAW DURING THE APPEAL PROCEEDINGS. 3.2 IT IS SUBMITTED THAT THE SAID EXPENDITURE IS REVENU E EXPENDITURES IN VIEW OF DIRECT JUDGEMENT IN THE CAS E OF JANKIRAMAN MILLS LIMITED 275 ITR 403 (MAD) AND ON T HE RATIO OF ALEMBIC CHEMICALS WORK COMPANY LIMITED 177 ITR 3 77 (SC). 3.3 WITHOUT PREJUDICE TO ABOVE IT IS SUBMITTED THAT ALL THE RELEVANT FACTS FOR THIS CLAIM ARE ON RECORDS OF THE LEARNED ASSESSING OFFICER AND LEARNED CIT(A) AND THE HON. TRIBUNAL CA N AND OUGHT TO DECIDE THIS QUESTION OF LAW ARISING DURING THE ASSESSMENT PROCEEDINGS, TO MEET THE END OF JUSTICE, FOLLOWING HON. APEX COURT JUDGMENT IN THE CASE OF N ATIONAL THERMAL POWER COMPANY LIMITED 229 ITR 383 (SC). 7.1 THE ASSESSING OFFICER DISALLOWED MODERNISATION EXPENSES AND TREATED IT TO BE CAPITAL IN NATURE. THE ASSESSING O FFICER RELIED UPON DECISION OF MADRAS HIGH COURT IN THE CASE OF JANKIR AMAN MILLS LIMITED 275 ITR 403 AND HELD THAT THE ASSESSEE COMP ANY DID NOT REPLACE PARTS OF TEXTILES MILLS AND CARRIED OUT COM PLETE RESTRUCTURE OF ERSTWHILE SICK COMPANY SHRI MINAKSHI MILLS LTD. AND THAT IT AS CAPITAL IN NATURE. THE ASSESSEE AGITATED THE ADDITION BEFOR E LEARNED COMMISSIONER OF INCOME TAX (APPEALS) AND DETAILED S UBMISSIONS WERE MADE. THE LEARNED COMMISSIONER OF INCOME TAX ( APPEALS) HOWEVER, NOTED THAT THIS CLAIM IS MADE FOR THE FIRS T TIME BEFORE THE ASSESSING OFFICER BECAUSE SAME WAS CAPITALISED AND DEPRECIATION WAS CLAIMED IN THE RETURN OF INCOME. LEARNED COMMIS SIONER OF 5 INCOME TAX (APPEALS) THEREFORE, REJECTED THE CLAIM OF THE ASSESSEE BEING NOT ADMISSIBLE AS PER DECISION OF SUPREME COU RT IN THE CASE OF GOETZE INDIA LIMITED (2006) 284 ITR 323 (SC). LEARN ED COUNSEL FOR ASSESSEE SUBMITTED THAT SINCE THE ASSESSING OFFICER CONSIDERED THE ISSUE ON MERITS AND REJECTED THE CLAIM OF ASSESSEE ON MERITS, THEREFORE, LEARNED COMMISSIONER OF INCOME TAX (APPE ALS) ON THIS TECHNICAL GROUND SHOULD NOT HAVE REJECTED THE CLAIM OF ASSESSEE AND HE SHOULD ALSO DECIDE THE APPEAL ON MERITS. HE HAS SUBMITTED THAT THERE IS NO BAR ON THE POWER OF THE LEARNED COMMISS IONER OF INCOME TAX (APPEALS) TO DECIDE THE ISSUE ON MERITS, WHICH IS ARISING OUT OF THE ASSESSMENT ORDER. HE HAS SUBMITTED THAT MATTER MAY BE REMANDED TO THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) TO DECIDE THE SAME ON MERITS. ON THE OTHER HAND, LEARN ED DEPARTMENTAL REPRESENTATIVE RELIED UPON THE ORDER O F LEARNED COMMISSIONER OF INCOME TAX (APPEALS). 