Marshall
Sons & Co. India Ltd. Vs. Income Tax Officer [1996]
INSC 1507 (27 November
1996)
B.P.Jeevan
Reddy, Suhas C.Sen B.P. Jeevan Reddy, J.
ACT:
HEAD NOTE:
These
appeals are preferred by Marshall Sons and Company [India] Limited [hereinafter referred to
as the "Holding Company"] as successors to Marshall Sons and Company
[Manufacturing] Limited [hereinafter referred to as the "Subsidiary
Company"] against the judgment and order of the Madras High Court
dismissing the writ petitions filed by them. The matter arises under the Income
Tax Act.
The
Holding Company had its registered office at 33-A, Chowranghee Road, Calcutta while the Subsidiary Company had its registered office at Madras. For the purposes of assessment
under the Income Tax Act, while the accounting year of the Holding Company was
the year ending on 30th June, the accounting year of the Subsidiary Company was
the calendar year. On 1st
December, 1982, two
letters were addressed by the Subsidiary Company to the Income Tax Officer
stating that the company is desirous of effecting a change in the accounting
year. They stated that they would wish to close their accounts on June 30, 1983 for the eighteen months' period [January 1, 1982 to June 30, 1983] instead of closing the accounts on December 31, 1982. It was also stated that since the
accounting year of the Holding Company ends on June 30, they too would like to
follow the same practice. In response to said letters, the Income Tax Officer
asked for certain particulars which were supplied.
On February 3, 1983, the Income Tax Officer permitted
the Subsidiary Company to change the accounting year from December 12, 1982 to June 30, 1983 subject to the conditions mentioned therein, viz.:
"As
a consequence to the change, the income of the period of 18 months from 1.1.82
to 30.6.83 will be assessed for the asstt. year 1984-85. Any relief that may be
withdrawn in the future legislation with effect from asstt. year 1984- 85 will
be made applicable to the entire income for the asst. year 1984-85 and depreciation
will be allowed proportionately as per rules.
The asstt.
year 1983-84 which is slipped on account of the change of the previous year
will, however, be treated as one assessment year for the purposes of set off of
carried forward losses, relief u/s.80J of the Income Tax Act, 1961, if
any." In December, 1982, the Subsidiary Company passed a resolution
proposing to amalgamate with the Holding Company with effect from January 1, 1982. An application was made to the Company Court and pursuant to the orders of the
Court, a meeting of the shareholders was held on February 11, 1982 whereat a resolution was passed approving the amalgamation
of the Subsidiary Company with the Holding Company, similar resolution was
passed by the shareholders of the Holding Company on May 7, 1983. The Company Court [Madras High Court] sanctioned the scheme of amalgamation
by its order dated November
21, 1983 in C.P. No.23
of 1983. On a similar application filed before the Calcutta High Court, C.P.
No.284 of 1983, that High Court [Company court] to sanctioned the scheme of
amalgamation by its order dated January 11, 1984. In both the orders,it was
directed that certified copies of the said orders shall be delivered to the
Registrars of Companies at Madras and Calcutta within thirty days therefrom.
Accordingly, certified copies of the orders were filed before the Registrars of
Companies on January
29, 1984 at Madras and on February 24, 1984 at Calcutta. The name of the Subsidiary Company
was struck off the register of Companies, maintained by the Registrar of
Companies at Madras, on January 21, 1986.
On November 25, 1984, a notice under Section 139(2) of
the Income Tax Act was issued to the Subsidiary Company calling upon it to file
a return of its income for the Assessment Years 1984-85 [for the year ending June 30, 1983] and for 1985-86 [year ending June 30, 1984]. The Subsidiary Company replied
stating that inasmuch as the Subsidiary Company has been amalgamated with the
Holding Company under a scheme of amalgamation sanctioned by the Company Courts
of Madras and Calcutta and because the said amalgamation was with effect from
January 1, 1982, there was no question of the Subsidiary Company filing a
return for the said two assessment years. There was exchange of notices/replies
thereafter, which it is not necessary to mention at this stage Ultimately, the
Income Tax Officer issued a notice under Section 142(1) asking for compliance
with it by February 7,
1986. At that stage,
the appellant-company filed writ petitions in the Madras High Court questioning
the aforesaid notices.
