2013 (6) TMI 856 - AT - Income Tax

Summary

Issues Involved:
1. Nature of surplus assets taken over by the assessee company on amalgamation.
2. Whether the assets taken over on amalgamation can be considered as income arising from business or exercise of profession.

Summary:

Issue 1: Nature of Surplus Assets Taken Over by the Assessee Company on Amalgamation

The Assessing Officer challenged the CIT(A)'s decision that the surplus assets taken over by the assessee company on amalgamation were non-business receipts. The Tribunal referenced a prior decision in the case of ITO, Ward-7(3), Kolkata vs. Shreyans Investments (P) Ltd., where it was held that the capital reserve of the amalgamating company, shown in the books of the assessee, could not be considered as income u/s 28(iv) as 'business income'. The Tribunal emphasized that Section 28(iv) requires the benefit or perquisite to arise from business or profession, and must be a revenue receipt. The distinction between capital and revenue receipts is crucial, and capital receipts are inherently outside the scope of income chargeable to tax unless specifically included under provisions like Section 2(24)(vi).

Issue 2: Whether the Assets Taken Over on Amalgamation Can Be Considered as Income Arising from Business or Exercise of Profession

The Tribunal noted that the amalgamation was a process of corporate reconstruction aimed at pooling resources and assets, approved by the Hon'ble jurisdictional High Court. The benefit, if any, derived from amalgamation was in the capital field and not of an income nature. The Tribunal held that the enhancement of capital reserve due to amalgamation could only be construed as a benefit in the capital field, not revenue. The onus was on the Assessing Officer to demonstrate that the benefit was in the revenue field, which was not done. The Tribunal upheld the CIT(A)'s conclusion that the amalgamation was not an adventure in the nature of trade and was a capital account transaction.

Conclusion:

The Tribunal found no reason to deviate from the coordinate Bench's view and upheld the CIT(A)'s decision, dismissing the Revenue's appeal.

Order:

The appeal filed by the Revenue is dismissed. Order pronounced in the open Court on 24th day of June, 2013.