TaxTMI 
TaxTMI 
2017 (5) TMI 1517
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....t winding up upon sanction of the Scheme. 2. A perusal of the petition discloses that initially the application seeking the dispensation of the meetings of equity shareholders, secured and unsecured creditors were filed before the Hon'ble High Court of Delhi in CA No. 107/2016. The Hon'ble High Court of Delhi vide its order dated 12.08.2016 was pleased to dispense with the requirement of convening the meetings of the equity shareholders of all the Petitioner Companies, in view of their consents having been obtained and produced before it. In relation to the Secured and Unsecured Creditors of the Petitioner/Amalgamated/Transferor Company and the Petitioner/Transferee Company, the meeting was convened vide above noted order dated 12.08.2016 and there being no secured and unsecured creditor in the Petitioner/Amalgamating Company, the necessity of convening a meeting of the creditors did not arise. 3. Under the circumstances, the petitioners have filed their joint petitions for sanction of the Scheme of Arrangement before the Hon'ble High Court of Delhi under the erstwhile provisions subsequent to the order of dispensation for some and for convening of the meeting of ....
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....s have also been annexed. 7. Further, it is also seen that pursuant to the directions of the Regional Director, Northern Region, a copy of the Company Petition has also been served on the jurisdictional Income Tax Officer of the concerned Petitioner Companies. 8. Pursuant to the notices issued to it, the Official Liquidator it seen from its report, had sought information from the petitioner company and based on the information received, the Official Liquidator has filed a report dated 10.03.2017 wherein it has been stated that it has not received any complaint against the proposed Scheme of Arrangement from any person or party interested in the Scheme in any manner and that the affairs of the Petitioner Companies do not appear to have been conducted in a manner prejudicial to the interest of its member, creditors or public interest as per second proviso to Section 394(1) of the Companies Act, 1956. The Official liquidator has further observed that as per Part V1 Clause 6 of the Scheme of Arrangement, the authorized share capital of the Transferor Company will get merged to form new authorized share capital of the Transferee company. 9. Further, Regional Director, Northern ....
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....ervation of the RD at Para 9 of its report the Regional Director (Northern Region) has sought directions from this Tribunal to the effect that the Petitioner Company be directed to follow and ensure compliance of AS-14 while implementing the proposed Scheme of Arrangement. 13. In reply to the above the Petitioner Company has undertaken to ensure compliance of the Accounting Standard 14, to the extent applicable, to the proposed Scheme of Arrangement, in the course of implementation of the said Scheme of Arrangement once the same becomes effective". 14. The above observations of RD and the reply of the Petitioner Companies merit a detailed consideration in view of the mandatory provisions of the Companies Act, 2013 in relation to the Scheme and the accounting treatment stated therein to be in compliance with the Accounting Standards prescribed by the Central Government under Section 133 of the Companies Act, 2013. While under the provisions of the Companies Act, 1956 there was no express directions to the above effect and the same, namely the Certificate of Auditor was requisitioned by the RDs/ROCs by virtue of a General Circular No. 53/2011 : dated 26.07.2011 issued by Govern....
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....of which has been made available to us, we do not find any certificate from the respective Company's auditor having been filed. A copy of the Joint application made available to us contains Page Nos. 1 to 554 having Annexure 'A' to T and the Joint Petition a copy of which has been filed before us, contains Page Nos. 1 to 394 having Annexure A' to 'O' does not contain the certificate as required under proviso to sub-section (7) of Section 230 or proviso to sub-section (3) of Section 232. 16. A perusal of the respective company's audited financial statements for the year ended 31.03.2016 discloses that the following persons have certified the financial statements in the capacity of statutory auditors of the respective companies, namely:- Petitioner/Amalgamated/Transferor Company i.e. Statcon Power Controls Ltd. AAR & Associates, Chartered Accountants, 701-702, R.G. Trade Tower, Netaji Subash Palace, Pitampura, New Delhi - 110 034. Petitioner/Amalgamating Company i.e. State Enterprises Private Limited Jain Rajiv & Associates, Chartered Accountants, 51B, Pocket - R, Dilshad Garden, Delhi 110 095 ....
