TaxTMI 
TaxTMI 
2016 (1) TMI 940
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....t summarizing its pleadings. Its first substantive ground challenges disallowance of Rs. 10,28,028/- of preliminary expenditure u/s. 35D of the Act. This assessee is a company engaged in trading and transportation of natural gas, production of compressed natural gas and sale thereof. It amortized preliminary expenses of Rs. 10,28028/- u/s. 35D. The same comprised of a sum of Rs. 5 lacs @ 1/5 of Rs. 25 lacs incurred in AY 2005-06. The remaining figure of Rs. 5,28,028/- is @ 1/5 of Rs. 26,40,140/- similarly incurred earlier. Both these amounts represent ROC fees paid to increase authorized capital. The assessee's case was that its identical claims had already been allowed in AY 2007-08 u/s. 35D. The Assessing Officer inter alia was of the view that such a expenditure for increasing authorized was neither allowable u/s. 37 nor u/s. 35D(2) since not covered by the specific illustrations therein. This culminated in the impugned disallowance being made in assessment order dated 28-12-2010 which in turn stands affirmed in the lower appellate findings under challenge. 4. Heard both sides. Case records perused. Relevant facts qua the issue stated in preceding paragraphs are not repea....
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....xed its prior period income, it is entitled for set off of the same. We find that the hon'ble Delhi high court in CIT vs. Exxon Mobil Lubricant Pvt. Ltd (2010) 8 TAXMANN.COM 249 (DELHI) holds that if an assessee has shown prior period income and the Assessing Officer has not excluded it while working out current year taxable income, there is no reason to disallow only one part of the prior period adjustment i.e. the prior period expenditure. The Revenue fails in rebutting this proposition. We accordingly accept this alternative contention and direct the Assessing Officer to set off assessee's prior period expenditure and income as per law. He shall pass a consequential order accordingly. The assessee's third and fourth substantive grounds are accepted for statistical purposes. 7. The assessee's next three substantive grounds assail correctness of the lower appellate findings affirming Assessing Officer's action inter alia holding it as not entitled to set off MAT credits as per section 115JAA, TDS and advance taxes of Rs. 2,11,51,773/- thereby rejecting its plea that consequential interest u/s. 234B is liable to be charged accordingly. The CIT(A)'s findin....
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....taxes paid by the appellant amount to Rs. 2,11,57,863. Due to demerger the entire credit was transferred to appellant company because the taxes resulted mainly from activities pertaining to the company. But on the perusal of order u/s 143(3) and notice of demand u/s 156 of appellant company it seems that appellant company has not been allotted the any credit of TDS. The Ld. A.O has proceeded to estimate the demand payable without giving this credit of the taxes paid. Your goodselves may direct the Assessing officer to recalculate the demand payable on the assessed income of Rs. 9,35,26,842 instead of Rs. 10,04,39,172 after giving the credit of the above faxes. Further it would also be necessary to note that in terms of provisions of Section 199 of the Income Tax Act, 1961 any taxes paid by the tax deductor and paid to the Central Government shall be treated as a payment of tax on behalf of the person from whose income the deduction was made and credit shall be given to him for the amount so deducted on the production of the certificate furnished under section 203 in the assessment made under this Act for the assessment year for which such income is assessable"., T....
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....ormer that it is inclusive of deferred tax benefits as well to name a few. It has already come on record that both the entities revised their returns stating incomes of Rs. 3,19,62,916/- and Rs. 9,09,73,050/- as against that shown earlier of Rs. 12,29,35,968/- declared at the demerged entity's behest in original return. The Revenue is also not alleging any claim of double relief of the impugned credits. There can hardly be any quarrel that a demerger scheme comes under sections 391 to 394 of the Companies Act, 1956. We proceed further and find that section 2(19AA) of the Income Tax Act defines a demerger to be an arrangement under the above stated provisions of the Companies law meaning transfer of all properties of the undertaking immediately before the demerger becoming properties of the resulting company followed by corresponding clauses pertaining to liabilities as well. 9. We come to the lower appellate findings now. The lower appellate authority holds that the Assessing Officer allowed the impugned credits only in the hands of M/s Adani Energy Ltd since the demerger scheme did not speak of any bifurcation thereof. We are unable to agree with this reasoning. We reiterat....
