2007 (1) TMI 158 - HC - Income Tax

Summary

Issues Involved:
1. Effective date of amalgamation.
2. Interpretation of "appointed day" in the context of the amalgamation order.
3. Validity and impact of the clarification dated March 17, 1993.
4. Applicability of judicial precedents on the effective date of amalgamation.

Summary:

Effective Date of Amalgamation:
The primary issue was whether the amalgamation of OMC Alloys Ltd. with Orissa Mining Corporation Ltd. became effective from August 30, 1991, as per the gazette notification, or from April 1, 1986, as per the clarification issued by the Department of Company Affairs. The Tribunal upheld the Revenue's stance that the merger took effect from August 30, 1991, but the High Court disagreed, holding that the effective date of amalgamation is April 1, 1986.

Interpretation of "Appointed Day":
The court examined the definition of "appointed day" in the amalgamation order, which was the date of notification in the Official Gazette (August 30, 1991). However, the court found that for accounting purposes, clause 4(2) of the order specified April 1, 1986, as the effective date, and this was supported by clause 8 regarding taxation.

Validity and Impact of the Clarification:
The court considered the clarification dated March 17, 1993, which stated that the effective date for all intents and purposes regarding the amalgamation shall be April 1, 1986. The court rejected the Revenue's argument that the clarification lacked legal basis, emphasizing that it was issued by the Government of India and must be considered in interpreting the amalgamation order.

Applicability of Judicial Precedents:
The court relied on the Supreme Court's decision in Marshall Sons and Co. (India) Ltd. v. ITO, which held that the effective date of amalgamation is the date specified in the scheme unless modified by the court. The court also referred to the Privy Council's decision in Raghubar Dayal v. Bank of Upper India Ltd., which supported the principle that an agreement becomes binding from the date it is made, subject to court sanction.

Conclusion:
The High Court concluded that the effective date of amalgamation is April 1, 1986, and directed the Tribunal to decide the matters accordingly. The references were answered in favor of the assessee, with no order as to costs.