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TMI Blog2023 (12) TMI 1047X X X X Extracts X X X X X X X X Extracts X X X X ..... substantial question of law:- "[i] Whether pursuant to a scheme for amalgamation, approved by the High Court, a transferee company that has issued its shares at face value to the shareholders of the transferors, the actual market and/or valuation of the Shares of the transferee company being more than face value, the differential valuation of such shares issued representing the value of the net identifiable assets accruing to the transferee constitutes a profit and/or taxable benefit accruing to the transferee company within the meaning of Section 28(iv) of the Income Tax Act, 1961?" By the aforesaid order, paper book was directed to be filed, but the appellant has chosen not to file even paper book. 3. Section 28(iv) of the Income Tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reproduced below:- "5. We have heard rival submissions and gone through facts and circumstances of the case. The assessee before us contested that the amalgamation reserve created did not constitute any benefit or perquisite arising from business of the assessee. According to him, the AO completely overlooked the provision of section 28(iv) of the Act. Ld. Counsel for the assessee took us to Notes on Accounts and argued that it would be noted that pursuant to sanction scheme of amalgamation assessee took over undertakings of the manufacturing companies on going concern basis. Consequent to amalgamation approved by Hon'ble Calcutta High Court, the assets and liabilities of the amalgamating companies were accounted in the books of accou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llotted and while exchanging the shares on fair valuation basis accounting difference between the face value and the intrinsic fair value of the shares allotted were accounted through the amalgamation reserve account in the books of account of the assessee company. According to him, when the exchanges of shares were based on fair valuation basis, there was no question of any benefit or perquisite in term of section 28(iv) of the Act. The Ld. Counsel for the assessee drew our attention to the judgment of Hon'ble Delhi High Court in the case of CIT Vs. Bharat Development P. Ltd., (1982) 135 ITR 456 (Del.) that an accounting reserve which is created in the books of the amalgamated company to give accounting effect to the amalgamation is no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t will appear in the amalgamated account. In no event will this surplus or deficit be a capital or revenue receipt or payment. They are merely book entries introduced for the purpose of accountancy, i.e., for balancing the balance-sheet." On the other hand, Ld. CIT, DR relied on the order of AO. 6. After hearing both the sides and going through the facts of the case, we find that this is a simple case of accounting reserve which is created in the books of the amalgamated company to give accounting effect to the amalgamation. According to us, this is nothing but an entry passed in the Balance Sheet with a sole object to balance the accounts which are maintained on double entry system of accounting. This view of ours is supported by the de ..... X X X X Extracts X X X X X X X X Extracts X X X X
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