Case Law Details
ITO Vs M/s. Datex Ohmeda (India) Pvt. Limited (ITAT Kolkata)
Contention raised by the ld. Counsel for the assessee is that the GE loan was converted into equity share capital on August 07, 2008 and since the petition for approval of scheme of demerger was filed before the Hon’ble Calcutta High Court in January, 2009, the said loan was not available and it was not possible for the assessee-company to transfer the said liability to Wipro-GE as a part of demerger. He has pressed into service the principle of impossibility of performance as embedded in legal maxim, “lex non cogit ad impossiblia” to contend that the law cannot possibly compel a person to do something, which is impossible to perform. We find it difficult to accept this contention of the ld. Counsel for the assessee. First of all, the petition for approval of the scheme of demerger was filed by the assessee before the Hon’ble Calcutta High Court for approval in January, 2009 and the GE loan, which was very much in existence on March 31, 2008 having been converted into equity share capital on August 10, 2010, the assessee-company was well aware that the same was not available for transfer to Wipro-GE as on April 01, 2008, which was chosen by the assessee-company itself as the effective date of demerger. Moreover, the demerger as defined in section 2(19AA) of the Income Tax Act envisages transfer, pursuant to a scheme of arrangement under sections 391 to 394 of the Companies Act, 1956 by a demerged Company of its one or more Undertakings to any resulting company in a particular manner as specified therein. If such transfer is not in a manner as envisaged in section 2(19AA), as is the position in the present case, the same cannot be regarded as a demerger for the purpose of Income Tax Act and the benefit available under section 47(vib) cannot be availed. As per the specific provision contained in clause (ii) of section 2(19AA), all the liabilities relatable to the undertaking, being transferred by the demerger company, immediately before the demerger, should become the liabilities of the resulting company by virtue of the demerger. In the present case, the liability representing GE loan was the liability relatable to T&D Division of the assessee-company as on March 31, 2008, i.e. immediately before the demerger and since the same had not been transferred to Wipro GE, we are of the view that the transfer of T&D Division of the assessee-company was not in a manner prescribed in section 2(19AA) so as to treat the same as demerger for the purpose of Income Tax Act and the benefit of section 47(viia) was not available to the assessee-company as rightly held by the Assessing Officer. The issue as to whether it was possible for the assessee or not to effect such transfer in the manner prescribed under section 2(19AA) is not relevant, inasmuch as, if such transfer is in that manner, it would be treated as demerger within the meaning of section 2(19AA) or otherwise not.
FULL TEXT OF THE ITAT JUDGMENT
This appeal is preferred by the Revenue against the order of ld. Commissioner of Income Tax (Appeals)-I, Kolkata dated 22.07.2014, whereby he deleted the addition of Rs.28,45,92,456/- made by the Assessing Officer on account of long-term capital gain.
2. The assessee in the present case is a Company, which is a wholly owned subsidiary of GE Healthcare OY, Finland. It was carrying on the business of trading and servicing of medical equipments through its three separate Divisions namely, Trading and Distribution (“T&D”) Division, Medical Engineering and Corporate Headquarters till 31.03.2018. Thereafter it was decided by the Board of Directors of the assessee-company to transfer its “T&D” Division to Wipro GE Healthcare Private Limited and accordingly an application was moved by the assessee-company in January, 2009 before the Hon’ble Calcutta High Court for transfer of its “T&D” Division to Wipro GE Healthcare Private Limited with retrospective effect from 1st April, 2008 through a scheme of demerger. Simultaneously Wipro-GE also moved an application to the Hon’ble Karnataka High Court. Hon’ble Calcutta High Court sanctioned the demerger vide order dated 30th October, 2009 with retrospective effect from 1st April, 2008 while the Hon’ble Karnataka High Court approved the scheme of demerger vide order dated 16.09.2 009. Thereafter the scheme of arrangement was approved by the shareholders of both the Companies on 13.03.2009. In the return of income filed for the year under consideration on 30.09.2009, no capital gain arising from the transfer of its T&D Division by way of demerger was offered to tax by the assessee-company, inter alia, on the ground that the same was exempt under section 47(vib). During the course of assessment proceedings, it was noticed by the Assessing Officer that the total unsecured loans of the T&D Division of the assessee-company before the date of demerger were to the tune of Rs.60,12,98,144/-, out of which only Rs.9.5 crores of unsecured loans had been transferred, while the balance amount of loan taken from the holding company had not been transferred. In this regard, it was explained by the assessee that there was demerger as per Hon’ble High Court’s order and all the assets and liabilities of the T&D Division having been transferred, the conditions stipulated in section 2(19AA) were duly satisfied. This explanation of the assessee was not found acceptable by the Assessing Officer. According to him, the orders of the Hon’ble High Courts were passed as per the requirements of the Companies Act and since the conditions stipulated in section 2(19AA) dealing specifically with the demerger were not fully satisfied, exemption from the capital gain as per the provisions of section 47(vib) was not available. He accordingly worked out the long-term capital gain arising from the transfer of T&D Division of the assessee-company as a result of demerger at Rs.28,45,92,456/- after deducting the net asset value of the said Division as on 01.04.2008 amounting to Rs.4,54,07,544/- from the consideration of Rs.33,00,00,000/- being the value of shares issued to the shareholders of the assessee-company on demerger and brought the same to tax in the hands of the assessee-company vide an order dated 28.03.2014 passed under section 143(3) of the Act.
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