2019 (9) TMI 1140

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....mpany (Ad2Pro Global Creative Solutions Pvt. Ltd.) subject to imposition of certain conditions, one of which relevant for the purposes of disposal of these appeals and in regard to which the Appellants are aggrieved being that the scheme of arrangement can only be given effect to subject to the Transferor Company paying the entire tax liability allegedly outstanding to the tune of Rs. 18,13,24,680/- to the Income Tax Department and Rs. 86,81,439/- to the concerned Service Tax Authorities. The issue raised in these appeals is whether the Tribunal could impose a condition to make payment of alleged tax liabilities when the same are disputed by the Company before the concerned authorities and make it a precondition to sanctioning of the scheme of amalgamation, more so, when no such demand has been made by the concerned/ relevant authorities and no objection has been raised before the Tribunal. The further issue for consideration raised in these appeals is whether the Tribunal could direct the Transferor Company to make payment of alleged tax despite an express undertaking by the Transferee Company to make such payment on behalf of Transferor Company if found due and payable after adju....

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....y future demands that may be raised by the Income Tax Department. It is pointed out that the NOC aforestated was issued much after the original demand of Rs. 19,88,24,680/- was raised by Respondent No. 4. 4. According to Appellants, it had provided an undertaking to the Tribunal that whenever the Income Tax and Service Tax demands become crystallized, the Transferee Company shall payoff the same to the concerned authorities. The Transferor Company has also reiterated this fact before this Appellate Tribunal. Reference is made to clause 12.7 of the Scheme of Arrangement which provides that post amalgamation all tax assessment proceedings and appeals shall be continued with the Transferee Company and all or any dues payable shall be paid by the Transferee Company. The Transferee Company has undertaken to satisfy any and all demands raised by the Tax authorities as would be determined in the proceedings. It is submitted that the Transferor Company did not refuse to comply with the demands raised by Respondent No. 3 (Designated Nodal Officer, Income Tax Department, Karnataka) and Respondent No.4 (Principal Commissioner of Income Tax - I) and in fact it made payments in terms of the or....

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....akes to make payment of all outstanding tax dues as determined in the aforesaid manner, the scheme cannot be refused and has to be allowed. Reference can be made to the judgment rendered by the Hon'ble High Court of Delhi in Company Petition No. 597/2014 reported in 2016 SCC Online Del 1135, para 45 whereof which is relevant for our purposes is reproduced as under:- "45. In response to the aforesaid objections, the transferee company in the affidavit dated 7th November, 2015 of Mr. Rajesh Bhatia, authorized signatory of the transferee company, has undertaken that in case of any liability, which may be legally assessed and payable by the transferor companies to the Income Tax Department, the same shall be paid by the transferee company. They further undertake that none of the provisions of the Scheme, shall prejudice the income tax dues and the income tax department shall be free to recover the said tax, if any, from the transferee company. The undertaking given by the transferee company is accepted and it shall remain bound by the same. In view of the aforesaid, the objection raised by the Regional Director stands satisfied." 7. In the instant case, Appellants have assailed the ....

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....been invited to clause 12.7 of the approved Scheme of Arrangement which eloquently states that post amalgamation all the tax assessment proceedings and appeals shall be continued with the Transferee Company and all or any dues payable in accordance with law shall be paid by the Transferee Company. Admittedly, proceedings are pending in appeal before ITAT and depending upon the outcome of such proceedings, the Transferee Company has undertaken to satisfy all demands emanating from and raised by the competent tax authorities. The Scheme having been approved and sanctioned and the same being in consonance with law, no fault can be found with the Transferee's undertaking to satisfy all demands raised by the tax authorities as finally determined by due process. The Appellants are justified in maintaining that the tax liabilities would be satisfied by the Transferee as determined by the competent forum seised of the matter in accordance with the approved Scheme which admittedly does not come in conflict with any express provision of the Companies Act, 2013. The legitimate interests of the concerned Tax Authorities have been lawfully protected and their right to recover the tax dues as de....