2023 (4) TMI 895 - AT - Income Tax

Carry forward and set off of accumulated loss and unabsorbed depreciation allowance in amalgamation or demerger - absence of undertaking in the scheme - HELD THAT - Since before the NCLT no undertaking in the scheme was given by the appellant in compliance with provision of Section 72A of the Income Tax Act, 1961, the Learned Tribunal has committed no error in dismissing the application. Before this Appellate Tribunal the said undertaking has been brought on record through its rejoinder. In such view of the matter we feel appropriate to dispose off this appeal with an observation that if fresh undertaking to amalgamation scheme in terms of Section 72A of the Income Tax Act, 1961 is filed before the NCLT, the learned NCLT may consider the same and pass appropriate orders expeditiously in accordance with law.

Summary

Issues involved: Appeal u/s 421 of Companies Act, 2013 against NCLT order dismissing application for approval of scheme of amalgamation due to absence of undertaking as required by Income Tax Department.

The appellants, transferor and transferee companies, filed an application under Section 230 to 232 of the Companies Act, 2013 seeking approval of a scheme of amalgamation. The Income Tax Department objected to the scheme, stating that it lacked an undertaking that the transferee company would retain assets and continue the business of the transferor company for a specified period. The NCLT dismissed the application based on these objections. The appellants then filed an appeal before the National Company Law Appellate Tribunal (NCLAT), submitting a rejoinder with an affidavit of undertaking to comply with the conditions of Section 72A of the Income Tax Act, 1961. The NCLAT noted that the absence of the undertaking before the NCLT was a valid reason for dismissal but allowed the appeal, directing the appellants to file the undertaking before the NCLT for reconsideration. The appeal was disposed of with this observation and the consent of both parties.

In the reply filed by the Respondent/Income Tax Department, it was reiterated that compliance with Section 72A of the Income Tax Act, 1961 was necessary for carry forward and set off of accumulated losses and unabsorbed depreciation in the amalgamation scheme. The reply emphasized the requirement for the transferee company to hold a certain percentage of fixed assets and continue the business of the transferor company for a specified period to avail tax benefits. The appellants, through their senior counsel, argued that the appeal could be resolved by providing the undertaking as per the changed circumstances. The Senior Standing Counsel of the Income Tax Department indicated readiness to accept the undertaking if provided before the NCLT, removing objections to the amalgamation.

The NCLAT acknowledged the validity of the NCLT's decision to dismiss the application due to the absence of the required undertaking in the scheme. However, considering the undertaking submitted during the appeal proceedings, the NCLAT directed the appellants to file the undertaking before the NCLT for reconsideration. The appeal was disposed of with the observation that if the fresh undertaking is filed before the NCLT, it should be considered for appropriate orders in accordance with the law.