DCIT Vs. Babcock Borsig Ltd. & Vice-Versa (ITAT Kolkata)
Liabilities brought forward from amalgamating company written off by the amalgamated company (assessee) become its Business income- i.e. Profit chargeable to tax under section 41(1) of Income Tax Act, 1961 as the assessee had written off the liabilities after coming to a conscious conclusion that those liabilities were no longer required to be paid. Accordingly, it automatically became the income under section 41(1) of the assessee even though the amalgamating company claimed the deduction in the earlier years and not the assessee. Since pursuant to the merger, the entire assets and liabilities of amalgamating company got merged at book values with the amalgamated company, thus, the issue of claiming deduction in earlier years was already duly factored in the scheme of amalgamation and the consideration fixed accordingly.
FULL TEXT OF THE ITAT
These appeals of the revenue and assessee arise out of the orders of the Learned Commissioner (Appeals)-6, Kolkata (in short the ld CITA) in Appeal No. 223/CIT(A)-6/Kol/15-16 dated 15-2-2016 against the orders passed by the D.C.I.T-Circle-5(2), Kolkata (in short the ld AO) under section 143(3) of the Act dated 11-2-2015 for the assessment year 2012-13. As identical issues are involved, both the appeals are taken up together and disposed off by this common order for the sake of convenience.
2. Disallowance under section 14A of the Act Ground Nos. 1 to 4 of assessee appeal & Ground Nos. 1 to 4 of revenue appeal
The brief facts of this issue are that the assessee is a Non-Banking Finance Company (NBFC) engaged in the business of advancing of loans and making investments. It had filed its return of income for the assessment year 2012-13 on 28-9-2012 declaring total income of Rs. Nil under normal provisions of the Act and Book Loss of Rs. 2,81,56,974 under section 115JB of the Act. The learned assessing officer observed in his order that the assessee had produced books of accounts, along with supporting g bills, challans, vouchers etc out of which few transactions were test checked and verified on random sample basis. The assessee earned dividend income of Rs. 88,75,687 from its group companies and its associates and claimed the same as exempt in the return of income. The details of dividend income are as under:–
