Reckitt Benckiser Healthcare India Private Limited Vs DCIT (ITAT Ahmedabad)
Income Tax Appellate Tribunal (ITAT) Ahmedabad ruled on cross-appeals filed by Reckitt Benckiser Healthcare India Pvt. Ltd. and the Income Tax Department concerning the company’s tax assessment for AY 2011-12. The dispute primarily revolved around additions made by the Assessing Officer (AO) regarding demerger compliance under Section 2(19AA) of the Income Tax Act and the treatment of capital gains. The AO had determined a revised total income of ₹84.94 crore, significantly higher than the declared ₹27.56 crore, leading to the appeal.
The key issue involved the AO’s assertion that Reckitt Benckiser’s demerger did not fulfill the conditions of Section 2(19AA), which governs tax-neutral demergers. Specific discrepancies were noted in asset transfers, investment classification, and inter-unit balances. The CIT(A) upheld some of these additions while providing relief on others. The assessee argued that the demerger was carried out as per legal requirements and that certain investments should not be considered part of the transferred undertaking.
The ITAT examined judicial precedents, including Rotork Controls India Pvt. Ltd. v. CIT (314 ITR 62) and CIT v. Woodward Governor Pvt. Ltd. (312 ITR 254), which provided guidance on tax treatment in cases of corporate restructuring. The tribunal found that while there were procedural gaps in Reckitt Benckiser’s documentation, the fundamental structure of the demerger complied with tax laws. However, it upheld some of the AO’s observations regarding discrepancies in asset allocation and investment reporting.
