The merger of subsidiary with the parent means that the assets, liabilities, and reserves of the subsidiary company which appeared in the consolidated financial statements of the parent before the merger would now be part of separate financial statements of the parent. Further, the balance of the retained earnings appearing in the financial statements of the transferor is aggregated with the corresponding balance appearing in the financial statements of the transferee. Alternatively, it is transferred to the General Reserve, if any.

In this story, we have discussed the treatment of whether the parent company can recognize goodwill appearing in the pre-merger consolidated goodwill appearing in the pre-merger consolidated financial statements in the post-merger financial statements of the Company.

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Notification no. 01/12024-25, dated 24-06-2024

The Central Board of Direct Taxes (CBDT) has specified the e-filing of 6 forms under rule 131 of the Income Tax Rules, 1962. These include forms for making applications under section 35AD, pre-filing meetings, Opting for Safe Harbour in respect of Specified Domestic Transactions, etc., namely, Form 3CN, 3CS, 3CEC, 3CEFB, 59, and 59A.

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Notification No.1/4/2019-NS, dated 28-06-2024

The Ministry of Finance has announced the small savings scheme rates for the second quarter of FY 2024-25. The interest rates for different small savings schemes during the second quarter of the Financial Year 2024-25, effective from July 1, 2024, to September 30, 2024, will remain unchanged from those set in the first quarter of FY 2024-25.

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Case Details: Income Tax Officer vs. The Theosophical Society - [2024] 163 taxmann.com 770 (Chennai-Trib.)

Judiciary and Counsel Details

• Mahavir Singh, Vice President & S.R. Raghunathan, Accountant Member
• N. Sanjay Gandhi, JCIT for the Appellant.
• Ms G. Vardini Karthik, Adv. for the Respondent.

Facts of the Case

The assessee is a society notified under section 10(23C)(iv) of the Income Tax Act, 1961. It is also registered under section 12A(a) of the Act. The Assessee filed a return of income admitting nil income after claiming an exemption under section 11 of the Act.

The Assessing Officer (AO) discovered that two individuals who had donated to the society had stayed in the society’s guest house, paying only nominal maintenance charges. He applied section 13(1)(c)(ii), arguing that the guest house had been rented to interested persons at an insufficient rate. As a result, the exemption under section 11 was revoked.

On appeal, the CIT(A) granted relief to assessee. Aggrieved Revenue filed the instant appeal before the Chennai Tribunal.

ITAT Held

The ITAT observed that it is an admitted fact that society has been registered under section 10(23C)(iv) along with the registration under section 12A(a). As per CBDT Circular No. 557, dated 19-3-1990, provisions of sections 11 and 13 relating to ‘interested person’ will not be applicable once the society is notified under section 10(23C).

Since the assessee was a charitable society duly registered under section 10(23C)(iv) along with section 12A(a), conditions prescribed in section 13 were not applicable, and the Assessing Officer could not make disallowance under section 11. Thus, there was no infirmity in the order of the CIT(A) in allowing the assessee’s appeal.

List of Cases Referred to

• ITO v. Virendra Singh Memorial Shiksha Samiti [2010] 35 SOT 1 (Lucknow) (para 7).

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Case Details: Padmavathi Electrometals (P.) Ltd. v. Assistant Commissioner of Commercial Taxes - [2024] 163 taxmann.com 744 (Karnataka)

Judiciary and Counsel Details

• S Sunil Dutt Yadav, J.
• Smt. Veena J. Kamath, Adv. for the Petitioner.
• Hema Kumar, AGA for the Respondent.

Facts of the Case

The petitioner was a registered dealer. The department had issued notice in Form GST ASMT-10 and also started proceedings for cancellation of registration. The department also blocked credit ledger in exercise of power under Rule 86A of CGST Rules, 2017.

The petitioner filed writ petition against the notice and contended that the department had blocked credit ledger and the said order had come into effect. It was also contended that the blocking of ITC was only for a period of one year but the department had still blocked credit ledger.

High Court Held

The Honorable High Court noted that as per Rule 86A(3) of the CGST Rules, 2017, the blocking of ITC is only for a period of one year. However, in the present case, the period of one year had already lapsed. Therefore, it was held that the blocking of ITC was to be set aside and consequently, the blocking of credit ledger was also to be set aside.

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Case Details: Cultgear (P.) Ltd. v. Commercial Tax Officer (Enf) - [2024] 162 taxmann.com 490 (Karnataka)

Judiciary and Counsel Details

• • S.R. Krishna Kumar, J.
  • Smt. Disha & P.B. Harish Advs. for the Petitioner.
  • Hema Kumar, AGA for the Respondent.

Facts of the Case

The petitioner was engaged in the business of manufacturing and trading of sports goods. The department issued SCN for demand of tax along with interest and penalty. It filed reply to SCN but the demand was confirmed along with interest and penalty. It filed appeal but the same was rejected. It filed writ petition against the order.