7.2 ON CONSIDERATION OF THE ABOVE FACTS, AND SUBMIS SIONS OF THE PARTIES, WE ARE OF THE VIEW THAT ONCE ASSESSING OFF ICER DECIDED THE ISSUE ON MERITS IN THE ASSESSMENT ORDER, THEREFORE, LEARNED COMMISSIONER OF INCOME TAX (APPEALS) SHOULD HAVE AL SO DECIDED THE ISSUE ON MERITS. THEREFORE, THE MATTER REQUIRES RECONSIDERATION BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS). T HE ASSESSING OFFICER HAS DECIDED THE ABOVE ISSUE ON MERIT IN THE ASSESSMENT ORDER AND HELD THAT THE MODERNISATION EXPENDITURES ARE CA PITAL IN NATURE AND NOT REVENUE. THUS, THERE WAS NO BAR ON THE POWE RS OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS) TO HAVE DECIDE D THE ISSUE ON MERITS, SPECIFICALLY WHEN THE ASSESSEE RAISED THE G ROUND OF APPEAL BEFORE HIM ON MERIT. THE LEARNED COMMISSIONER OF IN COME TAX (APPEALS) SHOULD HAVE ALSO TAKEN INTO CONSIDERATION THE DECISION OF SUPREME COURT IN THE CASE OF NATIONAL THERMAL POWER COMPANY LTD. 229 ITR 383. WE ACCORDINGLY, SET ASIDE THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS) AND RESTORE TH IS ISSUE TO HIS 6 FILE WITH DIRECTION TO RE-DECIDE THIS ISSUE ON MERI TS BY GIVING REASONABLE SUFFICIENT OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. AS A RESULT, THIS GROUND OF APPEAL OF ASSESSEE IS ALLO WED FOR STATISTICAL PURPOSES. 8. GROUND NO.4.1 AND 4.2 OF THE APPEAL OF THE ASSES SEE READS AS UNDER: 4.1 THE LEARNED CIT(A) ERRED IN LAW IN NOT ALLOWIN G THE LONG TERM CAPITAL LOSS OF RS.3,16,87,320 UNDER SECTION 45 R.W .S. 2(47) INCURRED ON TRANSFER OF SHARES, RESULTING INTO EXTI NGUISHMENT OF RIGHTS IN SHARES OF ICON DATA MANAGEMENT LIMITED (W HOLLY- OWNED SUBSIDIARY COMPANY) AMALGAMATED, PURSUANT TO HON. HIGH COURT ORDER, WITH THE APPELLANT. 4.2 THE LEARNED CIT(A) ALSO ERRED IN LAW TO HOLD THAT R ATIO OF GRACE COLLIES 166 CTR 201 (SC) AND ANARKALI SARABHAI 90 T AXMAN 509 (SC) ARE NOT APPLICABLE TO FACTS OF THE CASE. 8.1 THE ASSESSING OFFICER DEALT WITH THE ISSUE OF D ISALLOWANCE OF LONG TERM CAPITAL LOSS OF RS.3,16,87,302 IN PARA 5 OF THE ASSESSMENT ORDER AND RELIED UPON SECTION 47(VI) OF THE INCOME TAX ACT, 1961,WHICH PROVIDES THAT NOTHING CONTAINED IN SECTI ON 45 SHALL APPLY TO ANY TRANSFER, IN A SCHEME OF AMALGAMATION OF A C APITAL ASSET BY THE AMALGAMATING COMPANY TO THE AMALGAMATED COMPANY IF THE AMALGAMATED COMPANY IS AN INDIAN COMPANY. HE HAS N OTED THAT, IT IS CLEAR THAT SHARES OF ICON DATA MANAGEMENT LIMITE D (100% WHOLLY EARNED SUBSIDIARY OF GHCL LTD.) CANNOT BE TREATED A S TRANSFER IN THE HANDS OF THE AMALGAMATED COMPANY, IN THIS CASE, M/S . GHCL LTD. (ASSESSEE). THE ASSESSING OFFICER HAS ALSO NOTED TH AT THE ASSESSEES RELIANCE ON THE JUDGEMENT OF HONBLE SUP REME COURT IN THE CASE OF MRS. GRACE COLLIS AND OTHERS 248 ITR 32 3 IS MISPLACED BECAUSE THIS DECISION IS RENDERED WITH RESPECT TO T RANSFER BY A SHARE HOLDER OF A CAPITAL ASSET BEING SHARE OF SHARES HEL D BY HER IN THE AMALGAMATING COMPANY AS PROVIDED UNDER SECTION 47(V II) OF THE INCOME