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TMI Blog2017 (7) TMI 661X X X X Extracts X X X X X X X X Extracts X X X X ..... e equated with the securities. The assessee has made investments in government securities and sold the securities after holding the period of more than 12 months to treat the securities as long term capital assets. The capital gains arising on transfer of long term company assets are entitled for the benefit of indexation as per Sec.48 of Income Tax Act. From the plain reading of 3rd proviso section 48 of I.T. Act, government securities are not excluded for indexation benefit only bond or debenture included in the third proviso to Sec.48. Therefore, we do not find any infirmity in the order of the Ld.CIT(A) and the same is upheld. - Decided against revenue - ITA No.71/Mds/2015 And ITA No.284/Mds/2015 - - - Dated:- 31-3-2017 - SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI D.S.SUNDER SINGH, ACCOUNTANT MEMBER For The Appellant : Mr.R.Vijayaraghavan, Adv. For The Respondent : Mr.B.Koteswara Rao, CIT ORDER PER D.S.SUNDER SINGH, ACCOUNTANT MEMBER: These are the cross appeals filed by the assessee as well as Revenue against the order dated 14.11.2014 of Commissioner of Income Tax (Appeals), Chennai, in ITA No.8/13-14/LTU(A) for the AY 2003-04. The appeals are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e-17 of Notes on Accounts that Sundaram Auto Finance Ltd., a joint venture company promoted by the assessee company amalgamated with the assessee company under the purchase method as prescribed by accounting standard. The scheme of amalgamation has been given effect to in the accounts and accordingly, the assets and liabilities of the amalgamating company were transferred to and vested with the company w.e.f. 1.4.2002. The excess of assets over liabilities on account of amalgamation of M/s.Sundaram Auto Finance Ltd., to the tune of ₹ 2554.235 lakhs was transferred to the capital reserve. The AO was of the view that the amount of excess of assets over liabilities are in the nature of benefit or perquisite arising from business or the excess of profession and required to be taxed u/s 28(iv) of Income tax act. Hence, the AO sought the objections of the assessee and the assessee company submitted their objection stating that it had acquired 51% shareholding held by Fidis S p A, the joint venture partner in Fiat Sundaram Auto Finance Ltd (FISAF) and FISAF became a wholly, owned subsidiary of the company. Subsequent to the acquisition, the name of FISAF, was changed to Sundaram A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e disallowed u/s.28. I do not agree with the argument of the Ld.AR. After the amalgamation, the existence of the amalgamating company will be non est. All the assets and liabilities of the amalgamating company will be taken away by the amalgamated company and will form part of its own assets and liabilities When there is an excess of assets over liabilities, as in the present case, undisputedly will become the assets of the amalgamated company and the benefit does arises to the amalgamated company i.e., the appellant company in the light of s.28(iv). Therefore, such benefit should suffer tax in the hands of the amalgamated company. The decisions taken by the AO is proper. The decisions relied on by the appellant in this regard are distinguishable on facts. The ground is dismissed. 5.0 Aggrieved by the order of the Ld.CIT(A), the assessee filed appeal before this Tribunal. Appearing for the assessee, the Learned Authorized Representative (in short Ld.AR ) argued that Fiat Sundaram Auto Finance Limited was joint venture between the assessee and (49%) Fidis S p A, Italy (51%) share holding and later on, the assessee had acquired the 51% of share holding of Fidis and became th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for consideration in this appeal is whether the amalgamation reserve consequent to the merger of four companies would fall within the ambit of profits and gains of business or profession, more particularly under section 28(iv) of the Incometax Act. 10. Since the issue revolves around section 28(iv) of the Income-tax Act, it is necessary to extract the same herein for better clarity. 28. Profits and gains of business or profession.-The following income shall be chargeable to income-tax under the head Profits and gains of business or profession ,-. ( iv) the value of any benefit or perquisite, whether convertible into money or not, arising from business or the exercise of a profession . 11. A plain reading of the above said provision makes it clear that the amount reflected in the balance-sheet of the assessee under the head reserves and surplus cannot be treated as a benefit or perquisite arising from business or exercise of profession. The difference amount post-amalgamation was the amalgamation reserve and it could not be said that it is out of normal transaction of the business. The present transaction is capital in nature arose on account o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .AR. The appellant has made certain investments in government securities. The AO has denied indexation benefit on sale of such government securities holding that the investment in government securities are in the form of bonds and debentures and the indexation benefit is not available for such bonds and debentures as per the third proviso to s.48 of l.T.Act. The AO interpreted that the term bonds used in third proviso to s.48 not only includes bonds of corporate but also that of government. The Ld.AR on the other hand brought to my notice the definition of security mentioned at Explanation-2 to s.2(42A). As per this explanation the expression security shall have the meaning assigned to it in clause (h) of s.2 of the Securities Contract (Regulation) Act, 1956 . In clause (h) of section 2 of the Securities Contracts (Regulation) Act, 1956, securities is defined so as to include, ( I) shares, scrips, stock, bonds, debentures, debenture stock or other marketable securities of a like nature in or of any incorporated company or other body corporate; ( II) Government Securities; ( iia) such other instruments as may be declared by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sil or other article or worked or sewn into any wearing apparel.] 54[Explanation 2.-For the purposes of this clause- (a) the expression Foreign Institutional Investor shall have the meaning assigned to it in clause (a) of the Explanation to section 115AD; (b) the expression securities shall have the meaning assigned to it in clause (h) of section 2 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956)55;] 56[(iii) agricultural land57 in India, not being land situate- (a) in any area which is comprised within the jurisdiction of a municipality57 (whether known as a municipality, municipal corporation, notified area committee, town area committee, town committee, or by any other name) or a cantonment board and which has a population58 of not less than ten thousand 59[***] ; or 60- in any area within the distance, measured aerially,- 61[(b) (I) not being more than two kilometres, from the local limits of any municipality or cantonment board referred to in item (a) and which has a population of more than ten thousand but not exceeding one lakh; or (II) not being more than six kilometres, from the local limits of any municipality or cantonment bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ernment of India also issues savings instruments (Savings Bonds, National Saving Certificates (NSCs), etc.) or special securities (oil bonds, Food Corporation of India bonds, fertiliser bonds, power bonds, etc.). They are, usually not fully tradable and are, therefore, not eligible to be SLR securities.(Source: Government Securities Market in India A Primer-RBI.) From the above guidance note Bonds and securities distinguishable. The Bonds are not freely tradable and the securities are freely tradable. Therefore, the Bonds cannot be equated with the securities. The assessee has made investments in government securities and sold the securities after holding the period of more than 12 months to treat the securities as long term capital assets. The capital gains arising on transfer of long term company assets are entitled for the benefit of indexation as per Sec.48 of Income Tax Act. The AO relied on the third proviso to Sec.48 of Income Tax Act and denied the benefit of indexation. We have gone through the third proviso to Sec.48 of Income Tax Act, which reads as under: 7[Mode of computation. 38 48. The income chargeable under the head Capital gains shall be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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