| COURT: | ITAT Ahmedabad |
| CORAM: | Pradip Kumar Kedia (AM), Rajpal Yadav (JM) |
| SECTION(S): | 56(2)(viib) |
| GENRE: | Domestic Tax |
| CATCH WORDS: | amalgamation, deemed income |
| COUNSEL: | Nupur Shah, Virendra Ojha |
| DATE: | April 13, 2021 (Date of pronouncement) |
| DATE: | April 24, 2021 (Date of publication) |
| AY: | 2013-14 |
| FILE: | Click here to view full post with file download link |
| CITATION: | |
| S. 56(2) (viib): The object of s. 56(2)(viib) is to tax excessive share premium received unjustifiably by private companies on issue of shares without carrying underlying value. However, shares issued to shareholders of an amalgamating company in terms of a scheme of amalgamation does not fall within the sweep of the deeming provisions of s. 56(2) (viib). The so-called excess value of assets vested on amalgamation cannot be notionally termed as premium over the face value for the purposes of the deeming provision (AS-14 issued by the ICAI & CBDT Circular No 3/2012 dated 12-6-2012 referred) | |
To summarise, in our view, the issue of shares at ‘face value’ by the amalgamated company (assessee) to the shareholders of amalgamating company in pursuance of scheme of amalgamation legally recognized in the Court of Law neither falls with scope & ambit of clause (viib) to S. 56(2), when tested on the touchstone of objects and purpose of such insertion i.e. to deem unjustified premiums charged on issue of shares as taxable income; nor does it fall in its sweep when such deeming clause is subjected to interpretative process having regard to the scheme of the Act
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