In the
writ petitions filed by the appellant, the main ground urged was that inasmuch
as the amalgamation has taken effect on and from January 1, 1982, the Income
Tax Officer had no authority to call upon the Subsidiary Company to file a
return for any period subsequent thereto. It was submitted that the scheme of
amalgamation has been sanctioned by the Company Courts at Madras and Calcutta
and that, therefore, any business which may have been carried on by the
Subsidiary Company subsequent to January 1, 1982 was as an agent of the Holding
Company and not on its own account. It was submitted that the Subsidiary
Company had no income of its own - indeed no existence of its own in law on or
after January 1, 1982. In the counter-affidavit filed by the Income Tax
Officer, he submitted that the amalgamation became effective only when it was
sanctioned by the Court and after certified copies of the orders of the Courts
were filed with the Registrars of Companies. His case was that only when the
name of the Subsidiary Company was struck off the register by the Registrar of
Companies, Madras that the Subsidiary Company can be said to have ceased to
exist. The respondent also stated that, as a matter of fact, the relevant
clauses in the scheme of amalgamation themselves indicate that the scheme was
to take effect only when sanctioned by the court and only when the shares of
the Holding Company are allotted to members of the Subsidiary Company. He
submitted that this allotment of shares took place only in June, 1984. The
Income Tax Officer further submitted in his counter affidavit that the said
amalgamation was a device adopted to evade the tax legitimately due from the
Subsidiary Company. He submitted that while the Holding Company was incurring
losses, the Subsidiary Company was making substantial profits and that the
scheme of amalgamation was merely a device to avoid paying taxes on the income
earned by the Subsidiary Company.
The
idea behind the amalgamation, according to him, was to set off the accumulated
losses of the Holding Company against the profits of the Subsidiary Company. He
also raised objection with respect to the maintainability of the writ petition
on the ground inter alia that the Income Tax Act provides adequate remedies to
agitate all the contentions urged in the said writ petition.
The
High Court dismissed the writ petition with the following findings:
(1)
The date of amalgamation [January 1, 1982]
specified in the scheme of amalgamation is "totally artificial and
arbitrary". Till the beginning of December 1982, the amalgamation was not
even in the contemplation of either company. Only in December 1982, was the
resolution of the Directors passed proposing amalgamation. The shareholders
meeting took place sometime in February 1983. The scheme itself contemplates
that it is subject to and conditional upon the scheme being sanctioned by the
court under Section 391 of the Act and appropriate orders being made for
implementation of the said scheme under Section 394. The scheme also provides
that its implementation is conditional upon the shareholders holding not less
than 9/10th in value of the shares in the Subsidiary Company becoming
shareholders of the transferee company. In this view of the matter, specifying
the date of amalgamation as January 1, 1982
has no relevance or meaning. The amalgamation becomes effective only when the
Court approves the scheme of amalgamation and not at any earlier point of time.
In other words, the operative dates would be January 20, 1984 and February
24, 1984, on which
dates the Madras and Calcutta High Courts approved
the scheme. There is nothing in the orders of Courts to show that the said
orders were to be effective from January 1, 1982.
(2)
From the counter-affidavit, it appears that the Subsidiary Company was borne on
the register of companies upto January 21, 1986.
This shows that the company was in existence till that date and that it did not
cease to exist, as a fact, on January 1, 1982.
(3) In
view of the aforesaid findings, it is not necessary to go into or express any
opinion on the plea of the Income Tax Officer that the said amalgamation was
merely a device to evade the payment of taxes legitimately due on the income of
the Subsidiary Company. For the same reason, no opinion need be expressed on
the objection of the Income Tax Officer with respect to the maintainability of
the writ petition.
Sri
N.K. Poddar, learned counsel for the appellant, urged a number of grounds in
support of his attack upon the validity of the judgment under appeal. He
submitted that the view taken by the Madras High Court in United India Life
Assurance Company v. Commissioner of Income Tax [(1963) 49 I.T.R. 956], which
has been followed in the judgment under appeal does not represent the correct
view of law. He submitted that the contrary view taken by the Bombay High Court
in Commissioner of Income Tax, Pune v. Swastik Rubber Products Limited [(1983)
140 I.T.R.304) (and followed in later decisions of that Court) represents the
correct view.
