2010 (1) TMI 753 - HC - Income Tax

Revised return filed after expiry of one year - voluntary revised return u/s 139(5) or return filed in pursuance of notice u/s 148 - Revised return after approval composite scheme of amalgamation by the High Court - carry forward and set off of accumulated loss and unabsorbed depreciation allowance in amalgamation or demerger, etc. u/s 72A - held that - In this connection, the principle laid down by the Supreme Court in the decision reported in Marshall Sons and Co. (India) Ltd. vs. ITO (1996 -TMI - 5547 - SUPREME Court) needs reference. - once the scheme had been sanctioned with effect from a particular date, it is binding on everyone including the statutory authorities. Having regard to the law declared by the apex Court as to the effect of the scheme sanctioned by the Court, the only course open to the Revenue would be to act as per the scheme sanctioned effective from 1st Jan., 2004, which means that the tax authorities are bound to take note of the state of affairs of the applicant as on 1st Jan., 2004 and a return filed reflecting the same cannot be ignored on the strength of s. 139(5) of the IT Act. - Revenue directed to consider the returns filed in terms of the scheme sanctioned by this Court effective from 1st Jan., 2004. - Decided in favor of assessee.

Issues Involved:
1. Implementation of Clause 7.2 of the sanctioned scheme.
2. Granting injunction to restrain the respondent from taking further action against the applicant.
3. Validity of revised returns filed by the applicant.
4. Effective date of the scheme and its implications on the assessment.

Issue-wise Detailed Analysis:

1. Implementation of Clause 7.2 of the Sanctioned Scheme:
The applicant sought direction to implement Clause 7.2 of the scheme sanctioned by the Court on various dates, making it effective from 1st January 2004. The scheme involved the demerger and amalgamation of several companies, with the effective date fixed as 1st January 2004. The applicant argued that the revised returns filed immediately after the scheme's sanction should be accepted. The Court noted that the scheme was reflected in the applicant's annual accounts for 2004-05, and the modification sought was primarily about dropping the listing of shares, with other clauses remaining unchanged. The Court emphasized that the effective date of 1st January 2004 must be adhered to for all purposes, including tax assessments.

2. Granting Injunction to Restrain the Respondent from Taking Further Action:
The applicant requested an injunction to prevent the respondent from taking any further action against them concerning the revised returns for specific assessment years. The Court acknowledged the applicant's concern that the respondent's actions did not consider the effective date of the scheme. The Court agreed with the applicant's submission that the assessment must follow the scheme sanctioned by the Court, making the scheme effective from 1st January 2004 binding on the respondents.

3. Validity of Revised Returns Filed by the Applicant:
The respondent argued that the revised returns filed by the applicant were invalid as they were submitted after the original assessment was completed and beyond the period allowed under Section 139(5) of the IT Act. The Court noted that the revised returns were filed after the scheme's modification was approved and that the applicant had informed the assessing authority of the revised returns. The Court referred to the Supreme Court's decision in Marshall Sons and Co. (India) Ltd. vs. ITO, which held that once a scheme is sanctioned with a specific effective date, it is binding on all parties, including statutory authorities. Therefore, the Court concluded that the revised returns reflecting the scheme's effective date could not be ignored based on Section 139(5).

4. Effective Date of the Scheme and Its Implications on the Assessment:
The Court reiterated that the effective date of the scheme, as sanctioned by the Court, was 1st January 2004. This date was binding on all parties, including the tax authorities. The Court emphasized that the tax authorities must consider the state of affairs as of 1st January 2004 and that any returns filed reflecting this date could not be disregarded. The Court ordered the Revenue to consider the returns filed in terms of the scheme sanctioned by the Court, effective from 1st January 2004.

Conclusion:
The Court directed the Revenue to consider the revised returns filed by the applicant in accordance with the scheme sanctioned by the Court, effective from 1st January 2004. The applications were ordered in favor of the applicant, ensuring that the scheme's effective date was respected and adhered to in the assessment process.

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