GOA TRADING PVT.LTD., MUMBAI v. INCOME TAX OFFICER WARD 6(3)(1), MUMBAI

ITA 2185/MUM/2009 | 2004-2005
Pronouncement Date: 30-10-2013 | Result: Allowed

Appeal Details

RSA Number 218519914 RSA 2009
Assessee PAN AAACG8777D
Bench Mumbai
Appeal Number ITA 2185/MUM/2009
Duration Of Justice 4 year(s) 6 month(s) 22 day(s)
Appellant GOA TRADING PVT.LTD., MUMBAI
Respondent INCOME TAX OFFICER WARD 6(3)(1), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 30-10-2013
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted G
Tribunal Order Date 30-10-2013
Date Of Final Hearing 16-09-2013
Next Hearing Date 16-09-2013
Assessment Year 2004-2005
Appeal Filed On 08-04-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH G MUMBAI BEFORE SHRI P.M. JAGTAP ACCOUNTANT MEMBER AND DR. S.T.M. PAVALAN JUDICIAL MEMBER ITA NO. 2185/MUM/2009 ASSESSMENT YEAR : 2004 - 05 GOA TRADING PVT. LTD. 2 ND FLOOR SHREE RAM MILLS PREM ISES G.K. MARG WORLI MUMBAI - 400 013 PAN : AAACG 8777 D VS. ITO WD 6(3)(1) MUMBAI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI ARVIND SONDE RESPONDENT BY : SHRI O.P. SINGH D ATE OF HEARING : 16.09 .2013 DATE OF PRONOUNCEMENT : 30 .10 .2013 O R D E R PER DR . S.T.M. PAVALAN J M: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LD.CIT(A) - 26 MUMBAI DATED 02.02.2009 FOR THE ASSESSMENT YEAR 2 004 - 05. 2. IN THIS APPEAL THE ASSESSEE HAS AGITATED THE ACTION OF THE LD.CIT(A) CONFIRMING THE DISALLOWANCE MADE BY THE AO AGAINST THE EXEMPTION CLAIMED BY THE ASSESSEE U/S 10(23G) OF THE INCOME TAX ACT IN RESPECT OF LONG TERM CAPITAL GAIN OF RS.1 39 08 990/ - ON SALE OF 1 2 6 9 0 0 00/ - SHARES OF M/S RSPCL TO M/S REL. 3 . BRIEFLY STATED THE ASSESSEE COMPANY ENGAGED IN THE BUSINESS OF INVESTMENT DURING THE YEAR UNDER CONSIDERATION HAD CLAIMED DEDUCTION U/S 10(23G) IN RESPECT OF LONG TERM CAPITAL GAIN OF RS.1 39 08 990/ - . T HE ASSESSEE HAD ACQUIRED 1 26 90 000/ - NO. OF EQU ITY SHARES OF RELIANCE SALGAOCAR POWER CO. PVT. LTD [RSPCL] ON 10.07.2000 FOR THE TOTAL C ONSIDERATION OF RS.12.69 CRORES. RSPCL WAS UNDERTAKI NG WHICH WAS APPROVED FOR THE P U R POSE OF SECTION 10(23G) V IDE NOTIFICATION NO. 110 DATED 25.10.1999 FOR THE ASSESSMENT YEAR 1999 - 2000 2000 - 01 AND 2001 - 02 AND VIDE NOTIFICATION NO. ITA NO. 2185/MUM/2009 GOA TRADING PVT. LTD. ASSESSMENT YEAR : 2004 - 05 2 1080 DATED 30.04.2001 FOR THE ASSESSMENT YEAR 2002 - 03 2003 - 04 AND 2004 - 05 . THE AFORESAID SHARES WERE SOLD ON 29.09.2003 WHICH ACCOR DING TO THE ASSESSEE RESULTED IN LONG TERM CAPITAL GAIN OF RS.1 39 08 990/ - AND ACCORDINGLY THE ASSESSEE HAD CLAIMED EXEMPTION U/S 10(23G). HOWEVER IN THE ASSESSMENT FRAMED U/S 143(3) THE AO DISALLOWED THE SAID CLAIM . A CCORDING TO THE AO THE COMPANY RSP CL CEASE D TO EXIST FROM 01.04.2003 DUE TO AMALGAMATION WITH REL AND THE EXEMPTION WAS NOT AVAI LABLE TO THE COMPANY UNLESS THE NEW COMPANY IS ELIGIBLE ENTERPRISE APPROVED BY THE COMPETENT AUTHORITY. 