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2023 (4) TMI 899 - HC - Income TaxTransfer arising out of amalgamation - Evasion of tax in the guise of Amalgamation - Exemption from capital gains - transfer of shares arising out of amalgamation - Revenue submitted that though the Scheme of Amalgamation was approved by the Gujarat High Court and this Court in November, 1997, payments have been made continuously by the Sun Group to Dadha Group till the date of search in December 1998 and interest were charged on the defaulted installments. - It is submitted that there was absolutely no need of any payment as per the Amalgamation Scheme. HELD THAT:- As per the sanctioned Scheme of Amalgamation, for every 4 shares held by shareholders in Transferor Company, viz. M/s.Tamil Nadu Dadha Pharmaceuticals Ltd. (TNDPL), the shareholders were entitled to one share in the Transferee Company, viz. M/s.Sun Pharma Industries Limited (SPIL). Thus, members and entities under of SMD Group of Dadha Group (DG) who held shares in M/s.Tamil Nadu Dadha Pharmaceuticals Ltd. (TNDPL) came to hold a consolidated 1,05,353 numbers of shares in the Transferee Company. It is the case of the Income Tax Department that there was a capital gain arising out of transfer of shares held by the respective respondents in M/s.Tamil Nadu Dadha Pharmaceuticals Ltd. (TNDPL). On account of amalgamation of M/s.Tamil Nadu Dadha Pharmaceuticals Ltd. (TNDPL) with M/s.Sun Pharma Industries Limited (SPIL), the above capital gain was not offered to tax. This transfer arising out of amalgamation was treated as “capital gains” in the hands of the shareholders (the respondents herein) and other members of the Dadha Group (DG) and therefore, proceedings came to be initiated under Section 158BC of the Income Tax Act, 1961 by issuing notice to both the members of the Dadha Group and M/s.Sun Pharma Industries Limited (SPIL) for the block period between 01.04.1988 and 15.12.1998. Merely because some of the cases filed by the Income Tax Department were disposed in the light of the Litigation Policy of the Income Tax Department will not impel to dismiss these T.C.As. as admittedly the amalgamation though reality was devised to create a smoke screen in the eyes of the Income Tax Department to evade tax on the amounts transferred in cash without proper accounting. But, for the search conduced under Section 132 at the premises of the respective respondents and their Groups namely, Dadha Group and at the premises of M/s.Sun Pharma Industries Limited (SPIL) Group, the truth would have not came to the light. There are only notional allocations based on the number of shares before and after acquisition that were held and allegedly transferred prior to the amalgamation. None of the documents relating to the allocation of shares prior to the amalgamation has been filed. Share Registers of M/s.Tamil Nadu Dadha Pharmaceuticals Ltd. (TNDPL) were also not produced before AO. Whether the amounts were individually received by the respondent or consolidated amounts were received by the members of the SMD Group out of Rs.16,85,62,000/- is also not available. Therefore, the arguments that the undisclosed income for the block period 01.04.1998 to 15.12.1998 is below the litigation policy cannot be accepted. To meet the end of justice, that a fresh assessment is required to be made by the assessing officer based on the records instead of notional allocation of amounts received by the S.Mohandchand Dadha Group (SMD Group) without any proof of direct transfer of the amounts to the individual members of the S.Mohandchand Dadha Group (SMD Group). Therefore, while answering the substantial questions of law in favour of the appellant revenue, matter restored back for de-novo adjudication.
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