DCIT Vs Teleperformance Global Services Pvt. Ltd. (ITAT Mumbai)
ITAT Mumbai held that approved sanctioned scheme of amalgamation is binding on the authorities and the same cannot be permitted to be challenged in a collateral proceeding.
Facts-
The assessee is engaged in the business of IT & IT enabled services. The Ld.AO observed that assessee on 30/7/2010 sold 6,44,285 equity shares in M/s Sparsh BPO Services Pvt Ltd for Rs.12,88,57,000/-. These shares were purchased by the assessee on 7/7/2008 for Rs.12,88,57,000/-. The Ld.AO observed that as on the date of sale of these shares, the assessee (SKR BPO) was very much in existence and the assessee, namely, SKR BPO, got amalgamated with the erstwhile company, M/s Serco BPO with effect from 7/7/2011. The Ld.AO observed that the shares in M/s Sparsh BPO Services Pvt Ltd was valued at Rs.200/- in the balance-sheet of SKR BPO which continued to be valued at Rs.200/- per share in the balance-sheet of M/s Serco BPO, after the sale of shares by SKR BPO. He observed that at the same time, Serco BPO became eligible to carry forward the long term capital loss incurred by SKR BPO consequent to the amalgamation.
Accordingly, the Ld.AO held that SKR BPO sold the shares at purchase cost only with a view to claim fictitious losses and concluded that the sale transaction was not a genuine transaction and was a colourable device. With these observations, the Ld.AO proceeded to disallow the claim of long term capital loss of Rs.2,85,61,088/-.
Conclusion-
Merely because this transaction had resulted in long term capital loss which had also admittedly arose only due to the benefit of indexation which is statutorily available to the assessee, the Revenue in the instant case is trying to treat the entire transaction as a colourable device and making the assessee act as a conduit to enable the merged entity to have the benefit of carry forward of loss. All these allegations are made by the Ld.AO absolutely without any basis. In fact, this is a classic case where the Ld.AO had denied the benefit which is statutorily available to the assessee as per the Act.
This scheme of amalgamation has been approved by the Hon’ble Bombay High Court vide its order dated 5/3/2013 with effective date of 7/7/2011. Now once the scheme of amalgamation has been approved by the Hon’ble High Court, all the assets and liabilities of the transferor company including the losses would get automatically vested with the transferee company. The same cannot be disturbed or disputed by the Ld.AO at the time of implementation of the scheme of amalgamation.
In view of the above, we do not find any infirmity in the order of Ld.CIT(A) allowing the claim of long term capital loss in the hands of the assessee company. Accordingly, grounds raised by the Revenue are dismissed.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
This appeal in ITA No. 6473/Mum/2018 and cross objection in C.O. No. 227/Mum/2019 for A.Y.2011-12 arise out of the order by the Ld. Commissioner of Income-tax-20, Mumbai dated 07/06/2018 (ld.CIT(A) in short) against the order of assessment order passed u/s.143(3) r.w.s. 147 of the Income Tax Act, 1961 (hereinafter referred to as Act) dated 29/12/2016 by the ld. Asst. Commissioner of Income Tax-12(2)(2), Mumbai (hereinafter referred to as ld. AO).
ITA No. 6473/Mum/2018 – Revenue Appeal – Asst Year 2011-12
2. The only effective issue to be decided in the appeal of the Revenue is as to whether the Ld.CIT(A) was justified in allowing the claim of long term capital loss of Rs.2,85,61,088/- on sale of 6,44,285 equity shares of M/s Sparsh BPO Services Pvt Ltd, in the facts and circumstances of the instant case.
3. We have heard the rival submission and perused the material available on record.
4. M/s SKR BPO Services Pvt. Ltd. was a company which got amalgamated with an erstwhile company, viz. M/s Serco BPO Pvt. Ltd. w.e.f. 7.7.2011, as per the approval of the Bombay High Court dated 5.3.2013. Thereafter, the name of M/s Serco BPO Pvt. Ltd. was changed to M/s Intelenet Global Services Pvt. Ltd. w.e.f. 11.01.2016. For the assessment year 2011-12, the SKR BPO Services Pvt. Ltd. e-filed its return of income on 28.09.2011 declaring its total income at Rs.(-)3,26,17,215/-. Subsequently, an assessment order u/s 143(3) of the Act was passed on 17.02.2014 determining total income at Rs. (-) 2,82,52,429/-. Subsequently, the assessment was reopened u/s 147 of the Act and a notice dated 22.3.2016 u/s 148 of the Act was issued in the name of erstwhile M/s SKR BPO Services Pvt. Ltd. In response, the assessee (Intelnet Global Services Private Limited) filed a letter dated 13.04.2016 stating that the original return filed by SKR BPO Services Private Limited may be treated as return filed in response to the notice u/s 148 of the Act.
5. In the course of the assessment proceedings, by a letter dated 31.08.2016, Intelnet Global Services Pvt. Ltd. raised an objection stating that the notice issued u/s 148 was not a valid notice inasmuch as it was issued to the person who had ceased to exist. The Ld. AO disposed of the objections of the assessee by the order dated 10.11.2016. Thereafter the Intelnet Global Services Pvt Ltd. filed another letter dated 08.12.2016 raising fresh objections to the reopening u/s 148 of the Act. Eventually, the Ld. AO passed an order u/s 143(3) r.w.s. 147 of the Act determining the total income of the assessee at Rs.3,09,659/-.
6. We find that assessee is engaged in the business of IT & IT enabled services. The Ld.AO observed that assessee on 30/7/2010 sold 6,44,285 equity shares in M/s Sparsh BPO Services Pvt Ltd for Rs.12,88,57,000/-. These shares were purchased by the assessee on 7/7/2008 for Rs.12,88,57,000/-. The Ld.AO observed that as on the date of sale of these shares, the assessee (SKR BPO) was very much in existence and the assessee, namely, SKR BPO, got amalgamated with the erstwhile company, M/s Serco BPO with effect from 7/7/2011. The Ld.AO observed that the shares in M/s Sparsh BPO Services Pvt Ltd was valued at Rs.200/- in the balance-sheet of SKR BPO which continued to be valued at Rs.200/- per share in the balance-sheet of M/s Serco BPO, after the sale of shares by SKR BPO. He observed that at the same time, Serco BPO became eligible to carry forward the long term capital loss incurred by SKR BPO consequent to the amalgamation. Accordingly, the Ld.AO held that SKR BPO sold the shares at purchase cost only with a view to claim fictitious losses and concluded that the sale transaction was not a genuine transaction and was a colourable device. With these observations, the Ld.AO proceeded to disallow the claim of long term capital loss of Rs.2,85,61,088/-.
7. We find that SKR BPO had been amalgamated with Serco BPO with effect from 7/7/2011 vide order of approval of merger passed by the Hon’ble Bombay High Court dated 5/3/2013. The computation of long term capital loss on sale of shares of M/s Sparsh BPO Services Pvt Ltd arose in the instant case, only due to benefit of indexation that is statutorily available to an assessee. capital loss are as under:-
