TMI Blog2018 (3) TMI 473X X X X Extracts X X X X X X X X Extracts X X X X ..... ed forwarded - Held that:- Hon’ble Supreme Court in the case of K.P.Varghese vs ITO (1981 (9) TMI 1 - SUPREME Court) had held that : “It is a well settled rule of law that the onus of establishing that the conditions of taxability are fulfilled is always on the revenue and the second condition being as much a condition of taxability as the first, the burden lies on the revenue to show that there is an understatement of the consideration and the second condition is fulfilled. (underlining provided by us). To throw the burden of showing that there is no understatement of the consideration, on the assessee would be to cast an almost impossible burden upon him to establish a negative, that he did not receive any consideration beyond that declared by him.” Though this decision was rendered in the context of erstwhile provisions of section 52(2) of the Act which was later omitted from the statute, the ratio decidendi would be applicable to the facts of the instant case. No enquiries whatsoever were conducted in the hands of the purchaser of shares. We find that the entire disallowance of long term capital loss had been made only out of surmises, suspicion and conjectures. Entitled to cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egard was placed on the decision of the Hon ble Delhi High Court in the case of CIT vs Select Holiday Resorts (P) Ltd reported in 35 taxmann.com 368 (Del HC). The said contention was accepted by the ld CITA. However, the claim of carry-forward and set-off of losses was denied on the ground that the amalgamating companies in the instant case did not own an industrial undertaking as defined u/s 72A of the Act. Aggrieved, the assessee is in appeal before us on the following grounds:- 1. That the learned Commissioner of Income Tax (A), Central-II, Kolkata, was not justified in dismissing the claim of set-off of brought forward loss of ₹ 4,95,893/- against Current Year s Business Income though it was accepted that section 79 of Income Tax Act, 1961 is not applicable. 2. That the learned Commissioner of Income Tax (A), Central-II, Kolkata was not justified in dismissing the claim of set-off of brought forward Short Term Loss of ₹ 4,86,48,349/- against Current Year s Short Term Capital Gain and to carry forward balance Short Term Capital Loss of ₹ 5,39,95,774/- 4. We have heard the rival submissions and perused the materials available on record including t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 09 ITR 177 (Guj) b) Hon ble Bombay High Court in the case of Casby CFS (P) Ltd reported in 231 Taxman 89 (Bom) c) Hon ble Supreme Court in the case of J.K.(Bombay) (P) Ltd vs New Kaiser I-Hind Spg. Wvg.Co. reported in 1970 AIR 1041 (SC) dated 22.11.1968 d) Hon ble Madras High Court in the case of Pentamedia Graphics Ltd vs ITO reported in 236 CTR 204 (Mad) e) Co-ordinate Bench of this Tribunal in the case of Vivada Chemicals Pvt Ltd vs DCIT in ITA No. 1764/Kol/2014 dated 18.12.2014 f) Co-ordinate Bench of this Tribunal in the case of ITO vs Purbanchaal Power Co. Ltd in ITA No. 201/Kol/2010 dated 17.7.2014. 4.1. The ld AR argued that the Union of India is made a party in the said scheme of arrangement, meaning thereby, that all the central government regulatory authorities had a right to object to the scheme of merger before the Hon ble High Court before the merger. In the instant case, the income tax department , who is part of Union of India, had not filed any objections before the Hon ble High Court objecting to the merger. Hence the department cannot object to the same at this point of time while implementing the said order of merger. In case if the income ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gh creation of the transferor company and why it was being dissolved by merging it with another company, That is the colour and content of the expression public interest as used in the second proviso to section 394(1) of the Act which have to be enquired into. If the only purpose appears to be to acquire certain capital asset through the intermediary of the transferor-company created for that very purpose to meet the requirement of law, and in the process to defeat tax liability which would otherwise arise, it could not be said that the affairs of the transferor-company sought to be amalgamated, created for the sole purpose of facilitating transfer of capital asset through its medium, have not been carried on in a manner prejudicial to public interest. Public interest looms large in this background and the machinery of judicial process is sought to be utilized for defeating public interest and the court would not lend its assistance to defeat public interest. The court would, therefore, not sanction the scheme of amalgamation. Hence it could be safely inferred that the Court would exercise due diligence and would conduct detailed enquiries before sanctioning the scheme. A sc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to do so in the course of proceedings before the High Court but before the final order is passed. Whenever such objections have been raised, these have been considered on merits by the concerned High Court and also incorporated the condition for safeguarding the interest of revenue in the very scheme. As a matter of public policy, once a scheme of amalgamation is approved by Hon ble High Court no authority should be allowed to tinker with the scheme. In the present case of the assessee, neither the official liquidator nor the Regional Director nor Central Government raised