4. ON APPEAL THE LD.CIT(A) CONFIRMED THE ACTION OF THE AO . A CCORDING TO THE LD.CIT(A) THE AS SETS AND LIABILITIES OF RSPCL W ERE TRANSFERRED TO TRANSFEREE COMPANY FROM THE APPOINTED DATE WHICH WAS 01.04.2003 AND THE COMPA NY RSPCL WAS NO MORE EXISTENCE AS SEPARATE LEGAL ENTITY FROM 01.04.2003 WHICH WAS ELIGIBL E UNDERTAKING FOR EXEMPTION U/S 10(23G). HENCE THE CAPITAL GAIN AROSE ON TRANSFER AND THE SALE OF SUCH SHARES OF RSPCL WAS NOT ELIGIBLE FOR EXEMPTION UNDER THE PROVISIONS OF SECTION 10 CLAUSE 23G OF THE ACT. AGGRIEVED BY THE IMPUGNED ORDER THE ASSESSEE IS IN APPEAL BEFORE US. 5. BEFORE US THE LEARNED COUNSEL FOR THE ASSESSEE HAS STATED THAT THE INVESTMENT BY WAY OF PURCHASE OF SHARES HAVE BEEN ACQUIRED DURING THE PERIOD IN WHICH THE ENTERPRISE HAS BEEN APPROVED U/S 10( 23G ) . THE SAID SHARES HAVE BEEN SOLD ON 29.09.2003 I.E. AGAIN DURING THE PERIOD WHEN THE ENTERPRISE HAS BEEN APPROVED FOR TH E PURPOSES OF SECTION 10( 23G ). A S PER THE AMALGAMATION ORDER OF THE HIGH COURT OF BOMBAY AT GOA PAN AJI DATED 18.12.2003 A MONG OTHER THINGS APPROVALS PERMISSIONS EX EMPTIONS [INCLUDING EXCISE CUSTO MS AND DUTY EXEMPTIONS ) INCENTIVES SALES TAX DEFERRALS LOANS OR BENEFITS SUBSIDIES CONCESSIONS GRANTS CLAIMS ETC. ENJOYED OR CONFERR ED UPON OR HELD OR AVAILED OF BY THE PETITIONER COMPANY I.E. RSPCL AFTER THE APPOINT ED DATE AND PRIOR TO THE E FFECTIV E D ATE STANDS TRANSFERRED TO AND VESTED IN THE TRANSFEREE C OMPANY. THE LEARNED COUNSEL FOR THE ASSESSEE BY RELYING ON VARIOUS DECISIONS HAS ARGUED THAT THE ORDER OF AMALGAMATION HAS THE EFFECT OF TRANSFERRING ALL LIABILITIE S AND ASSETS OF THE TRANSFER O R COMPANY IN THE HANDS OF THE TRANSFEREE COMPANY INCLUDING ALL THE CONC ESSIONS AND BE NEFITS ENJOYED BY THE TRANSFEROR COMPANY. FURTHER OUR ATTENTION HAS BEEN DRAWN TO RULE 2(E) OF THE INCOME TAX RULES TO ESTABLISH THE PROPOSIT ION THAT SO LONG AS THE CENTRAL GOVERNMENT HAS NOT WITHDRAWN THE APPROVAL ITA NO. 2185/MUM/2009 GOA TRADING PVT. LTD. ASSESSMENT YEAR : 2004 - 05 3 GRANTED THE SAID APPROVAL SHALL EXIST AND THE ASSESSEE ENTITLED FOR THE BENEFIT U/S 10(23 G). ON THE OTHER HAND THE LD.DR HAS STATED THAT SINCE THE RELEVANT INCOME FROM SALE OF RSPCL SHARES HAVE TAKEN PLACE ONLY A FTER 01.04.2003 WHEN RSPCL CEASE D TO EXIST AND SINCE IT I S RSPCL THAT IS THE APPROVED UNDERTAKING EXEMPTION U/S 10( 23G ) ON SALE OF SHARES OF RSPCL WOULD NOT BE AVAILABLE TO THE ASSESSEE UNLESS THE ENTITY INTO WHICH IT GOT A MALGAMATED I.E. BSES/RE L ALSO RECEIVES THE APPRO VAL FROM CENTRAL GOVERNMENT UNDER THE PROVISIO NS OF THE SAID SECTION. THE LD.DR HAS FURTHER STATED THAT THE AMALGAMATION ORDER CANNOT MAKE THE NEW COMPANY ELIGIBLE FOR THE APPROVAL U/S 10(23G). 