Supreme Court in Madhur Housing and Development Co. on 05-10-2017 has held that loan/advance by closely held company to another company in which shareholder of closely held company having more than 10% voting power also had substantial interest in the borrowing company, although is taxable as deemed dividend income but the income is taxable in the hands of shareholder and not the borrowing company

Presumption underlying the deeming provision is that that the loans or advances would ultimately be made available to the shareholders of the company giving the loan or advance. The legal fiction in s. 2(22)(e) enlarges the definition of dividend but does not extend to, or broaden the concept of, a “shareholder”.

Continue reading “Supreme Court in Madhur Housing and Development Co. on 05-10-2017 has held that loan/advance by closely held company to another company in which shareholder of closely held company having more than 10% voting power also had substantial interest in the borrowing company, although is taxable as deemed dividend income but the income is taxable in the hands of shareholder and not the borrowing company”

October 12, 2017February 27, 2018

Amalgamation taking place retrospectively before transfer of assets to amalgamated company by amalgamating company, No capital gains u/s 50 arise in hands of amalgamating co.

Para 6“…………..though the transfer of block of assets by the erstwhile entity Makino Asia Pte Limited had resulted STCG in the hand of the said entity but it exists only so long there was no merger/amalgamation. Once the merger / amalgamation was effected from 1.4.2002 (vide High Court order dated 19-12-2003)ail the transactions thereafter would be treated as transactions of the new entity post amalgamation. Thus when there is no extinguishment of block of assets of plant and machinery in the hand of the assessee then the transfer of assets in question after 1.4.2002 would not result in deemed capital gain under Section 50 of IT Act. “

Hence with drawl of income offered for STCG pre amalgamation through revised return was held valid by ITAT Banglore Bench in Makino India (P.) Ltd. [2017] 86 taxmann.com 139 (Bangalore – Trib.)

October 2, 2017

Whether in an amalgamation, the companies shall be treated as separate entities for the period starting from effective date and ending on the date of order of the Court

Yes, for the purposes of this Act, the two or more companies amalgamated or merged in pursuance of an order of Court or of Tribunal or otherwise, shall be treated as distinct companies for the period up to the date of the said order and the registration certificates of the said companies shall be cancelled with effect from the date of the said order.

(ICAI FAQ PUBLICATIONS 06-09-2017 Liability in case of amalgamation /merger of Companies: FAQ NO. 6)

October 2, 2017

In case of an amalgamation, supplies effected for the period from effective date till the date of order of the Court between the companies inter-se is liable to tax

Yes. In terms of Section 87(1) of the CGST Act, 2017, the supplies between the
companies inter-se for the period starting from effective date and ending with the date of order of the Court is liable to tax and supply and receipt shall be included in the turnover of supply or receipt of the respective Companies.

(ICAI FAQ PUBLICATIONS 06-09-2017 Liability in case of amalgamation /merger of Companies : FAQ NO. 5)