ITO 5(1)(1), MUMBAI vs. ATLAS EQUIFIN P.LTD, MUMBAI

Order u/s.254(1)of the Income-tax Act,1961(Act) लेखा सद�य सद�य,राजे�� राजे�� केकेकेके अनुसार अनुसार -Per Rajendra,AM: लेखा लेखा लेखा सद�य सद�य राजे�� राजे�� अनुसार अनुसार Challenging the order dated 02/07/2012 of the CIT (A)-9,Mumbai the Assessing Officer(AO) has filed the present appeal.Assessee-company,engaged in the business of sale of film rights and investment activities, filed its return of income on 30/09/2009, declaring total income at Rs.NIL. The AO completed the assessment on 26/12/2011, u/s.143 (3) of the Act,determining its income at Rs.4.52 crores.

2.Effective ground of appeal is about deleting the disallowance of Rs. 4.40 crores made by the AO u/s.2(22)(e) of the Act.During the assessment proceedings,the AO found that on 03/04/ 2008,10/04/2008 and 07/05/2008 M/s. Ace Telefilms India Private Ltd (ATIPL) gave loans to the assessee of Rs.3.71 crores,Rs. 29 lakhs and Rs. 40 lakhs respectively.Vide his letter dated 15/ 11/2011 the AO directed the assessee to show cause as to why the provisions of section 2(22)(e) should not be applied on the aforesaid transactions because the assessee had substantial shares of ATIPL.After considering the submission of the assessee, the AO relied upon the case of Oscar Investments Ltd.(98 ITD 339) and held that a sum of Rs. 4.04 crores was to be treated as deemed dividend in the hands of the assessee.

6029/M/12 (09-10) M/s.Atlas Equifin 3.Aggrieved by the order of the AO, the assessee preferred an appeal before the First Appellate Authority (FAA). Before him it was argued that as per the approval of the Hon’ble High Court there was amalgamation of both the entities i.e. the assessee and ATIPL,that there was no lender and/or no borrower or for that matter alone or advance was neither given or taken, that the provisions of section 2(22)(e) were not applicable.After considering the submission of the assessee and the assessment order, the FAA held that Hon’ble Bombay High Court vide its order dated 26/02/2010 the scheme of amalgamation of ATPIL with the assessee under section 139 to 394 of the companies act,that ATIPL had been dissolved and it had ceased to exist for all practical purposes in the Ay of law, that all the interest of the transferor company including all the debts,liabilities,duties,obligations and all the assets and properties of the assessee got merged /amalgamated with the new company with effect from 01/04/2008, that clauses 4(2) and (8) of the amalgamation order revealed that for accounting and taxation purposes the effective date was 01/04/1996,that there was a time gap between the amalgamation scheme and period when same was sanctioned by the court,that after the sanction the effective date of amalgamation was the date when scheme was arrived at and when the date was fixed under the scheme.He referred to the cases of General Radio and Appliances Company Ltd.,Orissa mining Corporation Ltd (208 CTR 380)and directed the AO to reduce the addition made u/s.2(22)(e),post amalgamation.

4.During the course of hearing before us the Departmental Representative stated that matter could be decided on merits. The Authorised Representative (AR) contended that assessee had a wholly owned subsidiary company namely ATI PL, that the assessee and ATIPL applied to the Hon’ble High Court of Bombay for amalgamation u/s.391-394 of the Companies Act,1956 with effect from the appointed date i.e. 01/04/2008, that the scheme was approved by the Hon’ble court on 26/02/2010 effective from 1st,April,2008, 5.We have heard the rival submissions and perused the material before us. We find that the AO had made an addition of Rs.4.04 crores to the total income of the assessee under the head deemed dividend invoking the provisions of section 2(22)(e),that as per the AO ATPIL had advanced certain amounts to the assessee in the months of April and May of 2008,that the Hon’ble Bombay High Court had approved the scheme of amalgamation of two companies w.e.f. 01/04/2008.Therefore,question of two companies existing after 01/04/2008 would did not arise. Settled principles of taxation jurisprudence hold that one cannot give loan to oneself.As that the 6029/M/12 (09-10) M/s.Atlas Equifin amounts in question were self withdrawals,so,in our opinion,the AO had wrongly invoke the provisions of section 2(22)(e) of the Act.The order of the FAA does not suffer from any legal or factual infirmity.So,confirming the same,we decide the effective ground of appeal against the AO.