In
other words, the contention is that inasmuch as both the Madras and Calcutta High Courts [Company
Courts] had approved the scheme of amalgamation as it stood, it means that the
scheme of amalgamation is effective from January 1, 1982. No doubt, the scheme states that
it is conditional upon being sanctioned by the Court but that only means that
whenever it is sanctioned by the Court, the scheme as approved takes effect.
The scheme specifically states that the scheme of amalgamation is effective
from January 1, 1982. Learned counsel submitted that
according to the well- accepted practice prevailing in this country, all
schemes of amalgamation specify a particular date of amalgamation and unless
the court specifies otherwise, the date provided in the scheme of amalgamation
is taken as the actual date of amalgamation. Counsel submitted that subsequent
to January 1, 1982, the Subsidiary Company may have carried on business
awaiting the orders of the Court but it could not do otherwise and that the
business so carried on by it was as an agent of and for and on behalf of the
Holding Company and not on its own account. Learned counsel also submitted that
no balance-sheet was drawn for any period subsequent to January 1, 1982 for the Subsidiary Company. No
Annual General Body Meeting of shareholders was held of the Subsidiary Company
after the said date and that, to all intents and purposes, the Subsidiary
Company ceased to exist as an independent entity on and from January 1, 1982.
Counsel
relied upon the language of Sections 391 and 394 and on certain decisions in
support of his contention. Sri Poddar raised an alternate contention too, viz.,
if for any reason, it is held that the amalgamation is not effective with
effect from February 1,
1982, it must be held to
be effective from February
11,1983/May 7, 1983
[the date on which the shareholders' meetings were held]. Both these dates are
prior to June 30, 1983 - the last day of the accounting
year [as sanctioned by the Income Tax Officer];
since
the income of the company can be said to accrue only at the end of the year
when the accounts are made up - and not from day to day - it must be held that
no income accrued to Subsidiary Company at the end of the said accounting year
[January 1, 1982 to June 30, 1983]; the income accrued only on June 30, 1983
and it accrued only to the Holding Company.
On the
other hand, Dr. R.R. Misra, learned counsel for the Revenue, supported the
reasoning and conclusion of the High Court. Learned counsel further submitted
that the scheme of amalgamation was a mere device to evade the payment of taxes
lawfully due according to law and that this is a good ground on which the
Income Tax authorities can ignore the alleged amalgamation even if for any
reason it can be held that it is effective from January 1, 1982.
Counsel
also submitted that the writ petition filed by the appellant ought to have been
dismissed summarily on the ground that it was premature and that the appellant
should have been directed to pursue the remedies provided by the Income Tax Act
according to law. The High Court, he submits, ought not to have entered into
the merits of several contentions raised by the appellant, all of which can be
more satisfactorily gone into after the assessments are made wherein all the
relevant facts could have been gathered.
Let us
first examine the position obtaining in this behalf under the Companies Act. Sub-sections
(1). (2) and (3) of Section 391 (relevant for our purpose) and Section 394
read:
"S.
391. Power to compromise or make arrangements with creditors and member.- (1)
Where a compromise or arrangement is proposed-- (a) between a company and its
creditors or any class of them; or (b) between a company and its members or any
class of them;
the
Court may, on the application of the company or of any creditor or member of
the company, or in the case of a company which s being wound-up, of the
liquidator, order a meeting of the creditors or class of creditors, or of the
members or class of members, as the case may be, to be called, held and
conducted in such manner as the Court directs.
