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TMI Blog2013 (10) TMI 514X X X X Extracts X X X X X X X X Extracts X X X X ..... sed in respect of the income of the previous year after the date of succession. In our humble understanding a "successor" is held responsible for assessment after the date of succession. We hereby take a little liberty with due respect to the legislatures that if the meaning of clause (b) is slightly extended than it can be supposed that a 'successor/transfree' shall be held responsible for the legal proceedings after the date of succession. Rather sub section (3) of Section 170 prescribes that when any sum payable under this Section in respect of the income of such business for the previous year in which the succession took place upto the date of succession assessed on the 'predecessor' cannot be recovered from him, then the said sum shall be payable and recoverable from the successor. Meaning thereby the successor/transferee is liable for any liability of the predecessor/transferor - burden of liability gives an inherent right to defend a litigation, therefore the successor within his rights can file an appeal - it is apparent that a resulting company on one hand acquires the assets, side by side, on the other hand, responsible for the liabilities, including tax liability. Furthe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re going to be decided in the light of the provisions of the I.T. Act as also the ITAT Rules. Hence in case of prejudice, if caused, to either of the side, a remedy can be sought from a higher judicial forum but only against a speaking judgment. Hence herein below follow a detailed decision. 3. At the start of the proceedings learned AR Mr. C.S. Agarwal, Advocate had made a mention that these are duplicate appeals filed as a precautionary measure because on the last date of hearing on 12th March, 2013 the respected 'D' Bench of ITAT Ahmedabad had expressed that the appeals filed in the name of Cairn India Ltd. (Erstwhile known as Cairn Energy Gujarat BV) have wrongly been filed thus not maintainable. Learned AR has informed that a question has been raised that on account of the demerger of Cairn Energy Gujarat BV with Cairn India Ltd. whether these appeals have been correctly filed in the name of the 'transferee company'. 3.1 To justify the appellants original action, that is, filing of the appeal in the name of the 'transferee company' viz. Cairn India Ltd., which were titled as Cairn India Ltd. (Erstwhile known as Cairn Energy Gujarat BV) learned AR has placed before us submi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vour of Cairn India Ltd. (transferee company) vide a letter dated 18th October, 2012. As per the scheme, the "transfer and vesting" was accomplished in terms of the provisions of section 391 to 394 of the Companies Act. The said undertakings thus vested in CIL at book value. The transferor company was therefore deemed as a going concern and took over in accordance with Section 2(19AA) of IT Act. As per one of the clause, all the assets of Transferor Company deemed to have been transferred and vested in CIL. Likewise, all the liabilities have also been transferred in CIL. He has also drawn our attention on one of the clause that all accrued taxes, duties, cess etc. payable shall be treated as the liability of CIL. Through one of the clause, that is, clause no.12, it was arranged that the transferor companies and CIL were permitted to revise their respective income tax returns and thereupon can claim refund on the basis of the related TDS certificates. Learned AR has referred clause 16 in respect of Legal Proceedings, wherein it was arranged that upon the scheme becoming effective, all legal proceedings of any nature shall not abate and shall be continued as also enforced by CIL. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 'transferor company' i.e, 'Cairn Energy Gujarat BV'. In view of these orders the 'transferor company' in fact is the 'assessee aggrieved' and not the 'transferee company'. Learned DR has also quoted that the decisions cited of Honble Calcutta High Court also supports his argument. 5. We have heard both the sides at some length. A subtle question required to be answered, in simple words, is that under given circumstances i.e. in case of demerger of a company, who should be made the party to the litigation. Undisputedly this is a case of Court approved demerger. We have noted that the Hon'ble High Court of Judicature at Bombay had approved the scheme vide an order 22nd June, 2010. As per the judgment, the Cairn India Ltd., the petitioner, sought an order for sanctioning a scheme of arrangement between itself and for transferor companies, as listed in the order, Cairn Energy India Pvt. Ltd. ("CEIPL"), Cairn Energy India West B.V., ("CE India West") Cairn Energy Cambay B.V. ("CE Cambay") and Cairn Energy Gujarat B.V. ("CE Gujarat"). Under the scheme, the entire business relating to the Indian undertakings of the 'transferor companies' were to stand transferred to and vested in the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r sub clause (a) of Section 170 the 'predecessor' is subject to assessment in respect of the income of the previous year in which the succession took place upto the date of the succession. However, as per sub clause (b) of section 170 (1) the 'successor' shall be assessed in respect of the income of the previous year after the date of succession. In our humble understanding a "successor" is held responsible for assessment after the date of succession. We hereby take a little liberty with due respect to the legislatures that if the meaning of clause (b) is slightly extended than it can be supposed that a 'successor/transfree' shall be held responsible for the legal proceedings after the date of succession. Rather sub section (3) of Section 170 prescribes that when any sum payable under this Section in respect of the income of such business for the previous year in which the succession took place upto the date of succession assessed on the 'predecessor' cannot be recovered from him, then the said sum shall be payable and recoverable from the successor. Meaning thereby the successor/transferee is liable for any liability of the predecessor/transferor. To our humble understanding the b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompany, immediately before the demerger, becomes the property of the resulting company by virtue of the demerger ; (ii) all the liabilities relatable to the undertaking, being transferred by the demerged company, immediately before the demerger, become the liabilities of the resulting company by virtue of the demerger; ** ** ** (vi) the transfer of the undertaking is on a going concern basis; (vii) the demerger is in accordance with the conditions, if any, notified under sub-section (5) of section 72A by the Central Government in this behalf : ** ** ** 5.6 On scrutiny of this section now it is apparent that a resulting company on one hand acquires the assets, side by side, on the other hand, responsible for the liabilities, including tax liability. Further, it is important to note that sub-sec. (vi) says that the transfer of the undertaking is on a going concern basis, meaning thereby, as a result of demerger the effected undertaking looses it's independent legal identity which merges with the resultant company. It's entity thereafter vests with the resulting company. As a natural corollary the litiga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... may lead to a serious problem, if remain un-noticed, because mistakenly two judgments can be delivered and that may lead to a serious error. Duplicity is void ab initio hence required to be dismissed in-limine. 5.9 Finally, we are of the view that the Hon'ble Calcutta High Court in the case of CIT v. Southern Bank Ltd. (since amalgamated with United Industrial Bank Ltd.), 120 ITR 92, had opined that transferee bank is entitled to continue the proceedings. Rather it was held that the appeal signed by the amalgamating bank i.e. the transferee bank was held valid. The Revenue department raised the question that the U.I. Bank was not entitled to continue the proceedings. The Hon'ble Court has held that the appeal preferred in the name of the amalgamated/transferor bank, but the memoranda were rightly signed by U.I. Bank and the transferee bank is competent in law to act on behalf of the transferor bank after the amalgamation. Rather, it was specified by the Hon'ble Court that on that date, under the scheme, it was the U.I. Bank which could continue the proceedings and necessarily had the right to file appeals. For better understanding of the issue in hand, we have added the terminol ..... X X X X Extracts X X X X X X X X Extracts X X X X
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