TMI Blog2013 (12) TMI 1544X X X X Extracts X X X X X X X X Extracts X X X X ..... O R D E R PER Mahavir Singh, Judicial Member:- This appeal by Revenue is arising out of order of Commissioner of Income-tax (Appeals)-VIII, Kolkata in appeal No.157/CIT(A)-VIII/Kol10-11 dated 16-01-2012. The assessment was framed by ITO, Wd-7(3), Kolkata u/s. 143(3) of the Income-tax Act, 1961 (hereinafter referred to as the Act ) vide his order dated 30-12-2010 for assessment year 2008-09. 2. At the outset, it is noticed that appeal is barred by limitation by five days and Revenue has filed condonation petition supported by affidavit stating the reasons. When this condonation petition was confronted to Ld. Counsel for the assessee, he fairly conceded that he has no objection if delay is condoned. As the assessee's counsel conceded the position, we condone the delay and admit the appeal for hearing. 3. The only issue in this appeal of Revenue is against the order of CIT(A) in deleting the addition made by Assessing Officer on account of capital reserve being treated as benefit arising out of merged accounts u/s 28(iv) of the Act. For this, Revenue has raised following two grounds:- 1. That on the fact and circumstances of the case and in law the L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on ble Madras High Court in the case of Iskraemeco Regent Ltd. V. Commissioner of Income-tax-I [2011] 196 Taxman 103 (Mad.). Further, in the case of CIT v. Alchemic (P) Ltd. [1981] 130 ITR 168 (Guj), it has been held that under sec. 28(iv),the question of including the value of the benefit or perquisite would arise only if the benefit or the perquisite is not in cash or money. In view of the facts and the circumstances of the case and the emerging legal position, in my opinion, the reserve and surplus brought in by the appellant company through the amalgamation duly approved by the Hon ble High Court does not come under the purview of benefit or perquisite to the appellant company under sec. 28(iv) of the IT Act. Therefore, the addition of ₹ 49,53,138- made by the Assessing Officer is hereby deleted . 5. We have heard rival contentions and gone through facts and circumstances of the case. The admitted facts are that the assessee being a Public Limited Company has amalgamated with the abovementioned nine companies. The purpose of amalgamation was to bolster the capability of the assessee to conduct business in dynamic way and more to earn profits. The block of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ambande vs CIT (195 ITR 877) observed that, we hold that the amounts received by the assessee during the financial year in question have to be regarded as capital receipts, and, therefore, are not income within meaning of section 2(24) of the Income Tax Act. (Emphasis by underlining supplied by us). This clearly shows, as is the settled law that a capital receipt, in principle, is outside the scope of income chargeable to tax. Of course, there are specific provisions under the Income Tax Act which provide hat certain capital receipts can also be considered as income, such as under section 2 (24)(vi) of the Act which covers any capital gains chargeable under section 45 , but right now we are confined to normal connotations of the expression income . Howsoever liberal or narrow be the interpretation of expression income , it cannot alter character of a receipt, i.e. convert a capital receipt into revenue receipt or vice versa. The crucial distinction between capital and revenue cannot be blurred or nullified by even the most liberal interpretation of expression income . It is also important to bear in mind that, as held by Hon ble Supreme Court in the case of Dr K Geo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le exercise of amalgamation in the nature of merger is an exercise in that of pooling of resources, as also pooling of assets, into the company in which two or more companies are blended. It is a process of corporate reconstruction and it is only with the approval of Hon ble jurisdictional High Court that this exercise is carried out. In the present case also, as stating paragraph 4 of Part I of Schedule A (i.e. scheme of amalgamation) to Hon ble Calcutta High Court s order dated 9th April 2008, for the purpose of better, efficient and economical management, control and running of the business and to withstand the recessionary tend in the economy of the business undertaking concerned and for administrative convenience and to obtain advantage of economies of large scale, the present scheme is proposed to amalgamate the transferor company (i.e VVPL) with the transferee company (i.e. the assessee). As a result of amalgamation, the assessee, being the transferee company, will increase its assets and liabilities, and, even if there be an benefit in the process, such a benefit can only be in the capital field because it is relatable to the non trading assets and capital. What it aff ..... X X X X Extracts X X X X X X X X Extracts X X X X
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