ACIT Vs Emami Realty Ltd. (ITAT Kolkata)
Demerger Fully Tax-Neutral: Section 56(2)(x) Inapplicable, Section 2(19AA) Conditions Satisfied — ITAT Kolkata in Emami Realty Ltd.
The Kolkata Bench of the ITAT dismissed the Revenue’s appeal and upheld the CIT(A)’s order deleting a massive addition of ₹374.53 crore made under section 56(2)(x) in the hands of Emami Realty Ltd. for AY 2021-22, arising out of a court-approved scheme of demerger.
The Revenue alleged that the demerger of the real-estate undertaking of Oriental Sales Agencies (India) Pvt. Ltd. (OSAIPL) into Emami Realty was not compliant with section 2(19AA), contending that (i) liabilities were wrongly transferred, and (ii) shares were undervalued by not applying Rule 11UA, thereby invoking section 56(2)(x).
The Tribunal rejected these contentions and recorded the following key findings:
- Liabilities correctly transferred: The ITAT upheld the factual finding that liabilities of ₹112.38 crore relating to the real-estate undertaking were actually transferred. The contrary figure of ₹20.28 crore relied upon by the AO was held to be a mistaken segmental disclosure, subsequently rectified by the statutory auditor and reflected in later audited financials and NCLT records.
- No violation of section 2(19AA)(ii) or (iv): Section 2(19AA)(iv) requires only proportionate allotment of shares, not valuation as per Rule 11UA. Rule 11UA applies only to section 56 and cannot be imported into section 2(19AA). The valuation adopted under the Companies Act, supported by a registered valuer and SEBI-registered merchant banker, was found to be fair.
- Section 56(2)(x) expressly inapplicable: The Tribunal reiterated that transactions covered by section 47(vib) (demerger) fall within the statutory exception under section 56(2)(x). Once the demerger satisfies section 2(19AA), no addition under section 56(2)(x) can be made.
- No taxable event in AY 2021-22: The appointed date of demerger was 01.04.2019 (AY 2020-21), while the NCLT order and actual issuance of shares occurred in FY 2021-22 (AY 2022-23). Since no transfer or receipt occurred in AY 2021-22, the ITAT held that no income could be taxed in that year.
- TDS u/s 194-IC not applicable: Payment of ₹57.25 crore for acquisition of the Joka Project was held to be a slump sale and not a “specified agreement” under section 45(5A); hence, section 194-IC was rightly held inapplicable.
While clarifying that NCLT approval does not bar tax examination by the Department, the ITAT concluded that on facts and law, the demerger was fully compliant and tax-neutral. Consequently, all Revenue grounds were dismissed, and the assessee’s cross-objection was rendered infructuous.
FULL TEXT OF THE ORDER OF ITAT KOLKATA