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....ed with such powers. 20. In exercise of the powers contained in Section 133 read with other relevant provisions of the Companies Act, 2013, the Central Government has prescribed several Accounting Standards including the one prescribed specifically relating to Amalgamations titled as Accounting Standard (AS) 14 - Accounting for Amalgamations for brevity called as AS-14 and in relation to which the observations have been raised by the RD in its report. However the section does not limit the ambit or scope of the certificate to be issued by the company's auditor is not confined to the compliance of the said AS-14 alone and the accounting treatment, if any, as specified in the Scheme should be in consonance with Accounting Standards as may be applicable under the given circumstances and prescribed under Section 133 of the Companies Act, 2013 by the Central Government. 21. The importance of adherence to the Accounting Standards as prescribed by the Central Government has been dealt extensively by the Hon'ble Supreme Court in the case titled as JK Industries Ltd. and Another v. Union of India and Others (2007) 81 CLA 401 (SC). The aforesaid judgment has been rendered in co....
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....s, intangibles, consolation, merger, etc. AS basically attempt to reduce the subjectivity and lay down rules so as to arrive at the best possible estimates. For example, net assets refer to the difference between total assets less liabilities but the value attributable to each asset and each liability is often subjective. It depends on estimates. This is where the AS help. They reduce the subjectivity. Therefore, AS help to arrive at the best possible estimates. This estimation/subjectivity is also on account of the conceptual difference between 'accounting income' and 'taxable income'. Accounting income is the real income. Tax laws lay down rules for valuation of inventories, fixed assets, depreciation, bad debts etc, based on artificial rules and not on the basis of accounting estimates, which results in mismatch between accounting and taxable incomes. For example, a fixed rate of depreciation, may, for some companies, result in computing lower than the actual income if the actual erosion in the value of the asset is lower than the depreciation calculated at the fixed rate and higher than actual income for others where assets erode faster. Accounting income is nor....
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.... company as well as the profit/loss of the company. Several AS prescribed by the Institute have been made mandatory. The Institute has, however, clarified that the expression 'mandatory in nature' implies that while discharging their functions, it will be the duty of the chartered accountants who are member of the Institute to examine whether the said Accounting standard has been complied within the presentation of financial statements covered by their audit 227(3)(d). In this regard, it may be noted that under Section 227(3)(d), it is the duty of the auditor to state in his audit report whether the P & L a/c. and the balance sheet complies with the AS referred to in Section 211(3C). Before introduction of sub-sections (3A), 3(B) and 3(C) in Section 211 (with effect from 31st October, 1998), these Standards were not mandatory. Therefore, the companies were then free to prepare their annual financial statements, as per the specific requirements of Section 211 read with Schedule VI. However, with the insertion of sub-sections 3(A), 3(B) and 3(C) in section 211 the P & L a/c. and the balance sheet have to comply with the AS. For this purpose, the expression 'AS' shall ....
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.... We, the statutory auditors of ...........................................(name of the listed entity), (hereinafter referred to as "the Company") have examined the proposed accounting treatment specified in clause................(specify clause number) of the Draft Scheme of ...............................(specify the type of Scheme) between..................................................................(names of the companies/entities involved) in terms of the provisions of section(s)........................................(specify the relevant section(s) of the Companies Act, 1956/Companies Act, 2013 with reference to its compliance with the applicable Accounting Standards notified under the Companies Act, 1956/Companies Act, 2013 and other Generally Accepted Accounting Principles. The responsibility for the preparation of the Draft Scheme and its compliance with the relevant laws and regulations, including the applicable Accounting Standards as aforesaid, is that of the Board of Directors of the Companies involved. Our responsibility is to examine and report whether the Draft Scheme complies with the applicable Accounting Standards and Other Generally ac....