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2024 (1) TMI 382 - AT - Income TaxAmortisation of expenditure in case of amalgamation or demerger u/s 35DD - 2/5th of 3/5 claim of expenses in each year - DR submitted that there is no provision for the assessee under section 35DD to claim 2/5th of expenses since the provisions are very clear that the assessee should be allowed to claim only 1/5th of the merger expenses in each year - HELD THAT:- Section 35DD is unambiguous wherein it is provided that the expenses incurred wholly and exclusively for the purpose of amalgamation is to be allowed as a deduction in 5 equal installments beginning from the year in which the amalgamation or demerger takes place. Therefore the claim of 2/5th of the merger expenses by the assessee during the year under consideration cannot be allowed for the reason that there is no provision under section 35DD to claim 2/5th of the expenditure incurred towards amalgamation / demerger. Accordingly we dismiss Ground no.3 raised by the assessee in this regard. First year of claim of merger expenses - Alternate prayer of the assessee through additional ground is to treat AY 2007-08 as the first year from which the merger expenses are claimed under section 35DD and allow the assessee to claim the expenses in next 4 assessment years subsequent to AY 2007-08 - Though the amalgamation is effective from 01.04,2005, the amalgamation became operative only post the approvals from the Hon'ble High Court which happened during the financial year relevant to AY 2007-08. Therefore we see merit in the contention that AY 2007-08 should be the first of claim u/s 35DD since the said year is when the amalgamation has taken place. A careful reading of language u/s 35DD would support this view for the reason that the section does not mention that claim should begin from the year in which the amalgamation is effective but uses the words from the previous year in which the amalgamation or demerger takes place. In present case, we are of the considered view that the amalgamation has taken place in AY 2007-08 since the amalgamation is operational only after the approval of Hon'ble High Court which is received during the previous year relevant to AY 2007-08. We therefore tend to agree with the alternate plea of the assessee that AY 2007-08 be treated as the first year of claim of merger expenses for the purpose of section 35DD of the Act. Accordingly the additional ground is allowed in favour of the assessee. Not allowing the MAT credit as per section 115JAA - HELD THAT:- From clarifications of VSV Scheme it is clear that the if the assessee chooses to include the amount of tax related to such MAT credit in the amount of disputed tax then the assessee shall be allowed to carry forward the MAT credit. It is the submission of the assessee that the assessee has chosen the said option. It is important to verify based on evidences and supporting documents relating submitted under VSVS by the assessee before allowing the MAT credit to be adjusted in the tax for the year under consideration. We notice that the lower authorities have denied the claim of the assessee for the reason that the claim is not adequately substantiated. Therefore we remit the issue back to the assessing officer with a direction to verify the claim of the assessee based on the documentary evidences and allow the claim in accordance with law.
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