I.  Useful Case law:

1.   M/s Modipon Ltd. Vs. ACIT, W.P.(C) 1623/1990, Date of Decision: 15/05/2012, High Court of Delhi

Issue:

Whether reassessment proceedings initiated u/s 147 to successor of business on account of omission and failure to disclose fully and truly all material facts necessary for determining the income chargeable to tax for these assessment years is valid?

Held:

It was not the effective date but the appointed date which would determine and decide when Indofil Chemicals Ltd. had amalgamated with Modipon Ltd. Accordingly, the Assessing Officer held that the amalgamation of the two companies, i.e. petitioner-Modipon Ltd. and Indofil Chemicals Ltd., had taken place after 31st March, 1986 in view of Section 2(1A) of the Act [now 2(1B)]. He held that till the assessment year 1986-87 both Modipon Ltd. and Indofil Chemicals Ltd., were separate assesses. Accordingly, their income/earnings should be taxed. CIT(Appeals) affirmed the view of the Assessing Officer. However, on further appeal the petitioner succeeded before the Tribunal vide order dated 10th May, 1995. It was held that the amalgamation was effective from 1st July, 1982 and accordingly income of Indofil Chemicals Ltd. was assessable in the hands of the petitioner (Modipon Ltd.) on the basis of the scheme of amalgamation which was effective from 1st July, 1982.  In these circumstances, the impugned reassessment notice issued to M/s Modipon Ltd as successors of Indofil Chemicals Ltd. for A.Y. 1984-85 & 1985-86 are accordingly set aside and quashed.

(Please click here for judgment)

2.  M/s Spencer and Co. Ltd. Vs. ACIT, ITA No. 440/Mds/2011, Date of Pronouncement: 20/04/2012, ITAT-Chennai

Issue:

Whether surplus amount arises from amalgamation was chargeable to tax u/s 28 of Income tax Act.

Held:

The Tribunal has correctly observed that general reserve being difference between paid up value of shares allotted on amalgamation and the net assets taken over from the transferor company is merely an accounting entry, and therefore, no real income arises. Since no actual benefit or perquisite arises from conduct of business carried on by the assessee, the surplus arising on amalgamation cannot be treated as taxable income.

(Please click here for judgment)

• Indian Drugs & Pharmaceuticals Ltd.
  CA Firms for preparation of Annual Accounts
  Gurgaon (Haryana)
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