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....under section 643, by proxy, at die 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 contributories 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 (2) shall have no effect until a certified copy of the order has been filed with the Registrar." "Section 394. Provisions for facilitating reconstruction and ....
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....ed 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 interest 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....
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....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 394A. (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 preconditions which too have to be observed by the Court. Subsection (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....
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.... 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 ....
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....issued by the ITO, which nonces were impugned in the writ petition, and dismissed the writ petition. The question is whether the view taken by the High Court is correct. 12. 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., 1-1- 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 C....
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....isable 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 the transferor and 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 of the transferor and transferee companies. But that may not be 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. 14. 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." 11. We draw support from the above extracted judicial precedent to hold that once the demerged undertaking no more exists post facto the appointed date thereof coming to 01-01-2007 and the assessee being the resulting company, the former....
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....s 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....
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....natural corollary, it cannot receive dividend out of its own profits. The High Court eventually held as under : "Evidently, dividend is made taxable as the income of the previous year in which it is declared. The dividend income, thus accrues as income of the previous year in which it is declared as distinct from income of the day on which it is declared. If something happens during the previous year due to which the declaration of dividend is cancelled and the amount paid as dividend is directed to be treated as loans or payment of a part of capital, it is possible to conceive that, at the end of the year, there will not be accrual of income by way of dividend despite a factual declaration. Similarly, if, by operation of law, the declaration of dividend becomes illegal, inoperative or invalid during the previous year itself, it is possible to conceive of a situation in which an assessee would be entitled to say that no income by way of dividend accrued to him during the previous year. What is important is that something factual or legal should have happened during the previous year in which the dividend is declared." Likewise, in the case of New Shorrock Spg. & M....
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....d case, question of payment of sales tax on the sales made by the transferor company to the transferee company between effective date as envisaged in the amalgamation scheme till the date the High Court sanctioned such scheme. In that context, referring to the decision of the Apex Court in the case of Marshall Sons & Co. (India) Ltd. (supra), Division Bench of this Court held that such transfers would cease to be sales between two independent entities but would be treated as branch transfers. It was observed as under: "20. As already noted, the term 'sale' has been defined under section 2(23) of the Act. Upon the High Court sanctioning the scheme for amalgamation, the effective date of amalgamation would be the date mentioned in the scheme, namely, 1st June 1995. Such legal fall out must be given its full implication for all purposes including for the purposes of the Act. If, therefore, in eye of law from 1st June 1995, the transferor companies did not exist, and by virtue of the order of the High Court sanctioning the scheme relating back to the date envisaged in the scheme, ceased to have any legal existence, any transfer from the transferor to the transferee com....
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....1) of section 115-O starts with a non-obstante clause and provides that notwithstanding anything contained in any other provisions of the Act, in addition to the income chargeable to tax in case of a domestic company, there shall be tax on any amount declared, distributed or paid by such company by way of dividend or interim dividend. Sub-section (3) thereof further provides that the principal officer of the domestic company and the company shall be liable to pay tax on distributed profits to the credit of the Central Government within fourteen days from the date of declaration of any dividend or distribution or payment of any dividend whichever is earliest. Sub-section (1) of section 115-O of the Act thus is a charging section and pertains to collection of tax on declaration, distribution or payment of dividend by a domestic company. Subsection (3) does nothing beyond prescribing the date within which such tax must be credited to the Central Government. Neither of these two provisions or anything else contained in section 115-O of the Act, in our opinion, would change the position. In the present case, we are concerned with a situation under which after certain dividend was declar....