High Court Held

The Honorable High Court noted that the petitioner had challenged the order on the ground that it was not able to prefer appeal against the impugned order since the Appellate Tribunal had not been constituted so far. The Court noted that as and when the Appellate Tribunal would be constituted, the petitioner would challenge the impugned order by filing a statutory appeal.

The Court further noted that the department had also submitted that no prejudice would be caused to the petitioner since the department shall refund a sum of Rs. 11,21,840/- back to the petitioner as directed by this Court. Therefore, the Court directed the department to refund the amount and the petitioner shall furnish a fresh bank guarantee within a period of one week from the date of refund.

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Case Details: Helbon Engineers (P.) Ltd. v. Ferral Anant Machinery Manufacturers (P.) Ltd. - [2024] 163 taxmann.com 775 (HC-Bombay)

Judiciary and Counsel Details

• • Abhay Ahuja, J.
  • Sarosh Bharucha, Hrushi Narvekar, K.V Ramdasan & Arnav Rane, Advs. for the Appellant.
  • Ranjeev Carvalho & Chetan Shelake, Advs. for the Respondent.

Facts of the Case

In the instant case, the Maharashtra Industrial Development Corporation (MIDC) leased a property in favour of the respondent company. A petition for winding up against the respondent was filed before the instant Court, and an Official Liquidator (OL) was appointed.

The applicant company purchased the said property and leasehold rights from the respondent. The applicant issued a public notice inviting objections to the transfer of the said property, but no objections were received.

The Respondent applied to MIDC to transfer the said property in favour of the applicant, which was granted. A sale deed was duly registered in favour of the applicant.

Meanwhile, OL submitted a liquidation report for the respondent, and the order to wind up the respondent was passed by the instant Court. The OL visited the said property and informed the applicant that it would take possession of the said property in view of the winding-up order.

The applicant filed a civil suit before the Civil Judge seeking a declaration that the sale agreement was valid, subsisting, and binding. An interim order was passed restraining OL from dispossessing the applicant of the said property.

The OL filed an application to reject the suit, which was accepted. The applicant then filed an instant interim application seeking various reliefs to declare that the sale agreement was valid and to ratify the sale.

It was noted that the applicant conducted its due diligence before entering into the sale agreement; it paid the entire consideration to the respondent. The sale agreement was duly registered after obtaining permission from MIDC and confirmed no dues from the creditor bank. Further, there were no creditors, claimants, or workmen claiming against the respondent.

High Court Held

The High Court noted that the transaction evidenced by the sale agreement was not only bona fide but also fair, just and reasonable and deserved to be protected. Thus, such a transaction was to be ratified, and section 536(2) of the 1956 act did not affect the sale agreement.

Therefore, the instant application was to be allowed, and an order of permanent injunction was to be passed restraining OL from disturbing the applicant’s possession of the said property and taking any action against the applicant pursuant to the winding-up order.

The post HC Protects Applicant’s Property Post Winding-Up as Sale Agreement with MIDC Approval Was Deemed Fair and Bona Fide appeared first on Taxmann Blog.

CIRCULAR No. IBBI/LIQ/74/2024, Dated: 28.06.2024

A corporate person (CP) can start voluntary liquidation u/s 59 of the IBC and IBBI regulations. The liquidator manages claims, sells assets, and distributes proceeds per section 53, submitting a final report and dissolution application to the AA. IBBI has developed e-forms for efficient reporting, enhancing efficiency, reducing errors, and ensuring accurate record-keeping. IPs must file forms online using a unique IBBI login, with strict deadlines.

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CIRCULAR No. IBBI/LIQ/73/2024; Dated: 28-06-2024

The Insolvency Professional (IP), acting as a liquidator, must comply with legal requirements and report to the Adjudicating Authority and IBBI. To streamline this process, the IBBI has developed e-forms LIQ 1, LIQ 2, LIQ and LIQ 4 to capture liquidation details and enhance efficiency and accuracy. These forms cover various stages from commencement to dissolution, reducing errors and delays. They are available on the IBBI website, and IPs must submit them online with a digital signature.

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Circular No. SEBI/HO/MIRSD/MIRSD-PoD1/P/CIR/2024/91; Dated: 28.06.2024

Earlier, SEBI provided a “Basic Services Demat Account” (BSDA) facility for eligible individuals. Individuals can opt for BSDA subject to a condition that the value of securities held in demat account must not exceed Rs 2 lakh. SEBI has now raised this limit to Rs 10 lakh. BSDA is a special category of demat account that can be opened/held only by individual investors. Only one account can be opened under BSDA where the investor is a first holder and has no other demat account with him/her.

Click Here To Read The Full Circular

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