Law:

Section:

(a) Income Tax Ordinance (XLIX of 2001)--- ----Ss. 75(1) (a), 2(1A), 22, 57A, 177, 120 & 122(9)---Merger/ amalgamation of Bank---Disposal and acquisition of assets---Surplus on revaluation of assets---Taxation of---Taxpayer contended that in case of merger/amalgamation, no gain/(loss) arose to the amalgamating companies and the action of Taxation Officer was not valid in law---First Appellate Authority deleted the addition on account of tax gain on revaluation of the building---Validity---When the merger/amalgamation took place there was no specific provision available in the scheme of Income Tax Ordinance, 2001 relating to tax issues and implications connected with merger of two or more companies except S.2(1A) that defines the meaning of the term "amalgamation" and S.57A that speaks about the setting off of business losses consequent to amalgamation---Merger of two or more companies was essentially a process of corporate reconstruction whereby assets of the merging companies were either clubbed or brought together in the surviving or the new company---Proprietary rights of assets remain intact---No financial transaction could be said to have taken place between the merging companies---In the scheme of merger arrangement no sale took place disposition, exchange or relinquishment or extinguishment of any right on the part of the amalgamating companies that gave rise to any income or gain resulting in a taxable event---Repositioning of the amalgamating companies through a due process of law resulting in the emergence of an amalgamated company only gave rise to one thing i.e. the shareholders of the merging companies eventually became the shareholders of the amalgamated company---Ultimate interest and ownership of shareholders of a merging company remained unchanged based on appropriate share swap ratio forming part of the scheme of arrangement under which the merger was ultimately sanctioned by the State Bank of Pakistan or the Court of law as the case may be---Shareholder's intrinsic right/interest remained the same as was prior to the merger---Net assets of the merging companies remained unaltered as also the proprietary interest of the shareholders in the…

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