DY. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-3(3), MUMBAI vs. M/S. WELSPUN STEEL LTD, MUMBAI

ITA 2169/MUM/2023Status: DisposedITAT Mumbai29 February 2024AY 2017-201844 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the scheme of merger had commercial rationale and was sanctioned by the High Court. The purported loss was not an artificial loss created to avoid tax, especially since it was already disallowed by the amalgamating company.

What were the facts?

The assessee, Welspun Steel Ltd, claimed a capital loss of Rs. 423 crore arising from the sale of shares of Welspun Energy Chhattisgarh Limited to a related entity. This loss stemmed from an amalgamation and subsequent sale of Optionally Convertible Preference Shares (OCPS).

What were the issues?

Whether the capital loss claimed on the sale of shares arising from a scheme of amalgamation and subsequent sale was an artificial loss to be disallowed, and whether Section 28(iv) was applicable to the created capital reserve.

Which sections of the Income-tax Act were involved?

Section 28(iv),Section 47(vi),Section 19

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Income Tax Appellate Tribunal, “G” BENCH, MUMBAI

Before: SHRI BR BASKARAN, AM & SHRI ABY T. VARKEY, JM

For Appellant: Shri Madhur Agrawal/Shri Mani, Dr. Kishor Dhule (DR)
Hearing: 01/02/2024Pronounced: 29/02/2024

PER ABY T. VARKEY, JM: This appeal has been preferred by the Revenue against the order dated 28.03.2023 passed u/s 250 of the Income-tax Act, 1961 [in short 'the Act'] by the Ld. Commissioner of Income-tax (Appeals), NFAC [in short 'CIT(A)'] for AY 2017-18. 2. Ground No. 1 of the appeal is against the Ld. CIT(A)'s action of deleting the disallowance of long-term and short-term capital loss arising upon sale of shares of M/s Welspun Energy Limited [in short 'WEL']. The facts of the case are that, the assessee is e

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