(2) If
a majority in number representing three-fourths in value of the creditors, or
class of creditors, or members, or class of members, as the case may be,
present and voting either in person or, where proxies are allowed under the
rules made under section 643, by proxy, at the meeting, agree to any compromise
or arrangement, the compromise or arrangement shall, if sanctioned by the
Court, be binding on all the creditors, all the creditors of the class, all the
members, or all the members of the class, as the case may be, and also on the
company, or, in the case of a company which is being wound-up, on the
liquidator and constributories of the company:
Provided
that no order sanctioning any compromise or arrangement shall be made by the
Court unless the Court is satisfied that the company or any other person by
whom an application has been made under sub-section (1) has disclosed to the
Court, by affidavit or otherwise, all material facts relating to the company,
such as the latest financial position of the company, the latest auditor's
report on the accounts of the company, the pendency of any investigation
proceedings in relation to the company under sections 235 to 251, and the like.
(3) An
order made by the Court under sub-section (3) shall have no effect until a
certified copy of the order has been filed with the Registrar.
S.394.
Provisions for facilitating reconstruction and amalgamation of companies.--(1)
Where an application is made to the Court under section 391 for the sanctioning
of a compromise or arrangement proposed between a company and any such persons
as are mentioned in that section, and it is shown to the Court-- (a) that the
compromise or arrangement has been proposed for the purposes of, or in
connection with, a scheme for the reconstruction of any company or companies or
the amalgamation of any two or more companies; and (b) that under the scheme
the whole or any part of the undertaking, property or liabilities of any
company concerned in the scheme (in this section referred to as a `transferor
company') is to be transferred to another company (in this section referred to
as `the transferee company');
the
Court may, either by the order sanctioning the compromise or arrangement or by
a subsequent order, make provision for all or any of the following matters:- (i)
the transfer to the transferee company of the whole or any part of the
undertaking, property or liabilities of any transferor company;
(iii)
the allotment or appropriation by the transferee company of any shares,
debentures, policies, or other like interests in that company which, under the
compromise or arrangement, are to be allotted or appropriated by that company
to or for any person;
(iii) the
continuation by or against the transferee company of any legal proceedings
pending by or against any transferor company:
(iv) the
dissolution, without winding-up of any transferor company;
(v)
the provision to be made for any persons who, within such time and in such
manner as the Court directs, dissent from the compromise or arrangement; and
(vi) such incidental, consequential and supplemental matters as are necessary
to secure that the reconstruction or amalgamation shall be fully and
effectively carried out:
Provided
that no compromise or arrangement proposed for the purposes of, or in
connection with, a scheme or the amalgamation of a company, which is being
wound-up, with any other company or companies, shall e sanctioned by the Court
unless the Court has received a report from the Company Law Board or the
Registrar that the affairs of the company have not been conducted in a manner
prejudicial to the interests of its members or to public interest:
Provided
further that no order for the dissolution of any transferor company under
clause (iv) shall be made by the Court unless the Official Liquidator has, on
scrutiny of the books and papers of the company, made a report to the Court
that the affairs of the company have not been conducted in a manner prejudicial
to the interests of its members or to public interest.
(2)
Where an order under this section provides for the transfer of any property or
liabilities, then, by virtue of the order, that property shall be transferred
to and vest in, and those liabilities shall be transferred to and become the
liabilities of, the transferee company; and in the case of any property, if the
order so directs, freed from any charge which is, by virtue of the compromise
or arrangement, to cease to have effect.
(3)
Within thirty days after the making of an order under this section, every
company in relation to which the order is made shall cause a certified copy
thereof to be filed with the Registrar for registration.
If
default is made in complying with this sub-section, the company, and every officer
of the company who is in default, shall be punishable with fine which may
extend to fifty rupees.
(4) In
this section-- (a) `property' includes property, rights and powers of every
description; and `liabilities' includes duties of every description; and
`liabilities' includes duties of every description; and (b) `transferee
company' does not include any company, other than a company within the meaning
of this Act; but `transferor company' includes any body corporate, whether a
company within the meaning of this Act or not." Section 394-A provides
that on every application under Section 391 or Section 394, the Court shall
give notice of such application to the Central Government and shall take into
consideration the representations, if any, made to it by that government before
passing any order under any of the said sections. Rules 67 to 87 of the
Companies [Court] Rules, 1959 deal with matters provided by Sections 391 to
394. The form in which several notices contemplated by Sections 391 and 394 and
Rules 67 to 87 are to be issued are prescribed in Forms 33 to 42 appended to
the Companies [Court] Rules.
