No Addition can be made by Way of Disallowance of Capital Loss on Account of no Change in Real Ownership of Company: ITAT [Read Order]

The New Delhi bench of Income Tax Appellate Tribunal (ITAT) held that no addition could be made by the way of disallowance of capital loss on account of no change in real ownership of the company of assessee.

BSBK Engineers Pvt Ltd, the respondent assessee was engaged in the business of generation of electricity through wind turbine generators. The assessee company was primarily engaged in the business of providing services relating to designing and manufacturing. The assessee entered into a Scheme of Arrangement under sections of  391 to 394 of the Companies Act, 1956.

The revenue appealed against the order passed by the Commissioner of Income Tax (Appeals) for deleting the addition made by the assessing officer by the way of disallowance of the capital loss.

Rohit Jain and Tejasvi Jain, the counsels for the assessee contended that the entire findings of the assessing officer are the result of erroneous understanding of the order of the High Court of Allahabad based on the implication of arrangement of scheme under section 391 of the Companies Act 2013.

It was also submitted that the assessee explained the transaction in light of agreement between the assessee and the party involved and assets and liabilities are transferred as per the arrangement approved.

Kanv Bali, the counsel for the revenue strongly opposed the contentions made by the assessee and supported the addition made by the assessing officer by the way of disallowance of capital loss on account of no real change in the ownership had taken place in any commercial sense and the real ownership remained with the assessee company.

The two member bench comprising of N.K. Billaiya (Accountant) and Shri Challa Nagendra Prasad (Judicial) held that the assessing Officer had proceeded on a wrong assumption of facts, his entire findings became erroneous and the commissioner had the correct understanding of  implication of Scheme of Arrangement and effective date relevant for the transaction for the year under consideration.

The appeal filed by the revenue was dismissed.

To Read the full text of the Order CLICK HERE

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