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2013 (11) TMI 1313 - ITAT MUMBAIWhen the conditions prescribed u/s 72A(2) are not satisfied by the amalgamated company for set-off of losses and depreciation – Set-off of losses of the amalgamating company in the hands of amalgamated company u/s 72A(1) of the Income Tax Act – Held that:- In a case where any of the conditions laid down in sub-section (2) are not complied with, the set off of loss or allowance of depreciation made in any previous year in the hands of the amalgamated company shall be deemed to be income of the amalgamated company chargeable to tax for the year in which such conditions are not complied with – Section 72A(3) of the income tax act gives logical meaning to consequences flowing from the failure to comply with the requirements with in the specified number of years as set out in sub-section (2) after having availed the benefit of set off and carry forward of accumulated loss of the amalgamating company as per sub-section (1) of section 72A. It transpires on a conjoint reading of sub-sections (2) and (3) of section 72A that the amalgamated company is entitled to set off and carry forward the brought forward business losses and unabsorbed depreciation of the amalgamating company from the very first year of the amalgamation. If, however, the conditions given in clause (b) of section 72A(2) are not fulfilled with in the prescribed time, then the set off as allowed in the earlier year(s) shall be deemed to be the income of the amalgamated company of the last year stipulated for compliance of such conditions – Set- off of losses allowed – Decided in favor of Assessee. Classification of heads of income on sale of shares of Bayer (India) Ltd. as income under the head ‘Capital gain’ of ‘Income from business and profession’ – Held that:- No material has been considered or referred to verify as to whether such shares were held as 'Investment’ or 'Stock in trade’ – Matter is restored to the file of A.O for verification - If such verification divulges that the shares were held as investment, then the income from their transfer should be considered under the head ‘Capital gains’ otherwise ‘Business income’. The relevant year of transfer(sale) of Harmer & Reimmer (H&R) Business - H&R Business was transferred to Symrise Ltd. on 30.9.2002. The sale of the business was effected pursuant to the decision of Bayer Group in Germany to hive off this business globally. Pending certain legal formalities, the assessee agreed to carry out the business on behalf of the buyer i.e. Symrise Ltd., as their custodian in India with the clear understanding that “any loss/profit arising out of the operations would belong to the buyer” – Held that:- Assessee can blowing hot and cold in the same breath – Non – reconcilable contention is made by the assessee. On one hand it is claiming to have transferred the business on 30.09.2002 and thereafter carried it as custodian of Symrise Ltd. and on the other it is claiming that the transfer of business took place on 31.03.2004 - The assessee cannot be considered simultaneously as agent of the buyer and also the owner of the business between 1.10.2002 to 31.30.2004. It is vivid that when the assessee conducted the H&R business during this period for and on behalf of Symrise Ltd. and also transferred income from such operations to them, then it cannot turn around and claim itself as owner of the business after 30.09.2002 – Confirmed the view of Commissioner(A) that the transaction of sale took place in the relevant A/Y 2003-04. Quantum of gain/ loss – Computation of market value of stock - Held that:- Actual price of the stock realized, that is, ₹ 1.18 crore will be considered as market value of the stock on that date – Revenue authorities no where held that such value of stock actually realized by the assessee is concocted or in any manner does not represent its true market price. There was evidence to show that the market price of the stock was more than that recorded in its books - Assessee recording higher market value in its books by showing certain profit on revaluation of stock but choosing to claim it as not taxable – In fact, there is no such material available in the facts of the instant case to show that the market value of stock was more than what was actually realized from the buyer of the H&R business - It was for the Revenue to show that the market value of the stock was more than the one which was actually realized from the buyer pursuant to the agreement - Both the transferor and transferee companies are unrelated to each other. It is not a case of the AO that there was some colorable arrangement between two independent parties to the agreement as the genuineness of the agreement has not been questioned. In such circumstances, the only conclusion which can be logically drawn is that the assessee transferred its stock at the market value recorded in the agreement at ₹ 1.18 crore. When the transferee company has paid total sale consideration of ₹ 7.12 crore, which includes a sum of ₹ 1.18 crore towards the value of inventories, then it is beyond our comprehension as to how the Assessing Officer can presume the market value of such inventories at ₹ 4.43 crore without any cogent reason – Decided in favor of Assessee. Classification of head of Income on sale of HR business – Held that:- AO took item wise value of assets (both fixed and current) of the H&R business. He considered all other assets of H&R business as having been transferred by the assessee at book value - No chargeable income arose from the transfer of other assets. Thereafter, A.O. computed income from the transfer of stock in trade by assigning some market value to it. The resultant profit was held to be chargeable to tax as capital gain.
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