6. WE HAVE H EARD BOTH THE SIDES AND PERUSED THE MATERIAL ON RECORD. C LAUSE ( 23G ) OF SECTION 10 OF THE INCOME - TAX ACT PROVIDE S THAT ANY INCOME BY WAY OF DIVIDENDS OTHER THAN DIVIDENDS REFERRED TO IN SECTION 115 - O INTEREST OR LONG TERM CAPITAL GAINS OF AN INFRASTRUCTU RE CAPITAL FUND OR AN INFRASTRUCTURE CAPITAL COMPANY FROM INVESTMENTS MADE ON OR AFTER 1ST DAY OF JUNE 1998 BY WAY OF SHARES OR LONG TERM FINANCE IN ANY ENTERPRISE WHOLLY ENGAGED IN THE BUSINESS OF DEVELOPING MAINTAINING AND OPERATING ANY INFRASTRUCTURE FACILITY SHALL BE EXEMPT IF SUCH INVESTEE ENTERPRISE IS APPROVED BY THE CENTRAL GOVERNMENT. THE CHRONOLOGY O F EVEN TS THAT LEADS TO THE DISPUTE ON THE ISSUE OF ALLOWABILITY OF THE CLAIM OF EXEMPTION U/S 10(23G) ARE THAT (I) D ATE OF PURCHASE OF SHA RES BY THE ASSESSEE IN RSPCL - 10.07.2000 (II) THE PROPOSAL BY WAY OF RESOLUTION TO THE EFFECT OF AMALGAMATION 15.10.2003 (III) T HE AMALGAMATION ORDER OF THE HIGH COURT 18.12.2003 (IV) THE APPOINTED D ATE FOR AMALGAMATION 01.04.2003 AND (V) T HE DATE OF SALE OF SH ARES 29.09.2003 . IT IS THE CASE OF THE REVENUE THAT THE SALE OF THE SHARES WHICH HAS TAKEN PLACE ON 29.09.2003 IS AFTER THE APPOINTED DATE FOR AMALGAMATION I.E. 01.04.2003 ON WHICH RSPCL HAS CEASED TO EXIST AND THE ASSESSEE/INVESTOR CANNOT CLAIM THE BEN EFIT UNDER THE APPROVAL GIVEN BY THE CENTRAL GOVERNMENT . 6.1 IT IS PERTINENT TO NOTE THAT ON THE DATE OF ACQUISITION OF SHARES I.E. 10.07.2000 RSPCL HAS BEEN AN UNDERTAKING APPROVED FOR T HE PURPOSE OF SECTION 10( 23G ) VIDE NOTIFICATION NO. 1110 DATED 25. 10.1999 AND ALSO ON THE DATE OF SALE OF SHARES I.E. 29.0 9.2003 RSPCL HAS ENJOYED THE APPROVAL OF THE CENTRAL GOVERNMENT UNDER SECTION 10(23G) VIDE NOTIFICATION DATED 30.04.2001. THE SAID APPROVAL GIVEN U/S 10(23G) HAS NOT BEEN WITHDRAWN AS PROVIDED IN RULE 2E OF THE INCOME TAX RULES. IN THE ABSENCE OF WITHDRAWAL OF THE SAID APPROVAL WHICH IS THE ONLY WAY TO TAKE AWAY THE APPROVAL ITA NO. 2185/MUM/2009 GOA TRADING PVT. LTD. ASSESSMENT YEAR : 2004 - 05 4 ALREADY GRANTED UNDER R ULE 2E IT HAS TO BE PRESUMED T HAT THE APPROVALS GIVEN BY THE CENTRAL G OVERNMENT IS IN FORCE. 