2019 (11) TMI 1811 - AT - Income Tax

Credit for advance tax and TDS credit of both the companies prior to the amalgamation - amalgamation between assessee company and its wholly owned subsidiary - A.O. had considered the income arising to the amalgamated company, but while granting credit of TDS and Advance Tax, he did not allow the same in toto - CIT(A) also dismissed the same holding that the assessee did not submit any TDS Certificate or Advance Tax payment details before the AO/CIT(A) - HELD THAT - We agree with the contention of the assessee that when the amalgamated results or income of the amalgamating company has been taken into consideration, then the credit for advance tax paid and TDS made by amalgamating company should be given to amalgamated company, i.e. the assessee before us. We deem it fit and proper to remand the issue to the file of A.O. with a direction to verify the claim of TDS credit and advance tax paid by amalgamating company and allow the same to the assessee in accordance with law. Appeal of the assessee is allowed for statistical purposes.

Summary

Issues:
Appeal against order of CIT(A) regarding credit for TDS and Advance Tax not allowed in case of amalgamation.

Analysis:
The assessee's appeal for A.Y. 2013-14 was against the order of CIT(A)-1, Hyderabad dated 27.9.2018. The case involved the merger of two companies where the amalgamated company's name was changed to M/s CES Pvt. Ltd. The AO considered the income of the amalgamated company but did not allow full credit for TDS and Advance Tax. The CIT(A) dismissed the appeal stating lack of submission of TDS Certificate or Advance Tax payment details. The grounds of appeal raised by the assessee included errors in not allowing credit for TDS and Advance Tax, failure to appreciate the amalgamation, and incorrect allowance of credit amounts by the AO. The counsel for the assessee highlighted the Profit & Loss a/c, Balance Sheet, and income computation for the relevant year, emphasizing the approval of tax benefits by the Hon'ble High Court in the scheme of amalgamation. The DR argued for further examination of details by the AO.

The Tribunal agreed with the assessee that credit for TDS and Advance Tax of the amalgamating company should be given to the amalgamated company. Therefore, the issue was remanded to the AO to verify the TDS credit and advance tax paid by the amalgamating company and allow the same to the assessee in accordance with the law. Consequently, the appeal of the assessee was allowed for statistical purposes.

This judgment highlights the importance of correctly allowing credit for TDS and Advance Tax in cases of amalgamation, ensuring that the amalgamated company receives the benefits related to taxes paid by the amalgamating company. The decision emphasizes the need for thorough verification by the AO to ensure compliance with legal provisions and the principles of amalgamation.