Addition u/s 68 for unsecured loans/share capital on account of amalgamation deleted

Addition u/s 68 for unsecured loans/share capital on account of amalgamation as per High Court order deleted as no sum was actually received

ABCAUS Case Law Citation
ABCAUS 3545 (2021) (08) ITAT

In the instant case, the assessee had challenged the order passed by the CIT(A) in confirming addition of Share Capital / Share Premium / unsecured loans made by the Assessing Officer (AO) as alleged unexplained cash credits u/s 68 of the Income Tax Act, 1961 (the Act).

The assessee was one of the companies covered under the search operations u/s 132 of the Act. Therefore, the case of the assessee was picked up for scrutiny.

Nine different companies amalgamated in the assessee company as per Order of the Hon’ble High court u/s 394 of the companies act. All the assets and liabilities of nine Transferor companies were incorporated in the balance sheet of the assessee company and shareholders of those    nine companies were issued shares of the assessee company as per exchange ratio as per the scheme of amalgamation.

The AO noticed that assessee had huge amount of unsecured loan and the share capital. The assessee submitted it had not received any amount during the year but the same was on account of merger vide order of the  Hon’ble High Court wherein different companies were amalgamated with the assessee company and the share capital represented shares allotted to the shareholders of amalgamated  companies with respect to the unsecured loans it was stated that the  same was also on account of amalgamation order and the assessee did not  received  any  sum during the year except small amount.

The Tribunal noted that no share capital was received during the year but only in exchange of the shares of the transferor companies, the shares had been allotted to the shareholders of the transferor companies.

The return of allotment filed with the Registrar of Companies also clearly showed that the share capital is only on account of amalgamation approved by the Hon’ble High Court.

The Tribunal opined that as there was no sum of money received during the year, addition u/s 68 on account of the share capital can not be made.

With respect to most of the unsecured loans, the Tribunal noted that the amount had been transferred on account of amalgamation. The assessee had also submitted the annual audited accounts as well as confirmation of the parties to show the above fact.  Even the copies of the confirmation, income tax returns of the parties were also submitted.

The Tribunal noted that the fact remained that most of amount had resulted on account of amalgamation of different companies with the assessee and no fresh sum was received during the year by the assessee with respect to all the loans and advances.

Accordingly, the Tribunal deleted the addition made by the AO on account of share capital as well as unsecured loan and allowed the appeal in favour of the assessee.

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