TAX ACT, 1961. THE CLAIM OF THE ASSESSEE IS ACCORDINGLY DISALLOWED BECAUSE IN THIS CASE, THE TRANSACTIONS R ELATES TO 7 AMALGAMATING AND AMALGAMATED COMPANY ONLY AS CONTEM PLATED UNDER SECTION 47(VI) OF THE ACT. THE LEARNED COMMI SSIONER OF INCOME TAX (APPEALS) AFTER RECORDING THE SUBMISSION S OF THE ASSESSEE AND MATERIAL ON RECORD, CONFIRMED THE ORDE R OF ASSESSING OFFICER AND REJECTED THE CLAIM OF THE ASSESSEE. HIS FINDINGS IN PARA 5.1 ARE REPRODUCED AS UNDER:- 5.1 BEFORE ME, THE LEARNED COUNSELS FOR THE APPELL ANT CONTENDED THAT IN VIEW OF AMALGAMATION OF WHOLLY OWNED SUBSID IARY, NAMELY, ICON DATA MANAGEMENT LIMITED WITH THE APPEL LANT COMPANY, NAMELY, GHCL LTD., THE RIGHTS OF THE APPEL LANT IN THE SHARES HELD IN THE SUBSIDIARY COMPANY GOT EXTIN GUISHED AND HENCE WITHIN THE MEANING OF SECTION 2(47) , THE RE WAS TRANSFER AND THE ACCUMULATED LOSS OF THE SUBSIDIARY COMPANY HAVING BEEN TAKEN OVER, THERE WAS CAPITAL LOSS ALLO WABLE IN THIS REGARD. AT THIS STAGE, THE APPELLANT WAS SPECI FICALLY ASKED TO CLARIFY WHETHER THE ASSETS OF THE SUBSIDIA RY COMPANY TAKEN OVER AS A RESULT OF AMALGAMATION WERE VALUED ON A MARKET CONSIDERATION IN ARRIVING AT THE SAID LONG TERM CAPITAL LOSS CLAIMED IN APPEAL. TO THIS, IT WA S FAIRLY ADMITTED THAT THE AMALGAMATION TOOK PLACE AT BOOK V ALUE. THUS, WHEN THE ASSETS OF THE SUBSIDIARY COMPANY, NA MELY FIXED ASSETS AND OTHER RECEIVABLE WERE TAKEN OVER I N LIEU OF THE INVESTMENTS BEING SHARES HELD BY THE APPELLANT COMPANY AS A 100 PER CENT HOLDING COMPANY, THERE WAS NO MAR KET VALUATION. IN FACT, THE AMALGAMATION, THOUGH CLEARE D BY THE HONBLE GUJARAT HIGH COURT AS PER THE REQUIREMENTS OF THE COMPANY LAW, IT CANNOT BE SAID THAT THE ENTIRE SHAR E CAPITAL WAS LOST. IN FACT, THE ASSETS OF THE AMALGAMATING C OMPANY BECAME THE ASSETS OF THE HOLDING COMPANY AND IN THE ABSENCE OF MARKET VALUATION OF THE ASSETS, IT CANNO T BE SAID THAT THE SAID TRANSACTION WAS AT ARMS LENGTH PRICE. IN REALITY, IT IS A SELF-SERVING CLAIM WITHOUT REFERENCE TO THE OPEN MARKET REALITY. FURTHER, THE RELIANCE ON THE HONBLE APEX COURT DECISION IN THE CASE OF MRS. GRACE COLLIES & CITED ABOVE WOULD NOT ADVANCE THE CLAIM OF THE APPELLANT AS IN THE SAID CASE THERE WAS TRANSFER OF SHARES HELD BY THE ASSES SEE IN THE AMALGAMATED COMPANY, WHICH SHE OBTAINED IN LIEU OF SHARES HELD BY HER IN THE AMALGAMATING COMPANY. IN THE PRESENT CASE, THERE IS NO SUCH SALE OF SHARES BECAU SE THE APPELLANT ITSELF IS THE AMALGAMATED COMPANY. FURTHE R, THE ASSETS REALIZED THOUGH AT LOOK VALUE AS PER THE SCH EME OF AMALGAMATION, HAS NOT BEEN GIVEN THE MARKET TREATME NT IN ARRIVING AT THE DIFFERENCE BETWEEN THE REALIZATION AND THE INVESTMENT. IN ANY CASE, THE CLAIM