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2015 (3) TMI 717 - MADRAS HIGH COURT

2015 (3) TMI 717 - MADRAS HIGH COURT - [2015] 373 ITR 313 (Mad) - Transfer to the General Reserve on amalgamation - whether is not in the nature of any benefit or perquisite and thus not taxable under Section 28(iv) - Held that:- A plain reading of the provision of Section 28(iv) makes it clear that the amount reflected in the balance sheet of the assessee under the head 'reserves and surplus' cannot be treated as a benefit or perquisite arising from business or exercise of profession. The diffe .....

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eserve on amalgamation is not in the nature of any benefit or perquisite and thus not taxable under Section 28(iv) of the Income Tax Act, 1961 - Decided against revenue. - Tax Case (Appeal) No.118 of 2015 - Dated:- 11-3-2015 - R.Sudhakar And R.Karuppiah JJ. For the Appellant : Mr.T.Ravikumar Standing Counsel For the Respondent : None. Judgment (Delivered by R.SUDHAKAR, J.) This Tax Case (Appeal) is filed by the Revenue as against the order of the Income Tax Appellate Tribunal raising the followi .....

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g the financial year 2002-03, four companies, viz., M/s.I-Triger Technologies Ltd., M/s.Web-net Technologies Ltd., M/s.Linus and M/s.Himachal Futuristic Communications Ltd., had amalgamated with the assessee company and a sum of ₹ 2,16,88,220/- had been reflected as reserves and surplus in the balance sheet. The assessee company filed its return of income for the assessment year 2003-04 on 01.12.2003. Since the assessee did not respond to the notice issued under Section 148 of the Income T .....

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ssessing Officer, holding as follows: "5.5. I have considered the findings of the AO, the remand report and also the submissions made by the AR of the appellant and also the judicial pronouncements cited by the AR of the appellant on this issue. I have also perused the order of the High Court of Madras dated 10.3.2003 approving the scheme of amalgamation of the three transferor companies viz., M/s. I.Trigger Technologies (P) Ltd., M/s.Web Technologies (P) Ltd., Linus Solutions (P) Ltd. with .....

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R of the appellant that the difference of ₹ 2,16,88,220/- was the amalgamation reserve. From the above facts and circumstances of the case, I find that the nature of the receipt ie., amalgamation reserve is not on account of any normal business transaction or revenue transactions. The nature of the receipt is a capital receipt which arose on account of the amalgamation of the companies. The ratio of the decision rendered by ITAT, Calcutta Bench, cited by the AR of the appellant in the case .....

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er of the Commissioner of Income Tax (Appeals), the Revenue pursued the matter before the Tribunal. The Tribunal, by a brief order, confirmed the order of the Commissioner of Income Tax (Appeals). 5. As against the said order of the Tribunal, the Revenue once again pursued the matter before this Court by filing the present appeal. 6. Heard Mr.T.Ravikumar, learned Standing Counsel appearing for the appellant and perused the materials placed before this Court. 7. It is seen that by order dated 10. .....

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, the assessee claimed that the combined share capital of the four companies before amalgamation was ₹ 3,04,48,600/- and equity share capital of the company post amalgamation was ₹ 87,60,380/- and the difference was ₹ 2,16,88,220/-. The assessee showed the said difference under the category "reserves and surplus" in the balance sheet. 8. The Department took a view that it is a profit and gains or profession, more particularly it is a value of benefit or perquisite ari .....

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