TaxTMI 
TaxTMI 
2006 (1) TMI 259
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....g of board of directors to amalgamate. A supplementary affidavit has been filed stating in para 3 that the liabilities of the company towards its creditors are only towards the transferor companies and the transferee company. Paras 3, 4, 5 and 6 are quoted as follows : '3. That the above interest-free deposits have been taken by the applicant company from the following companies : Name of the depositor-company Amount of deposit Rs. 1.Bhankerpur Simbhaoli Beverages (P.) Ltd. 64,721.00 2.Shaw Wallace Distilleries Ltd. 35,999.92 3.Shaw Wallace Financial Services Ltd. 10,16,450.00 4.Shaw Wallace & Company Ltd. 31,78,910.08 Total 42,96,081.00 4. That the above named Bhankerpur Simbhaoli Beverages (P.) Ltd. is the transferor company No. 2 and Shaw Wallace Distilleries Ltd. is the transferee company in the present company application and both are accordingly parties to the proposed scheme of amalgamation. 5. That the other two companies, namely, Shaw Wallace Financial Services Ltd. and Shaw Wallace and Company Ltd., as well as the applicant company, the transferee company and other transferor companies are part of same group popularly known as Shaw Wallace Group. 6. That ....
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....under section 391/394 of the Companies Act, 1956 for sanction of the scheme of amalgamation of Highland Distilleries Ltd. (transferor company) with Shaw Wallace Distilleries Ltd. (transferee company). 3. That Shri D.K. Meena, practising Company Secretary, produced books of account and statutory records before the Official Liquidator for scrutiny on 20-12-2005 as required under section 394 of the Companies Act, 1956. 4. That transferor-company was incorporated on 29-7-1991 and obtained Certificate of Commencement of Business on 3-10-1991. 5. That it is seen from the records of the company and the books and accounts that from the date of incorporation in the year 1991, the company has not started any business activities till date. However, the company has maintained ledger and other books of account. Copy of ledger account submitted by the company with effect from 1-4-2004 to 31-3-2005 is annexed herewith as Annexure-1. As per ledger account, from 1-4-2004, the company was having cash in hand (debit balance) as Rs. 10. The company has also filed copy of trial balance for the period 1-4-2004 to 31-3-2005 and copy of the same is annexed herewith as Annexure-2. 6. That as per balanc....
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.... 4.1, as follows : "4. That the deponent further craves leave to submit that para 7.5 of Part C of the scheme provides as under : 'The difference, being the excess of the value of the net assets of the transferor companies, transferred to SWDL pursuant to the orders of the High Courts, and after giving effect to clause 7.2 and clause 7.4 above, would be credited to general reserves account. In case of there being a shortfall, the same shall be debited to general reserves account.' 4.1 It is submitted that aforesaid para of the scheme does not seem to be in conformity with the provisions of the Companies Act, 1956 as well as normally accepted accounting principles, since surplus arising out of the scheme of amalgamation, i.e., 'amalgamation reserve' is of capital nature, and cannot be considered as general reserve as the same (general reserve) is free for distribution to the shareholders of a company in the form of dividend/bonus shares, whereas 'amalgamation reserve' cannot be utilised for distribution to the shareholders. It is, therefore, submitted that the aforesaid clause may not be allowed by this Hon'ble Court." 8. Shri R.P. Agarwal, learned counsel for the applicant, sub....
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....egative, the difference is debited to goodwill arising on amalgamation and dealt with in the manner stated in paragraphs 19-20. If the result of the computation is positive, the difference is credited to capital reserve. 18. Certain reserves may have been created by the transferor company pursuant to the requirements of, or to avail of the benefits under, the Income-tax Act, 1961; for example development allowance reserve, or investment allowance reserve. The Act requires that the identity of the reserves should be preserved for a specified period. Likewise, certain other reserves may have been created in the financial statements of the transferor company in terms of the requirements of other statutes. Though, normally, in an amalgamation in the nature of purchase, the identity of reserves is not preserved, an exception is made in respect of reserves of the aforesaid nature (referred to hereinafter as 'statutory reserves') and such reserves retain their identity in the financial statements of the transferee company in the same form in which they appeared in the financial statements of the transferor company, so long as their identity is required to be maintained to comply with the....