DCIT Vs Asian Hotels East Limited (ITAT Kolkata)
Once the claim under section 35D of the Act was accepted in the initial year i.e. AY 1995-96, then the clock had started running in favour of the assessee which was to continue for the entire period of ten years and the benefit once granted in the initial year could not be denied in the subsequent years.
FULL TEXT OF THE ITAT JUDGEMENT
All these appeals have been preferred by the revenue relate to AYs 2012-13 to 2014-15 against the separate orders of Ld. CIT(A)-3, Kolkata all dated 01.11.2018. Since issues involved are found to be common, all the appeals were heard together. Both the parties also argued them together raising similar arguments on these issues. Accordingly, for the sake of brevity, we dispose of all the appeals by this consolidated order.
2. First we take up the appeal for AY 2012-13 in ITA No. 114/Kol/2019 arising out of the order of the Ld. CIT(A) dated 01.11.2018 passed out against the assessment order passed u/s. 143(3) of the Act dated 31.03.2015.
3. Ground no. 1 of the appeal for the revenue is against the action of the Ld. CIT(A) deleting the disallowance of Rs.2,26,32,327/- being amortization of de-merger expenses claimed by the assessee u/s. 35DD of the Income-tax Act, 1961 (hereinafter referred to as the “Act”)
4. Briefly stated facts of the case are that a company named M/s Asian Hotels Limited (in short “AHL’) operated three separate and independent undertakings. Pursuant to a scheme of demerger approved by the Hon’ble Delhi High Court, vide their order dated 13.01.2010, which became effective from 11.02.2010, one of the hotel undertakings situated at Kolkata [hereinafter referred to as ‘Kolkata Undertaking’] stood transferred by way of demerger to M/s Vardhaman Hotels Ltd [which was renamed as M/s Asian Hotels (East) Ltd. i.e. the assessee] from the appointed date 31.10.2009. The terms and conditions related to the transfer of the Kolkata undertaking to the assessee were set out in Para IV of the Scheme of Arrangement. The relevant excerpts from the Scheme are reproduced hereunder:
“4.1 Upon this Scheme becoming effective, the Kolkata Undertaking shall stand demerged from AHL and be vested in Transferee Company – II, without any further deed or act, together with all properties, assets, rights, benefits and interest therein, subject to existing charges or lispendens, if any thereon, in favour of banks and financial institutions with effect from the Appointed Date.
4.2 Without prejudice to the generality of the foregoing, upon the Scheme becoming effective with effect from the Appointed Date:
i. any and all assets relating to the Kolkata Undertaking, as are movable in nature or incorporeal property or are otherwise capable of transfer by manual delivery or by endorsement and delivery or by vesting and recordal pursuant to this Scheme shall stand transferred and vested by AHL to Transferee Company-II and shall become the property and an integral part of Transferee Company-II. The transfer and vesting pursuant to this sub-clause shall be deemed to have occurred by manual delivery and possession or negotiation and endorsement, as appropriate to the property being vested and title to the property shall be deemed to have been transferred and vested accordingly. No stamp duty shall be payable on the transfer of such movable properties (including shares and other investments, which are in dematerialised form) upon its transfer and vesting in Transferee Company-II
ii. any and all movable properties of AHL relating to the Kolkata Undertaking, other than those specified in sub-clause (i) above, including sundry debtors, outstanding loans and advances, if any, recoverable in cash or in kind or for value to be received, bank balances and deposits, if any, with Government, semi-Government, local and other authorities and bodies, customers and other persons, shall without any further act, instrument and deed, be transferred and vested as the property of Transferee CompanyII;
iii. any and all immovable properties(including land together with the buildings and structures standing thereon) of AHL relating to the Kolkata Undertaking, whether freehold or leasehold and any documents of title, rights and easements in relation thereto, shall stand transferred to and be vested in Transferee Company-II, without any act or deed done by AHL or Transferee Company-II. Schedule I sets out the immovable properties pertaining to the Kolkata Undertaking. With effect from the Effective Date, Transferee Company-II shall be entitled to exercise all rights and privileges and be liable to pay ground rent, municipal taxes and all obligations, in relation to or applicable to such immovable properties. The mutation of title to the immovable properties and transfer of the leasehold and other rights therein, as applicable, in the name of Transferee Company-II shall be made and duly recorded by the appropriate authorities pursuant to the sanction of this Scheme by the Hon’ble High Court and this scheme becoming effective with effect from the Appointed Date, in accordance with the terms hereof without any further act or deed on part of Transferee Company-II (save and expect for filling the sanction order relating to the Scheme with the Registrar of Companies, NCT of Delhi and Haryana);”
5. It is noted that clause 6.11 of the Scheme further set out a pre-condition that the said Scheme was conditional upon obtaining approval of the Government of West Bengal for vesting of the leasehold property belonging to the Kolkata Undertaking to the transferee company. the said Clause 6.11 read as follows:
“6.11 This Scheme is conditional upon and subject to:
i. The Scheme being agreed to by the respective requisite majorities of the members (either by way of a meeting or a letter of consent) and the creditors of AHL, and the members of Transferee Company-I and Transferee Company-II in accordance with Section 391-394 and other applicable provisions of the Act;
ii. The vesting of the leasehold property belonging to the Kolkata Undertaking shall be subject to the approval of the Government of West Bengal; and
iii. The Scheme being sanctioned by the Hon’ble High Court and certified copy of the orders of the High Court sanctioning this Scheme being filed with the Registrar of Companies, National Capital Territory of Delhi and Haryana by AHL, Transferee Company-I and Transferee Company-II, respectively.”
6. It is noted that the Department of Urban Development Govt. of West Bengal granted permission for transfer of leasehold rights in respect of Plot No. I in Block JA, Sector-III, Saltlake on which the hotel is situated vide communication ref. no.402-UD/O/M/SL(AL/NR)6L-39/95(PT-II) dated 08.02.2010. The said permission was subject to payment of fees of Rs.10,89,84,900/- which was also deposited on 18.12.2009 and the fact duly acknowledged by the said State Department. Accordingly, the pre-condition set out in Clause 6.11(ii) to make the Scheme operational was satisfied.
7. It is further noted that Clause 6.12 contained the terms and conditions for giving effect to the Scheme of arrangement which reads as follows:
“6.12 This Scheme shall become effective on the date of filling Form 42 of the Companies (Court) Rules, 1959 of the High Court in relation to the Scheme (as amended by the present amendment) along with Form 21 with the Registrar of Companies, NCT of Delhi and Haryana. Such date shall be known as the “Effective Date”.”
8. Acting in accordance with the above conditions, the assessee had filed the certified copy of the approved scheme along with the requisite statutory forms with the Registrar of Companies, New Delhi on 11.02.2010. Hence, in terms of the above Clause 6.12 of the Scheme, the effective date of the Scheme became 11.02.2010 and it was operational from the appointed date i.e. 31.10.2009. Accordingly, by operation of the approved scheme, the Kolkata undertaking along with all its assets and liabilities stood vested with the assessee from 31.10.2009. Further, the profits and losses derived from the operation of’ the Kolkata Undertaking also stood automatically vested with the assessee retrospectively from 31.10.2009. The transferee company i.e. the assessee, therefore, prepared the accounts for the period 31.10.2009 to 31.03.2010 and the operating results for the said period was accounted in the books of the resultant company. In connection with this demerger, the assessee had incurred the following expenses which was also debited in the P& L Account for the period 31.10.2009 to 31.03.2010.