any objection to the scheme of amalgamation. In such circumstances , we are of the view that the revenue has nothing to say at the time of approval of the scheme by Hon ble High Court in the present case. 4.5. We find that the Hon ble Madras High Court in the case of Pentamedia Graphics Ltd vs ITO reported in 236 CTR 204 (Mad) had categorically held that once the scheme had been sanctioned with effect from a particular date by the Court, it is binding on everyone including the statutory authorities. It further held that having regard to the law declared by the Hon ble Apex Court as to the effect of the sche ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... omes sanctioned by the court, it ceases to operate as a mere agreement between the parties and becomes binding on the company, the creditors and the shareholders and has statutory operation by virtue of the provisions of section 391 of the Companies Act. The said judgement of Hon ble Bombay High Court further provided that an appeal, if any, against the order of amalgamation lies u/s 391(7) of the Companies Act, 1956 and the same cannot be agitated in any collateral proceeding. The relevant extract of the same is reproduced hereunder for the sake of ready reference :- We are of the view that the amalgamation, which has become final and binding, cannot be permitted to be challenged by the petitioners, without locus standi, in a collateral proceeding in the present writ petition. An amalgamation order can only be challenged under the Companies Act by an appeal under section 291(7) by any one of the parties, but no such appeal was ever filed. In the instant case before us, the ld AR informed that the Income Tax Department , which is part of Union of India, had not filed any appeal u/s 391(7) of the Companies Act, 1956 against the order of amalgamation sanctioned by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e same was acted upon by the assessee assuming acceptance from the income tax department since no appeal against the said judgement of the Hon ble High Court was filed before the Hon ble Supreme Court. Thus, at this juncture, if the revenue is allowed to challenge the same u/s 391(7) of the Companies Act, 1956, then it would be clearly barred by the doctrine of acquiescence and estoppel. In law, acquiescence occurs when a person knowingly stands by without raising any objection to the infringement of his or her rights, while someone else unknowingly and without malice aforethought acs in a manner inconsistent with their rights. As a result of acquiescence, the person whose rights are infringed may lose the ability to make a legal claim against the infringer, or may be unable to obtain an injunction against continued infringement. The doctrine infers a form of permission that results from silence or passiveness over an extended period of time. Applying this principle to the instant case before us, the assessee probably paid a consideration for the set off of accumulated losses taken over from the amalgamating companies and accordingly the share exchange ratio (as approved under th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0. Since the losses belonged to the amalgamated company i.e the assessee herein, the provisions of section 72 and section 74 of the Act would come into play with respect to set off of the same against the respective incomes of the assessee . In view of this, the provisions of non-compliance of section 72A of the Act as narrated by the ld CITA does not hold any water. Accordingly, the Grounds 1 2 raised by the assessee are allowed. 5. The Ground No. 3 raised by the assessee was stated to be not pressed by the ld AR during the course of hearing for which necessary endorsement was made in our file. Accordingly the Ground No. 3 raised by the assessee is dismissed as not pressed. 6. The last issue to be decided in this appeal is as to whether the ld CITA was justified in confirming the disallowance of Long Term Capital Loss of ₹ 62,12,753/- without Securities Transaction Tax (STT) and not allowing the same to be carried forward, in the facts and circumstances of the case. 6.1. The brief facts of this issue is that the assessee incurred Long Term Losses of ₹ 62,12,753/- on sale of 1066797 unquoted shares of M/s GK Sons Pvt Ltd which were sold at ₹ 2 per sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of GK Sons Pvt Ltd were held by the assessee for a period of more than 12 months from the date of its purchase. The purchase consideration thereon is not disputed by the revenue. We find that the assessee had produced the requisite evidences and documents in support of its claim and the sale consideration reported therein had been doubted by the ld AO. In such circumstances, it is incumbent on the part of the ld AO to make further investigations by cross verifying the same from the purchaser of shares i.e Malay Commercial Enterprises Ltd in the procedure known to law. Without doing so, he cannot simply disbelieve the consideration reported by the assessee and disallow the long term capital loss claimed thereon. There is no material brought on record by the revenue to controvert the claim of the assessee or any material that would show that the assessee had sold at a price higher than ₹ 2 per share. In the instant case, if the revenue alleges that the assessee sale consideration of ₹ 2 per share has been grossly understated, then the onus is on the revenue to prove with cogent materials that the assessee had indeed received higher sale price more than ₹ 2 per shar ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