The
effect and scheme of the above provisions, insofar as it is relevant to the
facts of the case before us, may be summarised thus:
(a)
Where an amalgamation of two or more companies is proposed, an application has
to be made to the Court for the purpose. Thereupon, the Court may call the
meeting of members of the companies concerned. The order of the Court shall be
in Form 35 prescribed by the Rules;
(b)
Such notice of the meeting has to be sent individually to all the members. (The
notice and the explanatory statement under Section 393 are settled by the
officer of the Court.) (c) Apart from individual notices, the notice of the
meeting has also to be published in such newspapers as may be directed by the
Court.
(d)
Only when a majority of the members representing three- fourths of the value of
the members present and voting, either in person or by proxy, approves the
scheme, would the Court proceed to sanction the amalgamation arrangement. Such
an order shall bind all concerned. Of course, the Court shall not sanction any
such arrangement unless it is satisfied that the applicants have disclosed all
material facts fully and truly;
(e)
the application for confirmation made under Section 391(2) and 394 is also
required to be advertised in the same newspapers in which the notice of the
meeting was advertised and the notice is also required to be served on the
Central Government as provided by Section 394-A.
(f) If
the Court is satisfied that the statutory formalities have been duly complied
with and the scheme is fair and a reasonable one and beneficial to the
interests of the companies and its members, the Court may sanction the scheme.
While sanctioning the scheme, the Court may also provide for all or any of the
matters specified in clauses (i) to (vi) of sub-section (1) of Section 394. The
two provisos appended to said sub-section provide for certain pre-conditions
which too have to be observed by the Court.
Sub-section
(2) provides that where the order sanctioning the amalgamation provides for any
of the matters in clauses (i) to (vi) aforesaid, they shall take effect as
provided in the order.
(g)
Within 30 days of the order sanctioning the amalgamation arrangement, the
company concerned shall file a certified copy of the order before the Registrar
for registration. This is made mandatory by the second limb of sub-section (3)
of Section 394.
(h)
The order sanctioning the scheme is required to be drawn up in accordance with
Forms 41 and 42 of the companies [Court] Rules.
We may
now refer to the scheme of amalgamation as passed at the meetings of the
shareholders of both the Holding and the Subsidiary Companies. "Transferor
company" is defined to mean the "Subsidiary company" and the
expression "Transferee Company" is defined to mean the "Holding
Company". The expression "this scheme" is defined to mean
"this scheme in the present form or with any modifications approved or
imposed by the High Court of Judicature at Tamil Nadu and/or by the High Court
of Judicature at Calcutta". The expression "the
transfer date" is defined to mean "1st January, 1982" and the
expression "the operative date" means the date on which the certified
copies of the orders of the High Courts of Tamil Nadu and Calcutta under
Sections 391(2)/394(2) of the Act shall have been filed with the Registrars of
Companies in Tamil Nadu and Calcutta respectively. The expression
"terminal date" is defined to mean the date immediately preceding the
operative date. The scheme refers to the capital structure of the Transferor
and the Transferee Companies, the object of the scheme underlying the agreement
between the parties and then states:
"1.
The undertaking of the Transferor company shall, with effect from and including
the transfer date and without further act or deed, be transferred to the
Transferee Company pursuant to Sections 391(2) and 394(2) of the Act and vest
in the Transferee Company with all the estate and interest of the Transferor
Company but subject, nevertheless, to all charges affecting the same and on the
charges affecting the same and on the said date, the Transferor Company shall
be amalgamated with the Transferee Company.
6. (a)
The excess of the value of the net assets of the Transferor Company, based on
the Balance Sheet of the Transferor Company as at the date immediately
proceeding the transfer date over its Subscribed and Paid Up Capital shall, to
the extent of the amount appearing as Development Rebate Reserve, Investment
Allowance Reserve and Investment Allowance Reserve (Utilised) in such Balance
Sheet of the Transferor Company, be the Development Rebate Reserve Investment
Allowance Reserve and Investment Allowance Reserve (Utilised) to the Transferee
Company.