6.2 MOREOVE R T HE BENEFIT WHICH HAS ACCRUED TO THE INVESTOR/ASSESSEE CANNOT BE TAKEN AWAY JUST BECAUSE OF THE REASON THAT THE INVESTEE COMPANY WHICH HAS ORIGINALLY BEEN APPROVED U/S 10(23G) BY THE GOVERNMENT HAS AMALGAMATED INTO ANOTHER COMPANY. THE ASSESSEE AT THE T IME OF INVESTMENT HAS BEEN ASSURED THAT IT WOULD BE ENTITLED TO THE BENEFIT BY WAY OF THE APPROVAL GRANTED U/S 10(23G) BY THE GOVERNMENT TO THE INVESTEE COMPANY. AT THE TIME OF PURCHASING THE SHARES IN R SPCL THE ASSESSEE WOULD HAVE HAD THE LEGITIMATE EXPE CTATION OF BEING TREATED IN A PARTICULAR WAY OF RECEIVING SUBSTANTIVE BENEFIT BY AN ADMINISTRATIVE AUTHORITY . SUCH BENEFITS ACCRUED TO THE ASSESSEE ON THE BASIS OF LEGITIMATE EXPECTATION CANNOT BE DENIED WHEN THE EVENTS LIKE AMALGAMATION IN WHICH THE ASSES SEE HAS NO ROLE TO PLAY EITHER BY ITS ACT OR OMISSION WHICH CANNOT BE ATTRIBUTED TO THE ASSESSEE. 6.3 IT IS ALSO RELEVANT TO STATE THAT WHEREVER AMALGAMATION/MERGER PUTS THE ASSESSEE IN A DISADVANTAGEOUS/NEGATIVE POSITION IN CLAIMING ANY BENEFIT WHICH THE ASSESSEE IS OTHERWISE ENTITLED THE LEGISLATIVE INTENT IS CLEARLY EXPRESSED IN TERMS OF A SPECIFIC PROVISION SUCH AS CLAUSE 12 AS IN THE CASE OF SECTION 80IB(10) W H EREAS SUCH SPECIFIC PROVISION HAS NOT BEEN INCORPORATED BY THE LEGISLATURE IN THE CASE OF S ECTION 10(23G) . THIS SUGGESTS THAT BY PROVIDING THE APPROVAL FOR AN INVESTEE COMPANY THE INVESTOR IS ENTITLED TO THE BENEFIT WHICH CANNOT BE DENIED TO THE ASSESSEE/INVESTOR MERELY ON THE GROUND THAT THE INVESTEE COMPANY HAS AMALGAMATED/MERGED WITH AN OTHER COMPANY THE PROCESS IN WHICH THE ASSESSEE/INVESTOR HAS NO ROLE TO PLAY. THE OTHER CONTENTION OF THE REVENUE THAT THE INVESTEE COMPANY IS NOT WHOLLY ENGAGED IN THE APPROVED BUSINESS IS NOT A GROUND FOR DENYING THE BENEFIT TO THE ASSESSEE SO LONG AS T HE APPROVAL GIVEN BY THE GOVERNMENT TO THE INVESTEE COMPANY U/S10(23G) REMAINS IN FORCE. IN VIEW OF THE AFOREMENTIONED DISCUSSIONS WE ARE OF THE CONSIDERED VIEW THAT THE AUTHORITIES BELOW ARE NOT JUSTIFIED IN HOLDING THAT THE ASSESSEE IS NOT ELIGIBLE FOR EXEMPTION UNDER THE PROVISIONS OF SECTION 10 CLAUSE 23G OF THE ACT. THEREFORE THE EXEMPTION CLAIMED BY THE ASSESSEE U/S 10(23G) OF THE INCOME TAX ACT IN RESPECT OF LONG TERM CAPITAL GAIN OF RS.1 39 08 990/ - ON SALE OF 1 26 90 000/ - SHARES OF M/S ITA NO. 2185/MUM/2009 GOA TRADING PVT. LTD. ASSESSMENT YEAR : 2004 - 05 5 RSPCL TO M/S BSES/REL IS ALLOWED AND THEREBY WE DELETE THE DISALLOWANCE/ADDITION MADE ON THIS ACCOUNT. 7. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN CO URT ON THIS 30 TH DAY OF OCTOBER 2013. SD/ - SD/ - ( P.M. JAG TAP ) (DR. S.T.M. PAVALAN) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI DATED: 30 . 10 . 2013. * S RIVASTAVA COPY TO: THE APPELLANT THE RESPONDENT THE CIT CONCERNED MUMBAI THE CIT(A) CONCERNED MUMBAI THE DR G BENCH // TRUE COPY // BY ORDER DY/ASSTT. REGISTRAR ITAT MUMBAI.