The ACIT, Circle-3(1)(1), Ahmedabad V. M/s. Ozone India Ltd, Ahmedabad

MA 145/AHD/2021

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 3480 (ITAT-AHMEDABAD)
• Duration Of Justice: 7 month(s) 8 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 20-07-2022
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 02-06-2022
• Assessment Year: 2013-2014
• Appeal Filed On: 12-12-2021
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V.K. SINGH
• Keywords: Fair market value; Scheme of amalgamation
• Section: 143(3); 56(2)

Judgement Text

आयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरणआयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरण, अहमदाबाद 瀈यायपीठ अहमदाबाद 瀈यायपीठअहमदाबाद 瀈यायपीठ अहमदाबाद 瀈यायपीठ ‘A’ अहमदाबाद। अहमदाबाद।अहमदाबाद। अहमदाबाद। IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, AHMEDABAD ] ] BEFORE SMT.ANNAPURNA GUPTA, ACCOUNTANT MEMBER AND SHRI MAHAVIR PRASAD, JUDICIAL MEMBER Misc. Application No.145/Ahd/2021 IN ITA No.2081/Ahd/2018 Assessment Year : 2013-14 ACIT, Cir.3(1)(1) Ahmedabad. Vs . Ozone India Ltd. Ahmedabad. PAN : AAACO 9588 N (Applicant) (Responent) Assessee by : Shri Dhiren Shah,AR Revenue by : Shri V.K. Singh, Sr.DR स ु नवाई क तार ख/D a t e o f H e a r i n g : 0 3 / 0 6 / 2 0 2 2 घोषणा क तार ख /D a t e o f P r o n o u n c e m e n t : 2 1 / 0 7 / 2 0 2 2 आदेश/O R D E R PER ANNAPURNA GUPTA, ACCOUNTANT MEMBER Present application has been filed by the Revenue seeking rectification in the order passed in the appeal of the assessee in ITA No.2081/Ahd/2018 dated 13.4.2021. 2. The mistake pointed out by the Revenue, which is sought to be rectified, is that in the said order while dealing with the issue of taxation of excess consideration received on the issue of shares, as per section 56(2)(viib) Income Tax Act, 1961 ("the Act" for short), the ITAT noted incorrect fact that the shares had been issued by the assessee-company, M/s.Kalavir Estate P.Ltd., (KEPL) at face value and not premium, and therefore, the order passed by the ITAT deleting the addition on the basis MA No.145/Ahd/2021 2 of recording this incorrect fact, was an error apparent from record. The contents of the MA stating the same are as under: “Kindly refer to the appellate order dated 01.06.2021 in ITA No. 2081/Ahd/2018 & CO No.l03/Ahd/2019 in the case of M/S OZONE INDIA LTD, PAN: AAACO9588N for the Assessment Year 2013-14. 2. In this case, the assessee had filed its return of Income on 30.09.2013 for A.Y. 2013-14 declaring the total income of Rs.2,23,58,747. The case was selected for scrutiny and the assessment proceedings was finalized u/s. 143(3) of the Income Tax Act, 1961 on 30.03.2016 assessing the income at Rs46,24,77,790/- after making addition of Rs 43,99,66,156/- u/s 56(2)(viib) of the Act on account of difference of net asset value of Rs. 54,21,16,156/-credited in the books. The AO observed that M/s. Kalavir Estate Pvt. Ltd. (KEPL) amalgamated with the assessee company under the scheme of amalgamation. Hence, on coming into effect of the scheme on 01.04.2012, all the assets except land and all the liabilities of KEPL were taken in the books of assessee at book value and land parcels were taken at revalued price, the AO noted that on the date amalgamation, the issued and paid up capital of assessee company stood at Rs.21,00,000/- divided into 2,10,000 equity shares of Rs.10/- each and that of KEPL stood at Rs.5,00,000/- divided into 50,000 equity-shares of Rs.10/-each. Pursuant to scheme of amalgamation, shareholders of KEPL got 300 equity shares of assessee company for each share of KEPL towards consideration for transfer of its assets and liabilities. The AO observed that the amalgamated company i.e. assessee received assets worth Rs.60,26,55,864/- and liabilities worth Rs.6,05,39,708/- of the amalgamating company i.e. KEPL. Thus, assessee received net assets worth Rs. 54,21,16,156/- against corresponding issue of shares having face value of Rs. 15,00,00,000/- to the shareholders of KEPL. The AO thus observed that assessee has received excess net asset worth Rs. 39,21,16,156/- on account of amalgamation which was credited by it as capital reserve of the amalgamated company. The AO was of the opinion that the excess value of assets so received by assessee company was liable for taxation in the hands of the assessee being excess consideration for issue of its share. Thus, the AO calculated the fair value at Rs.6.81 per share as against the face value of Rs.10/- per share issued to KEPL on amalgamation. The total fair market value of shares issued to shareholders of KEPL was consequently worked out at Rs.10,21,50,000/-(1,50,00,000 x 6.81). Consequently, the AO made addition of Rs.43,99,66,156/- u/s. 56(2)(viib) of the Act. 3. Aggrieved by the order passed u/s 143 of the Act the assessee had preferred an appeal before CIT(A). The CIT(A) had decided this issue in favour of the assessee and deleted the addition. 