(b)
The Transferor company shall, with effect from the Transfer Date, be deemed to
have carried on its business for and on behalf of the Transferee Company, and
accordingly the Profits and Losses of the Transferor Company for the period
commencing from the Transfer Date shall be deemed to be the profits or losses
of the Transferee Company and shall be available to the Transferee Company for
disposal in any manner including the declaration of any dividend by the
Transferee Company after the Operative Date, subject to the provisions of the
Act.
7. The
implementation of this scheme is conditional upon this Scheme being sanctioned
under Section 391 of the Act and the appropriate orders for implementation of
this Scheme being made under Section 394 of the Act by the High courts of Tamil
Nadu and Calcutta.
8. The
implementation of this Scheme is conditional also upon shareholders holding not
less than nine-tenths in value of the shares in the Transferor Company (other
than shares already held therein immediately before the amalgamation by the
Transferee Company) becoming shareholders of the Transferee Company by virtue
of the amalgamation." A reading of the above clauses of the scheme shows
that according to the scheme, the entire undertaking of the Subsidiary Company
shall be transferred to the Holding Company with effect from the transferred
date and that the Subsidiary Company shall be amalgamated with the Holding
Company with effect from the said date. Clause (6) states clearly that the
implementation of the said scheme "is conditional upon the scheme being
sanctioned under Section 391 of the Act and the appropriate orders for the
implementation of this scheme being made under Section 394 of the Act by the
High Courts of Tamil Nadu and Calcutta".
Clause
(8) further provides that the implementation of the said scheme "is
conditional also upon shareholders holding not less than nine-tenths in value
of the shares in the Subsidiary company becoming shareholders of the Holding
Company by virtue of the amalgamation". It is one the basis of the
language of clauses (7) and (8) that the High Court has opined that the scheme
takes effect only on and from the date it was sanctioned by the High Courts of
Madras and Calcutta coupled with the date on which the shareholders of the
Subsidiary Company becomes the shareholders of the Holding Company as provided
in the sub-clauses. The High Court has opined that the transfer date mentioned
in the scheme viz., January 1, 1982 is "totally artificial and
arbitrary" [for the reason that on the said date neither the company nor
their shareholders had even thought of amalgamation] and that it has no legal
significance.
According
to the High Court, therefore, the date on which the amalgamation should be
deemed to have come into being is not January 1, 1982 but January 20,
1984/February 24, 1984, on which dates the Madras and Calcutta High Courts
respectively approved the scheme. In other words, the High Court has taken the
view that in the absence of any date being specified in the order of the High
Court as the date of amalgamation, the date of the order of the High Court
[Company Courts] shall be taken as the date of amalgamation.
For
arriving at the said view, the High Court followed an earlier Full Bench
decision of that Court in Sahayanidhi (Virudhnagar) Ltd. v. A.R.S. Subramanivam
Nadar [(1950) 20 Company Cases 214]. The High Court also opined that the
decision of the Bombay High Court in Swastik Rubber Products Ltd. is of no
assistance to the appellant. On this basis, the High Court has upheld the
validity of the notices issued by the Income Tax Officer, which notices were
impugned in the writ petition, and dismissed the writ petition. The question is
whether the view taken by the High Court is correct.
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 the 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 some
time; 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 affect 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 or 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. The Bank of Upper India Ltd. [A.I.R.1919
P.C.9].
Counsel
for the Revenue contended that if the aforesaid view is adopted when 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 purpose this line of enquiry because it does
not arise for consideration in these cases directly.
In the
light of the view taken by us on the principal question, it is not necessary to
consider the alternate submission urged by Shri Poddar.
For
the above reasons, the appeals are accordingly allowed. The writ petitions
filed by the appellant in the High Court shall be deemed to have been allowed.
We, however, make it clear that we have not expressed any opinion on the plea
of the learned counsel for the Revenue that the amalgamation itself is a device
designed to evade the taxes legitimately payable by the subsidiary company. If
the Income Tax authorities think that, they are entitled to raise this question
in the proceedings under the Income Tax Act, it is open to them to do so by way
of a separate proceeding according to law.
No
costs.
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