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TMI Blog1998 (2) TMI 66X X X X Extracts X X X X X X X X Extracts X X X X ..... the instance of the Revenue. It is not in dispute that the charge for the additional tax is created by section 104 of the Income-tax Act, 1961, as there is no other provision in the Act which creates a charge for tax on such undistributed profits. It is also not in dispute that the order was made within the period of limitation prescribed under the section. The amalgamated company is T. V. Sundaram Iyengar and Sons Private Limited, Madras, and the amalgamating company was Sundaram Motor Private Limited. An order of amalgamation was passed by this court in C. P. No. 52 of 1970, the petition having been filed by the two companies on which this court sanctioned a scheme of arrangement and amalgamation that had been proposed by the companies ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... liabilities had been taken over by the amalgamated assessee-company. The Commissioner of Income-tax (Appeals) to whom the amalgamated company, T. V. Sundaram Iyengar and Sons Private Limited, appealed, held that the liability sought to be enforced was that of a company which was no longer in existence and that no proceedings could be initiated or continued against the amalgamated company. That view of the Commissioner was affirmed by the Tribunal. The Tribunal relied upon a decision of the Supreme Court in the case of M. M. Parikh, ITO v. Navanagar Transport and Industries Ltd. [1967] 63 ITR 663 and the Supreme Court was there concerned with section 23A of the Indian Income-tax Act, 1922, which more or less corresponds to section 104 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1980] 122 ITR 156, that the liability of the company to pay tax on the undistributed profits arises when there is I failure to distribute such profits and would not be postponed till such time that an order is made under section 104 of the Act. With respect, we are unable to agree with that view. As laid down by the apex court in the case of Parikh (M. M.) [1967] 63 ITR 663, the liability to pay tax under section 104 does not arise at any point of time prior to the making of an order in accordance with the requirements of that section. Learned counsel for the assessee submitted that as no liability had accrued for the amalgamating company, the amalgamated company cannot be made to suffer a tax liability for payment of which was not taken. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d long prior to the issuance of the notice. An order of amalgamation made by the High Court under the provisions of section 394 of the Companies Act is not an order which is meant to relieve either of the legal entities which are parties to the scheme of amalgamation, from the liability for payment of tax. An order of amalgamation is intended to facilitate reconstruction and amalgamation of the companies expeditiously in a manner which is beneficial to the companies and its shareholders of the two companies, so long as such amalgamation is not opposed to public interest. None of the provision of the Companies Act providing for amalgamation, nor any other provision in the Act, confers immunity from payment of tax on either of the entities ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d out. The fact that the liability had not crystallised and the charge had not been created would not entitle the amalgamated company to avoid the payment of the tax under section 104 that would been payable if the amalgamating company had continued to exist. Notice in this case was given by the Income-tax Officer rightly to the amalgamated company as the amalgamating company had been dissolved by the time the notice was issued and the liability, after amalgamation, was that of the amalgameted company. Under the terms of amalgamation, the amalgameted company had taken over the obligation to pay and discharge "all liabilities, debts and obligations of whatsoever nature" of the amalgamating company. The liability of the amalgamating company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue is in no way responsible for the amalgamating company's act of being a party to the scheme of amalgamation and thereby rendering itself incapable of taking the benefit of section 105. The provisions of the Companies Act should be read harmoniously with those of the Income-tax Act. After the transfer of all assets and liabilities, debts and obligations of the amalgamating company to the amalgamated company in terms of the sanction accorded by the company court under section 394 of the Companies Act, the striking out of the name of the amalgamating company from the register does not wipe out the obligation to comply with an order made by the Income-tax Officer under section 104, and the order is capable of being enforced against the amal ..... X X X X Extracts X X X X X X X X Extracts X X X X
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