INCOME TAX ACT, 1961

Section 115JB, Expln. clause (v)

MAT - Computation of book profit - Treatment of capital reserves arising as a result of revaluation of shares as a result of scheme of amalgamation -

Two wholly subsidiaries of the assessee company, were amalgamated with assessee. Under the scheme of amalgamation, shares of M/s. IHFL held by amalgamating companies were transferred to assessee. As per the said Scheme, such shares were revalued and difference arising between book value was shown in the books of amalgamating companies and fair value shares was formed part of the capital reserves of assessee company. AO held that in terms of clause (v) of Expln. 1 to section 115JB, such capital reserve had to be taken into account while computing book profit.Held: All the assets, i.e., shares of IHFL originally belonged to amalgamating companies and were appeared in their balance sheet, and these assets entered in the books of assessee by virtue of amalgamation and were valued as per the purchase method for a certain price. Thus, it would be wrong to say that there was any kind of revaluation of assets and accordingly, there could be no question of invoking clause (v) of Explanation to section 115JB for calculation of book profit under section 115JB.

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2015-16

INCOME TAX ACT, 1961

Section 14A(2)

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