OF LONG TERM CAP ITAL LOSS IS PURELY NOTIONAL AND HAS NOT BEARING ON THE AMOUNT R EALIZED. THE AMALGAMATION PROCEEDINGS, AT THE APPROVAL OF TH E 100% HOLDING COMPANY CANNOT BE EQUATED WITH A TRANSACTIO N BY A SHAREHOLDER INDEPENDENT OF THE AMALGAMATING COMPANY AND THE AMALGAMATED COMPANY. IN FACT, IT IS MERGER OF T HE SUBSIDIARY INTO HOLDING COMPANY IN AN AS IS WHERE I S BASIS AND HENCE IN THE EYE OF LAW NO LOSS IS COMPUT ED WITH 8 MARKET REALITIES. IT IS A RELEVANT QUESTION IF THE APPELLANT WOULD HAVE OFFERED GAIN FOR TAXATION HAD THE ASSET BEEN VALUED AT MARKET RATES AFTER SET OFF OF INVESTMENT COST OF SHARES. IN VIEW OF THE SAME, THE CLAIM OF THE APPEL LANT IS NEGATIVED AS WITHOUT BASIS AND THE LOSS CLAIMED IS PURELY NOTIONAL AND NOT AS COMPUTED IN ACCORDANCE WITH THE PROVISIONS OF I.T.ACT. THE OBSERVATIONS OF THE HON BLE APEX COURT IN THE DECISION OF THE VANIA SILK MILLS LTD. S CASE RELIED ON BY THE ASSESSING OFFICER THROUGH DISAPPROVED IN THE JUDGEMENT OF THE HONBLE APEX COURT IN THE CASE OF MRS. GRACE COLLIES & ORS RELIED ON BY THE APPELLANT, STI LL THE APPELLANTS CLAIM CANNOT SURVIVE AS THE NECESSARY INGREDIENTS FOR SUBSTANTIATION OF CAPITAL LOSS ARE MISSING. IN THE LIGHT OF THE ABOVE DISCUSSION, THIS GROUND OF T HE APPELLANT IS REJECTED. 8.2 LEARNED DEPARTMENTAL REPRESENTATIVE AT THE OUTS ET, SUBMITTED THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE REVENUE AND AGAINST THE ASSESSEE BY THE JUDGEMENT OF HONBLE CA LCUTTA HIGH COURT IN THE CASE SHAW WALLACE AND CO. LTD. REPORTE D IN 119 ITR 399. HE HAS RELIED UPON ORDERS OF THE AUTHORITIES BELOW. INITIALLY, LEARNED COUNSEL FOR ASSESSEE REITERATED THE SUBMISS IONS MADE BEFORE AUTHORITIES BELOW BUT ULTIMATELY STATED THAT ISSUE IS COVERED BY THE JUDGEMENT IN THE CASE OF SHAW WALLACE AND CO. L TD. (SUPRA) RELIED UPON BY LEARNED DEPARTMENTAL REPRESENTATIVE. 8.3 ON CONSIDERATION OF THE ABOVE, FACTS AND CONSI DERING FINDINGS OF AUTHORITIES BELOW, WE AGREE WITH SUBMISSIONS OF THE PARTIES THAT THE ISSUE IS COVERED IN FAVOUR OF THE REVENUE BY TH E JUDGEMENT OF HONBLE CALCUTTA HIGH COURT IN THE CASE OF SHAW WA LLACE AND CO. LTD. (SUPRA) IN WHICH IT WAS HELD, THAT, UNDER THE SCHEME, THERE HAD BEEN, FIRSTLY, A TRANSFER OF THE CAPITAL ASSETS OF THE AMALGAMATING COMPANIES TO THE AMALGAMATED COMPANY AND IT WAS COVERED BY S.47(VI) OF THE ACT AND THERE CANNOT BE ANY CAPITAL GAIN OR LOSS AR ISING FROM SUCH A TRANSFER AS SECTION 45 DOES NOT APPLY TO SUC H TRANSFER. (II) AS A RESULT OF THE DISSOLUTION OF THE AMALGAMA TING COMPANIES THE RIGHT OF THE ASSESSEE IN THE SHARES O F THOSE COMPANIES CAME TO AN END. SUCH EXTINGUISHMENT OF TH E RIGHTS IN THE SHARES WAS INEXTRICABLY LINKED WITH T HE TRANSFER