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TMI Blog2022 (11) TMI 528X X X X Extracts X X X X X X X X Extracts X X X X ..... (Appeals)-5, Mumbai [in short the Ld. CIT(A)] for Assessment Year 2016-17. 2. The grounds raised by the assessee reproduced as under:- Disallowance u/s 14A 1. The CIT(A) erred in confirming the disallowance by invoking clause (iii) to sub-rule (2) to Rule 8D r.w.s 14A to the extent of 0.5% of average investments even when the investments are held as stock-in-trade. Without prejudice to the above if at all any disallowance has to be made under that section, same cannot be more than the sum relating to prorate expenditure incurred by treasury department as per regular method of accounting followed and suo-moto disallowed by appellant. Addition as per rule 6EA 2. The CIT(A) erred in confirming charging to tax unrealised interest of Rs. 2.41 crore in respect of borrower accounts classified as Non performing accounts under RBI directions even when collecting principal itself is uncertain and no income can be said to accrue therefrom. 2.1 The CIT(A) ought to have allowed the sum of Rs. 5.26 crore which was taxed in earlier year since in current year these amounts have been credited to P L a/c or have satisfied the requirements of the said Rule. Taxability o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... off 10. The CIT(A) erred in confirming the taxing of recovery in respect of bad debts written off which was not allowed as deduction by erroneously relying on the decision of Karnataka High Court in the case of Pragathi Grarnin Bank (91 taxmann.com 343) without appreciating that in that case the issue was on taxability of write back of excess provision for bad and doubtful debts and which was also decided in favour of assessee. Enhancement of income by disallowing interest paid on bonds 11. The CIT(A) erred in making an enhancement of assessed income, travelling beyond the subject-matter of the assessment and assessing a new sources of income. The suo moto disallowance of Rs 28.63 crore being interest paid on amount borrowed by issuing Innovative Perpetual Debt Instruments is not an issue discussed in the assessment order nor mentioned in the return of Income. 11.1 Without prejudice to above, the CIT(A) erred in re-characterising funds raised through issue of debt instruments as share capital and further wrongly extrapolating interest payments as dividend and disallowing interest paid on the debt raised. 3. The grounds raised by the Revenue are reproduced as un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment, memento on retirement and silver jubilee award expenses without appreciating the fact that the same are not incurred only exclusively for the purpose of business? Whether on the facts and in the circumstances of the case and in law, Ld. CIT(A) was right in directing to delete the additions made on account of accrued interest without appreciating the fact that as per the provision u/s 5 of the I. T. Act the total Income of a person includes all income which has accrued to him during such period. Whether on the facts and in the circumstances of the case and in law, Ld. CIT(A) was right in directing to delete the additions made on account of accrued interest without appreciating the fact that as per the mercantile system of accounting in accordance with the provision u/s 145 of the IT Act the total income of a person includes all income which has accrued to him during such period? 4. The assessee also raised two additional grounds, which are reproduced as under: Additional Ground No. 1 : Order passed on a non-existent entity is bad in law 1. On the facts and in the circumstances of the case and in law, the appellant submits that the assessment ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... successor to erstwhile state Bank of Indore) in ITA Nos. 277 to 280/Mum/2022 and State Bank of India (successor to State Bank of Bikaner and Jaipur) in ITA No. 2875/Mum/2019. 8. The Learned DR, on the other hand, submitted that in view of the decision of the Hon ble Supreme Court in the case of PCIT Vs Mahagun Realtor Private Limited [2022 SCC OnLine SC 407] wherein it is held that in the process of amalgamation, the business of the erstwhile entity is taken over by the amalgamated entity and thus the old entity is not destroyed. He submitted that in the instant case also facts are identical, thus ratio in the case of Maruti Suzuki India Private Limited (supra) is not applicable over facts of the case. 9. We have heard rival submission of the parties on the issue in dispute and perused the relevant material on record. The coordinate bench of the Tribunal in the case of state Bank of India (successor to erstwhile state Bank of Indore)(supra), wherein the Bench relied on the earlier decision in the case of the Sate Bank of India (successor to erstwhile state Bank of Bikaner Jaipur) in ITA Nos. 277 to 280, 365, 411 412/Mum/2022, held as under: 24. Considered the rival sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the income sought to be subjected to the charge of tax for the assessment year 2012- 13 was the income of the erstwhile entity (S) prior to amalgamation. The consequence of the scheme of amalgamation approved under section 394 of the Companies Act, 1956 was that the amalgamating company ceased to exist. It could not thereafter be regarded as a person under section 2(31) of the Act against which assessment proceedings could be initiated or an order of assessment. Notice under section 143(2) was issued on September 26, 2013 to the amalgamating company, 5, which was followed by a notice to it under section 142(1). Prior to the date on which the jurisdictional notice under section 143(2) was issued, the scheme of amalgamation had been approved on January 29, 2013 by the High Court under the Companies Act, 1956 with effect from April 1, 2012. The Assessing Officer had assumed jurisdiction to make an assessment in pursuance of the notice under section 143(2). The notice was issued in the name of the amalgamating company in spite of the fact that on April 2, 2013, the amalgamated company M had addressed a communication to the Assessing Officer intimating the fact of amalgamation. On t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd seizure operations took place, as well as statements were recorded by the revenue of the directors and managing director of the group. A return was filed, pursuant to notice, which suppressed the fact of amalgamation; on the contrary, the return was of MRPL. Though that entity ceased to be in existence, in law, yet, appeals were filed on its behalf before the CIT, and a cross appeal was filed before ITAT. Even the affidavit before this court is on behalf of the director of MRPL. Furthermore, the assessment order painstakingly attributes specific amounts surrendered by MRPL, and after considering the special auditor s report, brings specific amounts to tax, in the search assessment order. That order is no doubt expressed to be of MRPL (as the assessee) - but represented by the transferee, MIPL. All these clearly indicate that the order adopted a particular method of expressing the tax liability. The AO, on the other hand, had the option of making a common order, with MIPL as the assessee, but containing separate parts, relating to the different transferor companies (Mahagun Developers Ltd., Mahagun Realtors Pvt. Ltd., Universal Advertising Pvt. Ltd., ADR Home D cor Pvt. Ltd.). Th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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