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TMI Blog2013 (12) TMI 1544X X X X Extracts X X X X X X X X Extracts X X X X ..... rder 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the provisions of Section 28(iv) of the Act being the value of benefit arising from the scheme of amalgamation. Accordingly, he added the same to the profit and loss account of the assessee. Aggrieved, assessee preferred appeal before CIT(A), who considering the submission of the assessee that whatever assets are acquired on amalgamation cannot be treated the benefit arising from business and accordingly, he deleted the same by observing as under:- "I have carefully considered the facts of the case and the submissions made on behalf of the appellant company. The Assessing Officer has sought to tax the reserve and surplus brought in by the appellant company through the amalgamation of the nine companies. The reserve and surplus is brought i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. Whether the reserve and surplus of the amalgamated company can be treated as benefits accruing from business of the assessee in term of provisions of Section 28(iv) of the Act or not? 6. Now, we have to go through the clause (iv) of Section 28 which lays down as under: "Section 28 sets out the incomes which are chargeable to income-tax under the head 'Profit and Gains of Business and Profession', and clause (iv) thereto refers to "the value of any benefit or perquisite, whether convertible into money or not, arising from the business or exercise of a profession". It is clear from the above provision that besides the profits and gains from business and profession carried on by the assessee at any time during the previous year or any ot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mbande 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 expres ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be in the nature of income [except in a situations in which capital receipts are specifically included in the definition of income such as under section 2(24)(vi)], and unless it is in nature of income, it cannot be considered for taxation under section 28(iv). The reference to benefit which can be brought to tax under section 28(iv) for benefits 'arising from the business' also indicates that such benefit must be a business or revenue receipt in nature. To find out whether or not the benefit, even if that be so, is on capital account or revenue account, it is necessary to understand the nature of transaction which has resulted in, what the Assessing Officer, perceives as 'benefit to the assessee'. This was a case of amalgamation in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esult 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 affects is the capital structure of the assessee company and the manner in which business is consolidated. As the Assessing Officer himself observes, "..... this exercise of amalgamation is also aimed at bolstering the capability of the assessee to conduct business more dynamically and earn more profit. So, the enhancement of its capital reserve, as a result of this amalgamation can only be construed as a benefit accrued to the assessee ...", but then it is not even th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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