Business Restructuring Amongst Foreign Group Entities To Eliminate Duplicate Corporate Procedure Is 'International Transaction' U/s 92B: Mumbai ITAT
9 months, 1 week ago

Business Restructuring Amongst Foreign Group Entities To Eliminate Duplicate Corporate Procedure Is 'International Transaction' U/s 92B: Mumbai ITAT

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The Mumbai ITAT ruled that as per Explanation to section 92B of the Income tax Act, the transaction of business restructuring shall be considered an international transaction, irrespective of the fact whether it has a bearing on the profit, income, losses, or assets of such enterprises. The ITAT also upheld the disallowance of interest on Compulsory Convertible Debentures and treatment of cash payment by assessee to its parent company, pursuant to scheme of amalgamation, as deemed loan. Accordingly, assessee's holding company became DIHBV, and assessee paid purchase consideration for the merger to DIHBV in the form of equity shares, CCDs and cash. The TPO took the view that assessee's valuation report had no scientific basis, and that fresh equity shares issued to DIHBV represent fair value of assessee's shares post-merger but consideration paid in the form of CCDs and cash is excessive payment and not at arm's length. The Bench further noted that “merely because the scheme of amalgamation appears to be fair and reasonable and not violative of any provision of law or contrary to public policy, the same doesn't mean that the consideration paid pursuant to the said scheme is also at arm's length price and if the TPO has proceeded to compute the arm's length price as per the provisions of Chapter-X of the Act the same cannot be construed to be sitting over the judgment of the Court/Tribunal in approving the scheme of amalgamation”.

Scheme Bench Merger Paid Transaction Itat Assessee Consideration Tpo Foreign Group Business Restructuring Deemed Loan Dihbv  mumbai  dimexon  paid  entities  transaction  eliminate  foreign  group  restructuring  scheme  procedure  international  consideration  dihbv  itat  ccds  assessee  cash  merger

History of this topic

Kolkata ITAT Deletes Addition Made Based On Third-Party Statement Who Was Not Allowed To Be Cross- Examined By Assessee
11 months, 1 week ago

Kolkata ITAT Deletes Addition Made Based On Third-Party Statement Who Was Not Allowed To Be Cross- Examined By Assessee

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Finding that assessee has discharged the burden of proving identity, creditworthiness, and genuineness of the creditors to the loan transaction, the Kolkata ITAT deleted the addition made for alleged unexplained loan under Section 68 of Income Tax Act, 1961 based on the statement of third-party in a post-search assessment whose cross-examination was never allowed to assessee. The Member of the …

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