Capital reserve generated from amalgamation is a `capital receipt' and can't be taxed as business...
IT : The words "arising out of business" in section 28(iv) essentially imply that the benefit or perquisite referred to therein must be in the nature of business receipt or revenue receipt. As Capital reserve arising in amalgamated company's books as a result of amalgamation in the nature of merger is a capital receipt and
not a revenue receipt, same cannot be brought to tax by AO by invoking section 28(iv)
• Unless it is a revenue receipt, it cannot be in the nature of income except in a situations in which capital receipts are specifically included in the definition of income such as under section 2(24)(vi), and unless it is in nature of income, it cannot be considered for taxation under section 28(iv).
• The reference to benefits which can be brought to tax under section 28(iv) for benefits 'arising from the business' also indicates that such benefit must be a business receipt, or revenue receipt, in nature.
• Even if, as the Assessing Officer observes, "it can be surmised that the assessee is benefited in a myriad ways by way of amalgamation", it does not lead to the conclusion that the benefit is in revenue field which alone can be treated as income and thus be considered for taxability under section 28(iv) of the Act. The onus is on the Assessing Officer to demonstrate that the receipt is of the revenue nature.
• Whatever be the scope of expression 'business', an advantage has to be in the nature of income first, and when it is not in the nature of income it cannot be brought to tax under the head profits and gains from business or profession.
• The benefit, if any, derived by the assessee on account of amalgamation by way of merger was not in revenue field, and not of an income nature. Accordingly, there was no occasion to invoke section 28(iv) of the Act. Learned CIT(A) was quite justified in his observations that "the amalgamation is not an adventure in the nature of trade" and that "this transaction is clearly a capital account transaction". Learned CIT(A) was quite justified in deleting the impugned addition.
[2013] 31 taxmann.com 11 (Kolkata - Trib.)
IN THE ITAT KOLKATA BENCH 'B'
Income-tax Officer, Ward 7(3), Kolkata
v.
IT : The words "arising out of business" in section 28(iv) essentially imply that the benefit or perquisite referred to therein must be in the nature of business receipt or revenue receipt. As Capital reserve arising in amalgamated company's books as a result of amalgamation in the nature of merger is a capital receipt and
not a revenue receipt, same cannot be brought to tax by AO by invoking section 28(iv)
• Unless it is a revenue receipt, it cannot be in the nature of income except in a situations in which capital receipts are specifically included in the definition of income such as under section 2(24)(vi), and unless it is in nature of income, it cannot be considered for taxation under section 28(iv).
• The reference to benefits which can be brought to tax under section 28(iv) for benefits 'arising from the business' also indicates that such benefit must be a business receipt, or revenue receipt, in nature.
• Even if, as the Assessing Officer observes, "it can be surmised that the assessee is benefited in a myriad ways by way of amalgamation", it does not lead to the conclusion that the benefit is in revenue field which alone can be treated as income and thus be considered for taxability under section 28(iv) of the Act. The onus is on the Assessing Officer to demonstrate that the receipt is of the revenue nature.
• Whatever be the scope of expression 'business', an advantage has to be in the nature of income first, and when it is not in the nature of income it cannot be brought to tax under the head profits and gains from business or profession.
• The benefit, if any, derived by the assessee on account of amalgamation by way of merger was not in revenue field, and not of an income nature. Accordingly, there was no occasion to invoke section 28(iv) of the Act. Learned CIT(A) was quite justified in his observations that "the amalgamation is not an adventure in the nature of trade" and that "this transaction is clearly a capital account transaction". Learned CIT(A) was quite justified in deleting the impugned addition.
[2013] 31 taxmann.com 11 (Kolkata - Trib.)
IN THE ITAT KOLKATA BENCH 'B'
Income-tax Officer, Ward 7(3), Kolkata
v.
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