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TMI Blog2023 (1) TMI 24X X X X Extracts X X X X X X X X Extracts X X X X ..... September, 2022, we have concluded the hearing. The order sheet passed by us reads as under:- "This appeal was listed on 27th September, 2022 and it was treated as heard on 28th September. We have passed the following order: - "The appeal and C.O. were listed yesterday. During the course of hearing, ld. D.R. submitted that tax effect appears to be less than monetary limit for challenging the order of the ld. CIT (Appeals). With his assistance, we have perused the grounds of appeal and concluded the hearing under the impression that tax effect is less than the monetary limit an appeal of the Revenue is not maintainable. Ld. Counsel for the assessee was seeking adjournment and, therefore, she was also not well-versed with the complete fact. However, during dictation, we find that Revenue has raised additional grounds of appeal also and if quantum in those grounds is being taken, then it will exceed the monetary limit for challenging the order of ld. CIT (Appeals). Therefore, we re-fix it for hearing tomorrow, i.e., 29th September, 2022. The emphasis for this exercise is that it is twenty-two years old and without our endeavor, the assessee is not going to argue this appeal. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... determined after allowing all necessary deduction and thereafter, apportionment of 40:60 has to be made. It can be explained by a simple example i.e., An assessee has gross income of Rs.100/-. Out of that necessary expenditure and deductions are to be allowed and the assessee has deduction admissible under Chapter VI at Rs.10/- and also under 80G, 80IA or 80HHC, then that Rs. 10/- has to be excluded from Rs.100/- and from the balance Rs. 90/-, apportionment of 40:60 has to be made. The Assessing Officer did not accept this contention. However, the ld. First Appellate Authority has accepted this contention on the strength of the decision of the Hon'ble Madras High Court in the case of Periakaramalai Tea and Produce Co. Ltd. and others (84 ITR 643). 3.2. After going through this well reasoned finding of the ld. CIT(A) based on the decision of the Hon'ble Madras High Court, we do not find any error in it. Accordingly, this ground of appeal is dismissed. 4. Ground Nos. 2 & 4:- These grounds are interconnected with each other. In these grounds of appeal, grievance of the revenue is that the ld. CIT(A) has erred in deleting the disallowance of Rs.18,182/- on account of travelling ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bags are necessary tools. Therefore, as the gunny bags go through wear and tear, they are bound to be sold out. This activity is interconnected with the business activity and hence such income deserves to be assessed as business income. The ld. CIT(A) has given right treatment to the above sale proceeds. We do not find any error in the order of the ld. CIT(A). Thus, this ground of appeal is rejected. 7. Ground No. 5:- In this ground of appeal, the grievance of the revenue is that the ld. CIT(A) has erred in deleting the disallowance of Rs.8,12,692/-, incurred on account of Guest House expenses. Brief facts of the case are that the assessee has incurred Rs.2,65,723/- on repairs and maintenance. It claimed depreciation at Rs.26,723/- and a sum of Rs.5,26,969/- is meant for transit flats. Out of the total amount of Rs.94,905/-, Rs.20,000/- is debited towards food for guests. The Assessing Officer has added back this Rs.20,000/- The ld. First Appellate Authority has gone through the details of all these expenditure and held that no disallowance u/s 37(4) of the At can be made out of the above expenditure except Rs.20,000/-. The finding recorded by the ld. CIT(A) is reproduced as u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ove grounds of appeal, the revenue has filed an application for raising additional grounds of appeal. The additional grounds of appeal read as under:- "1. For that the learned CIT(A) was not justified in deleting the addition of Rs1, 27,27,520/-being deduction u/s 32 AB (1) (b) allowed in earlier years for direct utilization for purchase of plant and machinery without appreciating the fact that due to amalgamation of Doom Dooma India Ltd with Brooke Bond India Ltd the provisions of Sec 32 9AB(7) were attracted and as such, there was transfer of assets acquired in terms of Sec. 32 AB and therefore, the unutilized amount was income of the year under appeal. 2. For that the CIT(A) was not justified in deleting addition of Rs.2,19,13, 300/-on the grounds that amalgamation is not hit by provisions of Sec 32 AB (7) and 33 AB (8). 3. For that the CIT(A) was not justified in deleting addition of Rs. 1,31,81, 134/- u/3 33 AB without appreciating the fact that Doom Dooma India Ltd. ceased to exist on 1-1-93 and the deposit, with NABARD was made on 24-5- 93." 10. First of all, we take additional Ground No. 3 wherein the grievance of the revenue is that the ld. CIT(A) has erred in de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... off the amalgamation petition whereas, according to the assessee it is the day when such approval is obtained as per Clause (10) of the amalgamation scheme. The Hon'ble High Courts have given this liberty to the companies and last approval has been taken on 31/05/1993. Therefore, it is entitled for claim for deduction. 