Payment of Tax Liability by Transferee of Transferor in an agreement of amalgamation is of capital nature [Bombay HC]

FCS Deepak Pratap Singh | Last updated: 22 July 2024

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The Bombay High Court has ruled that when a transferee company pays the tax liability of a transferor company as part of an amalgamation agreement, this payment is considered capital expenditure. Therefore, it cannot be deducted as a revenue expense when calculating the transferee's business income. The court clarified that such payments are part of the overall consideration for acquiring the business.

BOMBAY HIGH COURT COMMISSIONER OF INCOME-TAX VS PLASMAC MACHINE MFG. CO. LTD. DATED: 4th FEBRUARY, 1993 EQUIVALENT CITATIONS: [1993]201ITR650(BOM) HELD THAT In the instant case, evidently, the tax liability discharged by the assessee was in pursuance of the agreement with the transferor for

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1 Year PLAN

1999

(Excl. of GST ₹359)

BEST VALUE

2 Years PLAN

3499

(Excl. of GST ₹629)

3 Months PLAN

999

(Excl. of GST ₹179)

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About the Author

FCS Deepak Pratap Singh

Associate Vice President - Secretarial & Compliance (SBI General Insurance Co. Ltd.)

Dear Friends, MyselfFCSDeepak P. Singh ( B.Sc.. LLB, FCS. FIII, CIAFP, CRMP, ID) , A Fellow Member of ICSI, Law Graduate ,Fellow Member of Insurance Institute of India, Certified Independent Director ,Certified Insurance Anti Fraud Professional , Certified Risk Governance Professional ( ICSI-III) and cleared Limited I ... Read more

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