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Makino India Pvt. Ltd. Versus Assistant Commissioner of Income-tax, Circle- 12 (1) , Bangalore

2017 (10) TMI 582 - ITAT BANGALORE

Sale of block of assets by the amalgamated entity - Excess of sales consideration received over Written Down Value (WDV) of the block of plant and machinery - Short Term Capital Gain - Held that:- There is no dispute that even after the transfer of the said assets the assessee was still having balance in the block of assets of plant and machinery. Therefore the conditions as stipulated under Section 50 of the Act have not been satisfied so that any capital gain arising in the hand of the assesse .....

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ng there was no merger/amalgamation. Once the merger / amalgamation was effected from 1.4.2002 ail the transactions thereafter would be treated as transactions of the new entity post amalgamation. Thus when there is no extinguishment of block of assets of plant and machinery in the hand of the assessee then the transfer of assets in question after 1.4.2002 would not result in deemed capital gain under Section 50 of IT Act. The revenue has not disputed the facts relating to the transfer of the as .....

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t. ORDER Vijay Pal Rao, Judicial Member - This appeal by the assessee is directed against the order dt.3.4.2014 of Commissioner of Income Tax (Appeals) for the Assessment Year 2003-04. 2. The assessee has raised the following grounds : 1. Enhancement of income 1.1 The learned Commissioner of Income-tax (Appeals) - III, Bangalore [hereinafter referred to as "the learned CIT (A)"] erred in enhancing the income of the appellant by R.S. 29,95,570, by treating the excess of sales considerat .....

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Therefore, the short term capital gains would not arise as such to the appellant. 1.2 The learned CIT (A) consequently erred in reducing the short term, capital gains against the business loss shown by the appellant The Appellant craves leave to add, to alter or amend all or any of the aforestated grounds of appeal. For the above and any other grounds which may be revised at the time of hearing, it is prayed that the order of the learned CIT (A) be set aside. 3. The only issue arises in this app .....

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d. The Hon'ble High Court vide decision dt, 19.12.2003 approved the scheme of amalgamation merger whereby the company Makino Asia Pte Limited was merged with Makino Machine Tools India Pvt. Ltd, w.e.f. 1.4.2002 and the new entity after merger/amalgamation came into existence in the name of Makino Machine Tools India Pvt. Ltd., the assessee before us. Consequent to amalgamation the assessee filed a revised return of income on 31.10.2004 declaring loss including depreciation at ₹ 5,26,18 .....

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requisite details and documents however, the CIT (Appeals) issued a show cause for enhancing the assessment by an amount of ₹ 29,95,570 being STCG under Section 50(1) which was originally offered in case of Makino Asia Pte Ltd, The CIT (Appeals) was of the view that since the said company Makino Asia Pte Ltd. sold its block of assets and earned STCG of ₹ 29,95,570 which was also offered by the said company to tax therefore post amalgamation / merger the assessee is also required to o .....

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various specific block of assets. As there was an existing block of asset in the plant and machinery of assessee the relevant block of assets did not get extinguished due to the sale of asset by the Makino Asia Pte Limited while merging with Makino Precision Tools India Pvt. Ltd. Thus the learned Authorised Representative has submitted that when there was a substantial addition in the plant and machinery block amounting to ₹ 6,82,33,665 then there will be no STCG on account of transfer of .....

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aid STCG is taxable in the hand of the assessee. He has further submitted that this fact of transfer of block of assets by Makino Asia Pte Limited was not disclosed in the scheme of amalgamation and also it does not find place in the order of Hon'ble High Court approving the amalgamation. He has relied upon the impugned order. 6. We have considered the rival submissions as well as the relevant material on record. There is no dispute that Makino Asia Pte Limited and Makino Machine Tools India .....

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rior to the approval of the scheme of amalgamation / merger. The STCG as per Section 50(1) of the Act arises on the sale of depreciable asset if full value of the consideration received is more than the cost of acquisition of the asset or actual cost of asset falling in the block of assets as well as written down value of the block of asset at the beginning of the previous year along with the expenditure incurred wholly and exclusively in connection with such transfer then such excess amount sha .....

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mpany viz. Makino Asia Pte Limited sold its entire block of assets of plant and machinery during the year relevant to the assessment year under consideration however, the said transfer would be treated as a transfer post amalgamation in view of the approval of the scheme of amalgamation w.e.f. 1.4.2002. Therefore consequent to the amalgamation this transaction of transfer of the assets would be treated as transfer by the entity came into existence post amalgamation. There is no dispute that even .....

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