Book loss under section 115JB of the Income Tax Act

IN THE INCOME TAX APPELLATE TRIBUNAL,
MUMBAI BENCH “H”, MUMBAI
BEFORE SHRI RAJESH KUMAR, ACCOUNTANT MEMBER AND
SHRI AMARJIT SINGH, JUDICIAL MEMBER
ITA No.334/M/2020
Assessment Year: 2016-17

M/s. Keva Fragrances P.
Ltd.,
36 Devkaran Mansion,
36 Mangaldas Road,
Mumbai – 400 002
PAN: AAACK2243A

(Appellant)

vs

DCIT 4(2)(2),
Room No.640,
6th Floor,
Aayakar Bhavan,
M.K. Road,
Mumbai - 400020

(Respondent)

ITA No.1051/M/2020
Assessment Year: 2016-17

ACIT 4(2)(2),
Room No.640,
6th Floor,
Aayakar Bhavan,
M.K. Road,
Mumbai - 400020

(Appellant)

vs

M/s. Keva Fragrances P.
Ltd.,
36 Devkaran Mansion,
36 Mangaldas Road,
Mumbai – 400 002
PAN: AAACK2243A

(Respondent)

Present for:
Assessee by : Shri Saurabh Bhat, A.R.
Revenue by : Shri Sandeep Raj, D.R.
Date of Hearing : 02.07.2021
Date of Pronouncement : 02.08.2021
O R D E R

The above titled cross appeals have been preferred by the assessee as well as by Revenue against the order dated 20.11.2019 of the Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)] relevant to assessment year 2016-17.

2. M/s. S.H. Kelkar & Co. Ltd. (hereinafter referred to as SHK) is a 100% holding company of the assessee and also listed on National Stock Exchange of India. Thus the assessee is a 100% subsidiary of a listed company and also a company in which public are substantially interested. During the year under consideration another 100% subsidiary company belonging to Keva Group was amalgamated with the assessee company after obtaining approval of Hon’ble Bombay High Court on the scheme of amalgamation. Prior to amalgamation, the name of the assessee was M/S KV Arochem Pvt. Ltd. which was changed to M/s. Keva Frangrances Pvt. Ltd. post amalgamation. In other words the Keva Fragrances Pvt. Ltd. was amalgamated with the assessee M/s. KV Arochem Pvt. Ltd.

3.The Ld. D.R. submitted that the amalgamation was a colourable device intended to defraud the Revenue by claiming depreciation on the amount of goodwill created as a result amalgamation by making excess payment of consideration by one subsidiary to the another subsidiary.

4.In the case of M/S Cosmos Coop Bank Ltd. vs. DCIT (Supra), the coordinate bench has taken the same view on depreciation on goodwill.

5.The only effective issue raised in ground No.1 to 4 is against the deletion of addition of Rs.251,18,95,121/- as made by the AO under section 56(2)(viib) of the Act towards excess issue price of shares over fair market value of the shares.

6.In the result the appeal of the assessee is allowed and that of the Revenue is dismissed.
Order pronounced in the open court on 02.08.2021.

Please find attached the enclosed file for the full judgement.