12. On due consideration of the above facts and circumstances, we are of the view that the ld. Assessing Officer has erred in construing the judgment of the Hon'ble High Courts. On the other hand, the ld. CIT(A) has rightly appreciated it and has rightly held that once choice of the date is left open for making any scheme applicable, then it will be applicable from that date which is finalized by the parties. In the present case, that date is 31/05/1993. The amalgamated company DDIL ceased to exist on 01/06/1993. Whatever, it has deposited will be falling to its successor i.e. Brooke Bond India Limited (amalgamated company and it is entitle for deduction u/s 33AB of the Act. The ld. CIT(A) has not committed any error in this regard. Accordingly, this additional ground of appeal is dismissed. 13. Additional Ground Nos. 1 & 2:- Both these grounds of appeal are int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing deduction under section 32AB (1) (b) allowed in the undernoted assessment years on account of amounts utilized in purchase of plant and machinery. Assessment Year Amount utilised u/s.32AB(i)(b) 1990-91 Rs. 76,83,463 1989-90 Rs. 25,43,427 1988-89 Rs. 10,08,832 1987-88 Rs. 14,99,798 Rs. 127,27,520 The Assessing Officer held that due to the amalgamation of Doom Dooma India Limited with Brooke Bond India Limited the provisions of section 32AB (7) was attracted in view of the fact that there was transfer of the assets acquired in terms of section 32AB and as such the aforesaid amount was to be added back to the income of the year under appeal. On the same ground as above, the Assessing Officer has also added back a sum of Rs. 2,19,13,300/- by applying the provisions of section 32AB (7)/ 33AB (8) of the Income Tax Act. The aforesaid amount has been arrived at by deducting from the aggregate amount of Rs. 9,27,85,000/- deposited during the undernoted assessment years, the sum of Rs. 7,08,71,700/- which was the balance in the NABARD account as on 31.12.92. Assessment Year Amount deposited 1986-87 Rs. 1,52,00,000 1987-88 Rs. 90,43,000 1988- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ferred". From the context of juxta position of the expression sold or otherwise transferred it stands to reason that the expression otherwise transferred must be read in consonance with the expression sale i.e. it postulates the existence of two parties and it must also involve payment of consideration for such transfer. Admittedly in the present case there has been an amalgamation. Amalgamation does not amount to a sale. Further, amalgamation does not fall within the expression otherwise transferred as there are no two parties to the transaction and there is no consideration involved. A scheme of amalgamation does not amount to a transfer as under the scheme of amalgamation the whole undertaking of the amalgamating company stands transferred to and vested in the amalgamated company by an order of the High Court in terms of section 391 and 394 of the Companies Act, 1956 i.e. by operation of law, without any conveyance and/ or without any bilateral transaction. It is therefore a case of legal transmission and not transfer. The learned CIT(Appeals) will note that as a result of amalgamation in terms of section 2(1B) of the Income Tax Act all the properties i.e. the whole undert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... algamation per se is not with a view to evade tax. Further, amalgamation being a procedure which has to pass through the scrutiny of High Courts, there can not be any case of tax evasion where an amalgamation has taken place pursuant to an order of the High Court. If there is any such objection, the High Court is empowered to reject an amalgamation scheme. In the appellant's case the scheme has passed through the scrutiny of the High Courts at Calcutta and Guwahati. There is therefore no question of any tax evasion. Such being the fact, the provision of section 32AB (7) and 33AB (8) cannot be applied to cases of amalgamation per se as also to the appellant's case. 5. The fact that the proviso to sections 32AB (7) and 33AB (8) specifically provide for exemption of cases of succession in the business of a firm a company is also not material. Succession cannot be equated with amalgamation. Amalgamation is a case of legal transmission and there is no further requirement for providing for exclusion of the same from transfer. Further, a case of succession does not go through the scrutiny of High Courts which, as mentioned above objects to tax evasion. As such, there is no meri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id expression has to take its colour from word sale. There must be a consideration involved in the transactions. In an amalgamation there is no consideration involved as the amalgamating company does not get anything in return for the vesting of its whole undertaking in the amalgamated company. There is no individual transfer of any particular asset. It is a case of transmission rather than transfer. (12.6) The non-existence of any provision like section 33A(5) and section 32A(6) in section 32AB and 33AB do not have any materiality. The said sub-section in section 33A and 32A make it compulsory for the amalgamating company to continue satisfying the conditions required for allowance under the sections for the benefit of carry forward of the unabsorbed allowances in the hands of the amalgamated company. None of the said requirements/benefit exist in case of sections 32AB and 33AB. There is no provision for continuing fulfilment of any conditions, nor is there any carry forward benefit available for the allowances under sections 32AB and 33AB. (12.7) I also agree with the submission of the appellant that there is no specific exemption necessary for amalgamation similar to succe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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