High Court Of Gujarat
Khurana Engineering Ltd. vs. DCIT (OSD) – I
Assessment Year : 2010-11
Section : 143
Akil Kureshi And Ms. Sonia Gokani, JJ.
Special Civil Application No. 605 Of 2013
January 28, 2013
ORDER
1. Rule. Learned counsel Mrs. Bhatt appearing for the respondent on caveat waived service of rule. Considering the short question which is otherwise also covered by the decision of the Supreme Court, we took up the petition for hearing forthwith.
2. Brief facts are that the petitioner has challenged notice dated 20th June 2012 issued by the respondent under section 142(1) of the Income Tax Act, 1961, calling upon one M.S. Khurana Infrastructure and Toll Road Pvt. Ltd. (a company registered under the Companies Act and hereinafter to be called as ‘the transferor company’) to furnish certain details for the assessment year 2010-11. The petitioner is also a company registered under the Companies Act, which shall be hereinafter to be referred to as ‘the transferee company’ Under a scheme of amalgamation, copy of which is produced at Annexure G to the petition, entered into between the petitioner and the transferor company, it was resolved to merge the transferor company into the transferee company. As per definition clause 1(ii) of the Scheme, ‘appointed date’ is defined to mean 1st April 2009 or such other date as may be approved by the High Court of Gujarat. Definition clause 1(iii) defines the term ‘effective date’ as to mean the day on which the order passed by the High Court of Gujarat sanctioning the proposed scheme after obtaining other relevant approval is filed with the Registrar of Companies.
3. In clause 6 of the scheme of amalgamation, it was provided as under:
“6. Operative date of the scheme.
The scheme, although operative from the appointed date, shall become effective from the effective date.”
Clause 9 of the Scheme pertained to the conduct of business by transferor company till effective date, relevant portion of which reads as under:
“With effect from the Appointed Date and upto the Effective Date, the Transferor company:
9.1 shall carry on and be deemed to carry on all its business and activities and stand possessed of its properties and assets for and on account of and in trust for the Transferee Company and all the incomes or profits accruing to the Transferor Company or expenditure or losses arising or incurred by it shall, for all purposes, be treated as the incomes or profits or expenditure or losses of the Transferee Company as the case may be.”
4. Such amalgamation scheme was presented before the Gujarat High Court for its sanction. The High Court by the order dated 18th March 2011 passed in Company Petition No.161 of 2010 sanctioned the scheme as presented to it. Significantly in such order, the Court did not make any deviation in the appointed date as defined in the scheme itself. Thus, by virtue of the scheme being sanctioned by the High Court, by order dated 18th March 2011, the transferor company merged in the transferee company, however, with effect from the appointed date, namely, 1.4.2009.
5. It is the case of the petitioner that by virtue of such amalgamation, now since the transferor company no longer survives from 1.4.09, question of assessing such company for the purpose of income tax would not survive. It is on this ground that the notice issued by the respondent calling upon the transferor company to provide the details with respect to the assessment year 2010-11 is challenged in this petition.
6. Having heard the learned counsel for the parties, it emerges from the record that the transferor company had merged in transferee company with effect from 1.4.09. The High Court did not provide for any modification in the appointed date as envisaged in the merger scheme itself. In that view of the matter, as held by the Supreme Court in the case of Marshall Sons & Co. (India) Ltd. v. ITO [1997] 223 ITR 809/[1996] 89 Taxman 619, the effective date for amalgamation would be the date as envisaged under the scheme. The Supreme Court in the said decision observed as under:
“14. Every scheme of amalgamation has to necessarily provide a date with effect from which the amalgamation/transfer shall take place. The scheme concerned herein does so provide viz. January 1, 1982. It is true that while sanctioning the scheme it is open to the Court to modify the said date and prescribe such date of amalgamation/transfer as it thinks appropriate in this facts and circumstances of the case. If the Court so specifies a date, there is little doubt that such date would be the date of amalgamation/date of transfer. But where the Court does not prescribe any specific date but merely sanctions the scheme presented to it – as has happened in this case – it should follow that the date of amalgamation/date of transfer is the date specified in the scheme as “the transfer date”. It cannot be otherwise. It must be remembered that before applying to the Court under Section 391(1) a scheme has to be framed and such scheme has to contain a date of amalgamation/transfer. The proceedings before the Court may take sometime; indeed, they are bound to take some time because several steps provided by Sections 391 to 394-A and the relevant Rules have to be followed and complied with. During the period the proceedings are pending before the Court, both the amalgamating units, i.e., the Transferor Company and the Transferee Company may carry on business, as has happened in this case but normally provision is made for this aspect also in the scheme of amalgamation. In the scheme before us, clause 6(b) does expressly provide that with effect from the transfer date, the Transferor Company (Subsidiary Company) shall be deemed to have carried on the business for and on behalf of the Transferee Company (Holding Company) with all attendant consequences. It is equally relevant to notice that the Courts have not only sanctioned the scheme in this case but have also not specified any other date as the date of transfer/amalgamation. In such a situation, it would not be reasonable to say that the scheme of amalgamation takes effect on and from the date of the order sanctioning the scheme. We are, therefore, of the opinion that the notices issued by the Income-tax Officer (impugned in the writ petition) were not warranted in law. The business carried on by the Transferor Company (Subsidiary Company) should be deemed to have been carried on for and on behalf of the Transferee Company. This is the necessary and the logical consequence of the Court sanctioning the scheme of amalgamation as presented to it. The order of the Court, sanctioning the scheme, the filing of the certified copies of the orders of the Court before the Registrar of Companies, the allotment of shares etc. may have all taken place subsequent to the date of amalgamation/transfer, yet the date of amalgamation in the circumstances of this case would be January 1, 1982. This is also the ratio of the decision of the Privy Council in Raghubar Dayal v. Bank of Upper India Ltd. AIR 1919 PC 9.
Counsel for the Revenue contended that if the aforesaid view is adopted then several complications will ensue in case the Court refuses to sanction the scheme of amalgamation. We do not see any basis for this apprehension. Firstly, an assessment can always be made and is supposed to be made on the Transferee Company taking into account the income of both the Transferor and Transferee Company. Secondly, and probably the more advisable course from the point of view of the Revenue would be to make one assessment on the Transferee Company taking into account the income of both of Transferor or Transferee Companies and also to make separate protective assessments on both the Transferor and Transferee Companies separately. There may be a certain practical difficulty in adopting this course inasmuch as separate balance-sheets may not be available for the Transferor and Transferee Companies. But that may not be an insuperable problem inasmuch as assessment can always be made, on the available material, even without a balance-sheet. In certain cases, best-judgment assessment may also be resorted to. Be that as it may, we need not pursue this line of enquiry because it does not arise for consideration in these cases directly.”
In view of the above concluded position of law, we have no hesitation in holding that the transferor company would no longer be amenable to assessment proceedings for the assessment year 2010-11. The notice for producing documents for such assessment would, therefore, be invalid. Reference of the Revenue to clause 6 of the scheme is wholly misplaced. Clause 6 refers to two dates, namely, appointed date and the effective date. It only clarifies that the scheme shall be operative from the appointed date, but shall become effective from the effective date. This, in our opinion, does not alter the position of law. The term ‘appointed date’ as defined in clause 1(ii) itself envisages 1st April 2009 as the appointed date unless, of course, any other date as may be approved by the High Court. In the present case, the High Court made no change in this respect. The appointed date for the said scheme, therefore, must be held to be 1.4.2009.
In the result, the petition is allowed. The impugned notice Annexure A is quashed. Rule is made absolute accordingly.
[Citation : 364 ITR 600]
