The question before the Tribunal was whether the AO/DRP has erred in making addition u/s 28(iv) of the Act on account of increase in general reserve on transaction related to the Composite Scheme of Arrangement and Amalgamation and investment received on composite Scheme of Arrangement and Amalgamation considered as income u/s 56(2) (viia) of the Act. Tribunal held that anti-abuse provision which applies only to cases of bogus capital building and money laundering. It does not apply to an amalgamation where shares are allotted at alleged undervaluation. Increase in general reserves due to recording of assets of amalgamating company at FMV not give rise to any real income to the assessee. It is capital in nature. Amendment to s. 47(vii) by FA 2012 w.e.f 1-4 -2003 is clarificatory & retrospective. (ITA No. 1148/Del/2017, dt. 22.02.2019) (AY.2012-13)
Aamby Valley Ltd. v. ACIT (2019) 102 taxmann.com 38/ 198 TTJ 662 (Delhi)(Trib), www.itatonline.org
S. 47(vii) : Capital gains-Business income-Income from other sources -Transfer by a share holder in a scheme of amalgamation- Increse in general reserve on transaction related to the composite Scheme of Arrangement and Amalgamation-An anti-abuse provisions which applies only to cases of bogus capital building and money laundering- It does not apply to an amalgamation where shares are allotted at alleged undervaluation-.Increase in general reserves due to recording of assets of amalgamating company at FMV not give rise to any real income to the assessee-It is capital in nature- Amendment to s. 47(vii) by FA 2012 w.e.f 1-4 -2003 is clarificatory and retrospective- Addition is held to be not valid. [S. 28(iv); 56(2)(viia)]