OF THE CAPITAL ASSETS OF THE AMALGAMATING COMPANIES TO THE 9 AMALGAMATED COMPANIES. UNDER S.47(VI) SUCH A TRANS ACTION HAD TO BE EXCLUDED FROM THE OPERATION OF S.45 AND T HERE CANNOT BE ANY CAPITAL GAIN OR LOSS. (III) THE NET EFFECT OF THE SCHEME OF AMALGAMATION WAS A TRANSFER OF THE ENTIRE CAPITAL ASSETS OF THE SUBSID IARY COMPANIES TO THE HOLDING COMPANIES WHICH ALSO HELD THE ENTIRE SHARE CAPITAL OF THE SUBSIDIARY COMPANIES. S UCH A TRANSFER OR TRANSACTION WOULD FALL WITHIN S.47(V) O F THE ACT AND SHOULD BE EXCLUDED FROM THE OPERATION OF S.45. (IV) THE ASSESSEE IN EFFECT HAD ALL THE RIGHTS OF A N OWNER OVER ALL THE ASSETS OF THE SUBSIDIARY COMPANIES INA SMUCH AS THE ASSESSEE HELD 100 PER CENT, SHARES OF THE SUBSI DIARIES AND THERE CANNOT BE ANY ELEMENT OF GAIN OR LOSS WHE N THE ASSESSEE REARRANGED ITS CAPITAL BASE, FOR INSTEAD O F KEEPING THE CAPITAL IN THE NAME OR IN THE CONTROL OF ITS SU BSIDIARIES THE ASSESSEE BROUGHT BACK THE SAME UNDER ITS DIRECT CON TROL. THEREFORE, THE TRIBUNAL WAS RIGHT IN REJECTING THE CONTENTION OF THE ASSESSEE THAT THE LOSS REPRESENTING THE DIFF ERENCE BETWEEN THE COST OF THE SHARES HELD BY THE ASSESSEE IN THE SUBSIDIARY COMPANIES AND THE NET ASSETS TAKEN OVER BY THE ASSESSEE FROM THE RESPECTIVE COMPANIES AS A RESULT OF THE SCHEME OF AMALGAMATION SHOULD BE ALLOWED AS CAPITAL LOSS. 8.4 WE MAY ALSO NOTE THAT ASSESSING OFFICER WAS JUS TIFIED IN OBSERVING THAT THE ASSESSEES RELIANCE ON THE JUDGM ENT OF THE HONBLE SUPREME COURT IN THE CASE OF MRS. GRACE COL LIS (SUPRA) IS MISPLACED BECAUSE THE FACTS ARE CLEARLY DISTINGUISH ABLE AND JUDGEMENT WAS RENDERED IN THE CASE WITH RESPECT TO TRANSFER BY THE SHAREHOLDER OF A CAPITAL ASSETS BEING SHARES HELD B Y HER IN THE AMALGAMATING COMPANY AS PER SECTION 47(VII) OF THE INCOME TAX ACT, 1961. HOWEVER, IN THE APPEAL UNDER CONSIDERATION, THE TRANSACTION RELATES TO AMALGAMATING AND AMALGAMATED COMPANY ONL Y AS CONTEMPLATED UNDER SECTION 47(VI) OF THE INCOME TAX ACT, 1961. THE AUTHORITIES BELOW WERE THEREFORE, JUSTIFIED IN REJE CTING THE CLAIM OF ASSESSEE. IN THIS VIEW OF THE MATTER, WE DO NOT FIN D ANY MERITS IN THIS GROUND OF APPEAL OF THE ASSESSEE. SAME IS DISMISSED . 9. NO OTHER POINT IS ARGUED OR PRESSED. 10 10. AS A RESULT, APPEAL OF THE ASSESSEE IS PARTLY A LLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 12 TH FEBRUARY, 2010. SD/- SD/- (D.C.AGRAWAL) ACCOUNTANT MEMBER (BHAVNESH SAINI) JUDICIAL MEMBER DATE : 12/02/2010 PARAS* COPY OF THE ORDER FORWARDED TO : 1. THE RESPONDENT 2. THE DCIT, (APPELLANT). 3. THE CIT CONCERNED 4. THE CIT(A)-III, AHMEDABAD. 5. THE LEARNED DEPARTMENTAL REPRESENTATIVE , ITAT, 6. GUARD FILE BY ORDER //TRUE COPY// DY.R/AR, ITAT , AHMEDABAD