Court upholds writ petitions despite alternate appeal, Scheme of Arrangement binding, 'demerger' rejected.

The court found the writ petitions maintainable despite the availability of an alternate statutory appeal remedy, citing exceptions for issues like violation of natural justice. It held that the statement under Section 393 of the Companies Act forms part of the Scheme of Arrangement. The court determined that the Scheme of Arrangement is binding on statutory authorities and operates as a judgment in rem. The court rejected the classification of the Scheme as a 'demerger' for income tax purposes, directing the Assessing Authority to consider it otherwise. The writ petitions were allowed, assessment orders quashed, and Assessing Authority instructed accordingly.

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Issues Involved:
1. Maintainability of writ petitions due to non-availment of alternate statutory appeal remedy.
2. Whether the statement under Section 393 of the Companies Act, 1956 forms part of the Scheme of Arrangement.
3. Whether the Scheme of Arrangement is binding on statutory authorities and operates as a judgment in rem.
4. Classification of the Scheme of Arrangement as a 'demerger' under Section 2(19AA) of the Income Tax Act and its implications on depreciation claims.

Issue-wise Detailed Analysis:

1. Maintainability of Writ Petitions:
The respondent contended that the writ petitions were not maintainable due to the availability of an alternate statutory appeal remedy. However, the court referenced several Supreme Court decisions, including the case of Nokia India Private Ltd. Vs Deputy Commissioner (CT)-IV, which held that the presence of an alternate remedy is not an absolute bar to entertaining a writ petition. The court concluded that the grounds raised in the writ petitions, such as violation of natural justice and jurisdictional issues, fell within the exceptions that allow for the maintainability of writ petitions without availing the alternate remedy. Thus, the writ petitions were deemed maintainable.

2. Statement under Section 393 of the Companies Act:
The core issue was whether the statement under Section 393 forms part of the Scheme of Arrangement. The court analyzed the statutory provisions and judicial precedents, concluding that the statement under Section 393, which explains the terms and effects of the Scheme to creditors and members, is integral to the Scheme of Arrangement. The court held that the statement under Section 393 merges with the Scheme and forms part of the court's order sanctioning the Scheme. This was supported by the legal principle that the Scheme of Arrangement under Sections 391 to 394 of the Companies Act is a code by itself.

3. Binding Nature and Judgment in Rem:
The court referred to various judicial precedents, including Marshall Sons & Co. (India) Ltd. Vs Income Tax Officer and Dalmia Power Ltd. Vs Assistant Commissioner of Income Tax, to establish that the sanction of a Scheme of Arrangement by the Company Court is binding on all concerned, including statutory authorities, and operates as a judgment in rem. The court reiterated that once a Scheme is sanctioned, it attains statutory force and is binding not only inter se the parties involved but also on third parties, including tax authorities.

4. Classification as 'Demerger' and Depreciation Claims:
The Assessing Officer had disallowed the depreciation claims by treating the Scheme as a 'demerger' under Section 2(19AA) of the Income Tax Act, thereby restricting the depreciation to the Written Down Value (WDV) of the transferred assets. However, the court noted that the Company Court, while sanctioning the Scheme, had explicitly stated that the Scheme was not a 'demerger' within the meaning of the Income Tax Act. The court held that the Scheme, including the income tax implications explained in the statement under Section 393, was binding on the tax authorities. Consequently, the basis for the Assessing Officer's disallowance of depreciation was found to be fallacious. The court quashed the impugned proceedings and directed the Assessing Authority to proceed in accordance with the findings that the Scheme is not a 'demerger'.

Conclusion:
The writ petitions were allowed, and the impugned assessment orders and notices were quashed. The court directed the Assessing Authority to consider the Scheme of Arrangement as not being a 'demerger' under Section 2(19AA) of the Income Tax Act and to proceed accordingly. The connected miscellaneous petitions were closed, and no costs were awarded.

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