2021 (12) TMI 192 - Tri - Companies Law

Sanction of scheme of Amalgamation of the Transferor and Transferee Companies - section 233 of the Companies At, 2013 - HELD THAT - The judgement of the Supreme Court in the case Vodafone Essar Gujarat Limited and another 2015 (8) TMI 475 - SC ORDER , makes it clear that even if the scheme of amalgamation is evolved to save income tax, it cannot be said that the only object of the scheme was tax avoidance. The scheme of amalgamation may consequently result in some tax benefit to the Petitioner Companies. Only on that ground, going by the spirit of the above cited judgement, it cannot be said that the Scheme of Amalgamation is impermissible. The Scheme also clarifies that all the taxes and duties payable by the 1st and 2nd transferor companies from the appointed date onwards including all or as any refund and claim shall for all purposes be treated as the tax and/or duty liabilities or refunds and claims of the transferee and upon the scheme becoming effective, the transferee company is expressly permitted to file its respective income tax, sales tax etc., and any other return to claim refunds. There are no reason to deprive the Petitioner Companies of the benefit of amalgamating the transferor and transferee companies which is intended for the beneficial growth of the Companies - petition disposed off.

Summary

Issues involved:
1. Objections raised by the Income Tax Department regarding the amalgamation scheme and tax implications.
2. Compliance with legal provisions under the Companies Act, 2013 for amalgamation.

Detailed Analysis:
Issue 1: Objections by the Income Tax Department
The Income Tax Department raised objections related to the transfer of surplus funds from Transferor Company No. 2 to Transferee Company, amounting to ?156 crores, without paying taxes. The objections included concerns about violating Section 185 of the Companies Act, 2013, and potential tax liabilities under the Income Tax Act, 1961. The Income Tax Department highlighted options like extending loans or declaring dividends to transfer the funds and raised issues regarding tax implications and potential tax avoidance strategies. The objections aimed to prevent tax evasion and ensure compliance with tax laws.

Issue 2: Compliance with Legal Provisions
The Regional Director filed a petition on behalf of the Central Government, seeking approval for the amalgamation under Section 233 of the Companies Act, 2013. The Petitioner Companies responded to objections by clarifying that the scheme complied with legal requirements and that moving the petition under Section 233 was appropriate. They emphasized that all necessary meetings with creditors and members were conducted as per legal mandates. The Court considered precedents, including Supreme Court judgments, to validate the amalgamation scheme and address objections raised by the Income Tax Department. The Court concluded that the objections were not tenable and approved the scheme of amalgamation, emphasizing that it was intended for the beneficial growth of the companies.

In the final order, the Tribunal sanctioned the Scheme of Amalgamation with specific directions for compliance, including submission to the Registrar of Companies, newspaper publication, and necessary statutory steps. The order clarified that it did not grant exemptions from stamp duty, taxes, or other legal obligations. The Petitioner Companies were instructed to adhere to the approved scheme and address objections raised by the Official Liquidator and the Regional Director for full compliance with the Companies Act, 2013.