Amalgamation expenses not to be allowed as business expenses




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Amalgamation expenses not to be allowed as business expenses

 

ITAT, Ahemdabad in the case of Ambalal Sarabhai Enterprises Ltd vs ACIT [ ITA No 1772/Ahd/2015; Date of Order: 3/12/2024 has held that Amalgamation expenses not to be allowed as business expenses.

The Ahd Tribunal ruled that amalgamation expenses could not be treated as business expenses under Sec 37(1) of the Act upholding the disallowance of interest on bonds issued during the amalgamation of the assessee company.

Let us have a Short Overview of the case:

Ambalal Sarabhai Enterprises Ltd was involved in manufacturing drugs and pharmaceuticals. It also offered marketing and consultancy services in areas like fine chemicals, industrial glass containers, packing materials, and electronic instruments. The company had 15 divisions, including service units that supported other units within the corporation.

The assessments for AYs 2002-03 to 2007-08 were made under sec 143(3) of the Act disallowing interest claimed on bonds issued to the shareholders of Standard Pharmaceuticals Ltd. (SPL) during the amalgamation, across several assessment years.

The AO stated that amalgamation expenses could not be treated as business expenses under Sec 37(1) of the Act. The AO noted that similar claims in previous years had been disallowed, and the CIT(A) had upheld them.

As a result, interest claim on the bonds was disallowed. The CIT(A) upheld the disallowance of interest, citing previous rulings in the assessee’s case.

The Tribunal noted that the assessee agreed that the Co-ordinate Bench in ITA No. 1771/Ahd/2015 for AY 2001-02 had ruled against the assessee. The Tribunal noted that similar disallowance for interest on bonds issued during amalgamation had been upheld. Since there were no new facts or arguments, the tribunal upheld the disallowances made by the AO.

The Copy of the order is as under:

1733218074-mgfG5h-1-TO 




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