4. Thereafter, the Revenue had preferred an appeal before the Hon'ble ITAT against the order of .the CIT(A). The Hon'ble ITAT vide the above referred order has dismissed the appeal of the revenue stating that that the issue of shares at 'face value' by the amalgamated company (assessee) to the shareholders of amalgamating company in pursuance of scheme of amalgamation legally recognized in the Court of Law neither falls with scope & ambit of clause (viib) to S. 56(2). 5. The decision of the Hon'ble ITAT is not acceptable with regard to the mistake apparent from record in the order of the ITAT in as much as the amalgamated MA No.145/Ahd/2021 3 company had issued shares of face value of Rs.10 each at a premium and not a face value. 6. In view of above, this Miscellaneous Application is being filed to draw attention of the Hon'ble ITAT for the following issues: i) Whether the HonTDle ITAT was justified in recording the finding of fact that the shares were issued by the amalgamated company to the share holders of the amalgamating company at face value even though it is a fact on ; record that the shares were in fact were issued at a premium and the excess amount received by the assessee over and above the face value of shares issued was credited to capital reserve. ii) Whether the ITAT has erred in deleting the addition of Rs.43,99,66,156/- made by the AO under section 56(2j(viib) of the Act on account of difference of net asset value of Rs.54,21,15,156/- credited in the books by holding that the issue of shares at 'face value' by amalgamating company in pursuance of scheme of amalgamation though the transfer of shares in case of amalgamation are specifically excluded from the provisions of 56(2) (viia). iii) Whether the Hon'ble ITAT has erred in not adjudicating the addition of Rs. 1,49,137/- made by the AO on account of disallowance of Architect fees attributable to the unsold inventory. 7. This Miscellaneous Application is being filed with the prior approval of the Pr. CIT-3, Ahmedabad vide his letter NoPR.CIT-3/AHD/MA-OIL/2021-22 dated 25.11.2021.” 3. We have gone through the order of the ITAT in ITA No.2081/A/21, which is sought to be rectified vide the present MA and we have also gone through the MA filed by the Revenue, and we find that it is the Revenue which has misunderstood the fact of shares having been issued by the assessee company at premium and not at face value as noted by the ITAT while arriving at its findings in the order allowing the assesses appeal. The order of the ITAT we find emphatically notes the fact that the shares were issued by the assessee company at face value only. Even the facts reproduced by the AO in his MA are to the same effect, wherein the AO has pointed out that pursuant to the scheme of amalgamation on KEPL getting amalgamated with the assessee-company, every 50,000 equity shareholders of KEPL were given 300 shares in the assessee- company of face value of Rs.10/-,which amounted to shares of Rs.15.00 crores being given to the shareholders of the KEPL. He has further noted that while assets transferred by KEPL to the assessee-company were of the value of Rs.54,2,16,156/-, against which shares of value of Rs.15Crs MA No.145/Ahd/2021 4 were allotted, the AO observed that the assessee-company had received net worth of Rs.39,21,16,156/- on account of amalgamation which was credited as capital reserve of the amalgamated company. Therefore, even as per the facts narrated in the present MA ,against the assets acquired by the assessee-company of Rs.54 crores plus odd, on KEPL being amalgamated with the assessee company, it had issued shares of Rs.15.00 crores i.e. 1,50,00,000 shares (50,000 x 300) of value of Rs.10/- each per share, which is the face value of shares. The contention of the AO before us therefore that it was issued at premium is contrary to the facts that he has himself stated in the application before us and which we have also noted from the order of the ITAT as being incorrect. We do not therefore find any merit in the present Miscellaneous application of the Revenue. And the same is accordingly dismissed. 4. In the result, MA of the Revenue is dismissed. Order pronounced in the Court on 21 ST July, 2022 at Ahmedabad. Sd/- Sd/- (MAHAVIR PRASAD) JUDICIAL MEMBER (ANNAPURNA GUPTA) ACCOUNTANT MEMBER Ahmedabad, dated 21/07/2022