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TMI Blog2017 (1) TMI 1613X X X X Extracts X X X X X X X X Extracts X X X X ..... ellant. At the same time, the AO shall pass a protective assessment order in the case of appellant for A.Y. 2008-09 presuming that no amalgamation has taken place. Deduction u/Section 40(a) - Retrospectivity - Held that:- Hon'ble Apex Court in the case of G.E.India Technologies Centre (P) Ltd. vs CIT [2010 (9) TMI 7 - SUPREME COURT OF INDIA] has held that in case whole remittance is not chargeable in India then there is no question of tax at source being deducted. Since the tax at source is nor required to be deducted then Section 40(a) will not be applicable. It is further noticed that Section 40((a)(ia) refers to commission payable to a resident. Hence, this provision is not at all applicable. Section 40(a) is applicable in respect of payments to non-resident and the payment should be in the nature of interest, royalty, fee for technical services or other sum chargeable under this Act. It is undisputed fact that the sum is commission and the word commission is not specifically mentioned in Section 40(a). The sum paid is not chargeable in India under Income Tax Act, 1961. Hence, Section 40(a) is not applicable - ITA No. 784/JP/2011, 586/JP/2012 & 672/JP/2014 - - - Dated:- 30-1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of amalgamation i.e. application of provision of Section 72A will not be given in protective order because it will result in protective demand which cannot be enforced and assessee will never pay due tax even on declared income. ITA No. 672/JP/2014 A.Y. 2010-11 (i) On the facts and in the circumstances of the case and in law the ld. CIT(A) has erred in presuming the future action of the assessee and ignored the facts in existence that proposal of amalgamation of Modern Terry Towels Ltd. (MTT) with the assessee company w.e.f. 01-01- 2008 has been rejected and revised DRS was required to be submitted with cutoff dated 31-03-2010. 2.1 First of all, we take up the grounds of appeal of the Revenue in ITA No. 784/JP/2011 for the assessment year 2008-09 for adjudication. 2.2 Apropos Ground No. 1 of the Revenue, the facts as emerges from the order of the ld. CIT(A) is as under:- 4.1 I have perused the copy of draft resolution scheme dated 28-07-2009. In Annexure -1, the date of amalgamation has been taken on 01-01-2008. Similarly, as per para 4(iii) of Annexure-1, all the profits accruing to the Transferor Company or losses arising or incurred (including the ef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be resorted to. This decision is squarely applicable to the facts of the case. Once the scheme of amalgamation is sanctioned by the appropriate authority (High Court and BIFR), it is operative from the date mentioned in the scheme and not from the date on which the formal order would be passed by the specified. In the instant case, the scheme is operative from 01-01- 2008, therefore, it follows that income/losses arising upto 31-12-2007 will be assessed separately in the hands of M/s. Terry Towels Ltd. and the appellant. From 01-01-2008, the income/loss of both the entities would be assessable in the hands of the appellant. Further as per the provisions of Section 72A of the I.T. Act, on amalgamation the accumulated losses and the allowance and allowance for unabsorbed depreciation of M/s. Terry Towels Ltd. shall be deemed to be loss or allowance for unabsorbed depreciation of the appellant for the previous year in which the amalgamation would be effectively namely, in the present case the previous year 2007-08. Therefore, the conditions specified in Section 72A(2) will have to be complied. The pertinent question is what would be the procedure followed when the formalities ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... done by Modern Terry Towels Ltd. shall be on behalf of the appellant company. The importance of the registration of reference cannot be undermined as once a reference is registered, the provisions of SICA get triggered. There can hardly be and doubt that once a scheme is formulated after a reference is gone through the process of Sections 17 18 of the SICA, the said scheme would have the force of law notwithstanding anything inconsistent therewith contained in any other law. Thus, neither the party making any concessions at the time of formulation of the scheme nor the company at whose behest the scheme is formulated and sanctioned can get out of the scheme. I accordingly, direct the AO to allow set off of current year losses and brought forward losses/unabsorbed depreciation of M/s. Modern Terry Towels Ltd. as per Section 72A against the income of the appellant. At the same time, the AO shall pass a protective assessment order in the case of appellant for A.Y. 2008-09 presuming that no amalgamation has taken place. In case if the amalgamation scheme is not sanctioned then the protective assessment order shall prevail over the substantive order. This ground of appeal is accordin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecifies a date, there is little doubt that such date would be the date of amalgamation/date of transfer. But where the court does not prescribe any specific date but merely sanctions the scheme presented to it---as has happened in this case---it should follow that the date of amalgamation/date of transfer is the date specified in the scheme as the transfer date . It cannot be otherwise. It must be remembered that before applying to the court under section 391(1), a scheme has to be framed and such scheme has to contain a date of amalgamation/transfer. The proceedings before the court may take some time; indeed, they are bound to take some time because several steps provided by sections 391 to 394A and the relevant rules have to be followed and complied with. During the period the proceedings are pending before the court, both the amalgamating units, i.e., the transferor company and the transferee company may carry on business, as has happened in this case, but normally provision is made for this aspect also in the scheme of amalgamation. In the scheme before us, clause 6(b) does expressly provide that with effect from the transfer date, the transferor company (subsidiary company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and at the same time it was also directed to the AO that he should pass a protective assessment order in the case of the assessee for the AY 2008-09 presuming that no amalgamation has taken place. In case, if the amalgamation scheme is not sanctioned then the protective assessment order shall prevail over the substantive order. It is pertinent to mention here that assessee has received the order of Appellate Authority for Industrial Financial Reconstruction, New Delhi (PB Pgs. 88-89) dated 03.06.2013 whereby it has been held as under: We are of the view that the record date of merger is the date on which the merger of the sick company with M/s. Modern Insulators Ltd. has been approved by the shareholders of the company and this date cannot be arbitrarily changed by the BIFR. As such we dispose of the appeal with the clarification that the COD mentioned in the impugned order will apply only for the purpose of implementation of the sanctioned scheme. The record date for merger of the appellant company with the M/s MIL will continue to be treated as 1.1.2008 i.e., the date on which the merger was approved by the shareholder of the company. It may be noted that during the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he case CIT vs PAVL Kulandagan Chettiar 267 ITR 654 has held that where tax liability is must by the Act then agreement may be restored to either for reducing the tax liability or altogether avoiding tax liability. The observation of the Hon'ble Tribunal in para 2.19 and 2.20 on page 12 are reproduced as under:- 2.19 We also agree with the view taken by the ld. CIT(A) that TDS was not required to be deducted at source on account of Circular No. 786 dated 7-2-2000. The Circular No.7 of 22-10-2009 cannot be considered retrospectively to make it applicable for payments before that date. This has been considered by Lucknow Bench in the case of DCIT vs Sanjiv Gupta 50 DTR (Lucknow) Tribunal 225. 2.20 The Hon'ble Apex Court in the case of G.E.India Technologies Centre (P) Ltd. vs CIT 327 ITR 456 has held that in case whole remittance is not chargeable in India then there is no question of tax at source being deducted. Since the tax at source is nor required to be deducted then Section 40(a) will not be applicable. It is further noticed that Section 40((a)(ia) refers to commission payable to a resident. Hence, this provision is not at all applicable. Section 40(a) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion is not at all applicable. Section 40(a) is applicable in respect of payments to non-resident and the payment should be in the nature of interest, royalty, fee for technical services or other sum chargeable under this Act. It is undisputed fact that the sum is commission and the word commission is not specifically mentioned in Section 40(a). The sum paid is not chargeable in India under Income Tax Act, 1961. Hence, Section 40(a) is not applicable. The ld. CIT(A) was therefore, justified in deleting the disallowance of ₹ 6,04,58,699/-. Thus the solitary ground of the Revenue is dismissed. Respectfully following the decision of the Coordinate Bench dated 13-04- 2011 for the assessment year 2007-08 (supra), we find no reason to interfere with the order of the ld. CIT(A). Thus Ground No. 2 of the Revenue is dismissed. 4.1 Secondly, we take up the ground of appeal of the Revenue in ITA No. 586/JP/2012 for the assessment year 2009-10 for adjudication 4.2 Apropos solitary ground of the Revenue, the facts as emerges from the order of the ld. CIT(A) is as under:- 3.1 I have duly considered the submissions of the appellant. The issue in question is covered by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. It is not imperative to repeat facts of the case of issue in question as the similar issue has been decided in favour of the assessee by dismissing the ground of appeal No. 1 of the Revenue in ITA No. 784/JP/2011 and the decision therein shall apply mutatis mutandis on this ground no. 1 of the Revenue also. Thus solitary ground raised by the Revenue is dismissed and appeal of the Revenue in ITA No. 686/JP/2012 is dismissed, 5.1 Thirdly, we take up the grounds of appeal of the Revenue in ITA No. 672/JP/2014 for the assessment year 2010-11 for adjudication 5.2 Apropos solitary ground of the Revenue, the facts as emerges from the order of the ld. CIT(A) is as under:- 3.1 M/s. Modern Terry Towels Ltd. was amalgamated with the appellant company with effect from 01-01-2008 subject to approval of BIFR. In this assessment year, the appellant company had claimed the set off of business loss of M/s. Modern Terry Towels Ltd. for A.Y. 2010-11 amounting to ₹ 62,18,541/- and has also claimed the set off of brought forward business loss and unabsorbed depreciation of M/s. Modern Terry Towels Ltd. amounting to ₹ 94,24,43,685/-. In the order u/s 143(3) dated 6-03- 12013, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f current year losses and brought forward loses / unabsorbed depreciation of Modern Terry Towels Ltd. as per Section 72A against the income of the appellant. At the same time, the AO shall pass protective assessment order in the case of appellant for A.Y. 2009-10 presuming that no amalgamation has taken place. This ground of appeal is allowed. 3.4 In view of the above discussion, respectfully following the above orders of the ld. CIT(A) II Jaipur for A.Y. 2008-09 and 2009-10, the Assessing Officer is directed to allow set off of current year looses and brought forward losses/unabsorbed depreciation of M/s. Modern Terry Towels Ltd. as per Section 72A against the income of the appellant. At the same time, the AO shall pass a protective assessment order in the case of appellant for A.Y. 2010-11 presuming that no amalgamation has taken place. In case, the amalgamation scheme were not to be sanctioned by BIFR or the higher Courts with effect from 01-01-2008, then the protective assessment completed by the AO shall prevail over the substantive assessment. This ground of appeal is allowed. 5.3 We have heard the rival contentions and perused the materials available on record. I ..... X X X X Extracts X X X X X X X X Extracts X X X X
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