Section 47(vi) Amalgamation is Tax-Neutral, Indexation Runs from Year of Use, Not Occupancy Certificate: ITAT Bangalore in Boyance Infrastructure

Case Details

Case Reference	ITA 2097 & 2098/Bang/2025, ITAT Bangalore, Bench A
Appellant	DCIT, Central Circle-2(2), Bengaluru (Department)
Respondent	Boyance Infrastructure Private Ltd., Bengaluru
Date of Order	22-May-26
Outcome	Both departmental appeals DISMISSED

Background of Assessee

Boyance Infrastructure Private Ltd is a Bengaluru-based company incorporated on 29 September 2008. Its business activities include holding and dealing in immovable properties and investments in funds. It got possession of Township property through the amalgamation of M/s Domus Infra Pvt. Ltd. effective from the appointed date of 1 April 2010, under a Scheme of Amalgamation approved by the Hon’ble High Court of Karnataka.

It also holds investments in SEBI registered AIFS (Alternate investment Funds) & BNF (Bharat Nirman Fund)

ITA No 2097/B/2025

Background and Facts

DOMUS Infra Pvt. Ltd. had constructed a Township property during FY 2008-09 & let out this Township to GMR and started earning rental income from 15 November 2008 onwards This rental income was duly offered to tax in DOMUS’s hands in its return of income for AY 2009-10.

DOMUS was amalgamated into the assessee pursuant to a Scheme of Amalgamation approved by Karnataka HC vide order date 26-09-2012 expressively confirmed the appointed date as 01-04-2010.

The assessee sold the Township on 23 June 2015 for a consideration of Rs. 75.50 crores. For AY 16-17 assessee filled his ITR on 15-10-2016 showing a loss of Rs. 87,53,78,625 which was assessed us 143(3) r.w.s. 147 of the Act on 30.3.2022 determining total income of the assessee at NIL which includes a long-term capital loss (LTCL) of Rs. 31,94,36,733 on the sale of the Township and a short-term capital loss (STCL) of Rs. 7,72,05,000 on the sale of furniture.

For the purpose of computing the capital gains, the Cost Inflation Index (CII) was applied from FY 2008-09: a year in which property’s rental income commenced.

AO’s Submission

On Amalgamation: AO held that the amalgamation of DOMUS into the assessee was not a tax-neutral transaction. He treated 26-09-2012 (the date of the High Court’s order) as the date on which the assessee became owner of the Township. Hence assessee’s holding period becomes less than three years which results into loss of indexation benefits.

On indexation year: AO contended that since the Occupancy Certificate for the Township was issued by the Gram Panchayat on 30-07-2010 (FY 2010-11). Hence the CII is to be applied from FY 2010-11 at the earliest and not from FY 2008-09 as claimed. He also contended that Township was constructed over the period FY 2008-09 to FY 2010-11 and was not complete until the Occupancy Certificate was issued.

Based on these findings, the AO recharacterized the transaction as generating a short-term capital gain of Rs. 23,08,41,003 and allowed a short-term capital loss of Rs. 3,23,00,000 on furniture, resulting in a net addition of Rs. 19,85,16,766.

Assessee’s Submission

Before CIT(A) assessee made following submissions

On the amalgamation issue: The assessee contented that the High Court’s order expressly confirmed the appointed date as 1-04-2010 & not 26-09-2012. The AO had incorrectly read the HC order, confusing the date of the order with the appointed date.

Under Section 47(vi) of the Income Tax Act, 1961, any transfer of a capital asset by the amalgamating company to the amalgamated Indian company in a scheme of amalgamation is specifically excluded from the definition of transfer

Hence, the transaction is therefore wholly tax-neutral and the holding period must be taken from the date of acquisition by DOMUS i.e., from FY 2008-09.

On the indexation question: Assessee relied on its ITR for AY 09-10 showing the rental income from the township. He also submitted that he had not claimed depreciation on the Township assets in its returns confirming that the assets were treated as investment property in productive use, not as work-in-progress. Hence Occupancy certificate date won’t override the factual date of First use.

ITAT Ruling

The ITAT dismissed the departmental appeal and upheld the order of the CIT(A)

On the amalgamation question: Tribunal confirmed that the transfer from DOMUS to Boyance was covered by Section 47(vi) and was therefore tax-neutral. The asset does not get a fresh cost or a fresh acquisition date merely because the amalgamation was affected.

The period of holding is required to be taken from FY 2008-09, the year in which DOMUS originally brought the asset into existence and put it to use.

On the indexation issue: Tribunal held that since rental income was being earned by DOMUS from the property from FY 2008-09, it was confirmed that the property was in existence on that date. The AO’s reliance on the Occupancy Certificate date was rejected holding the date of such a certificate issued by a Gram Panchayat cannot override the factual evidence of the asset being in productive use.

The Tribunal expressly confirmed that the CIT(A) was correct in directing the allowance of indexation benefit from FY 2008-09 and the recognition of the LTCL.