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TMI Blog1991 (6) TMI 31X X X X Extracts X X X X X X X X Extracts X X X X ..... ereinafter referred to as "the Act") with its registered office at No. 33-A, Chowringee Road, Calcutta. The subsidiary company was an assessee under the jurisdiction of the respondent herein and the return of income for the assessment year 1982-83 was filed on June 30, 1982, and the assessment was completed on March 28, 1985. On December 1, 1982, the subsidiary company applied to the Income-tax Officer concerned for a change in the previous year from December 31, to June 30, and wanted to close the account books on June 30, 1983, for the period from January 1, 1982, to June 30, 1983, and this was granted, subject to the condition that the income for the period of 18 months from January 1, 1982, to June 30, 1983, would be assessed for the assessment year 1984-85. On February 11, 1983, at a meeting of the shareholders of the subsidiary company, a resolution was passed authorising the said company to be amalgamated with its parent company, Marshall Sons and Co. (India) Ltd. Similarly, the shareholders of the petitioner-company, at a meeting held on May 7, 1983, passed a resolution regarding the amalgamation of Marshall Sons and Co. (Mfg.) Ltd. with the petitioner and, in due course, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r, in his letter dated January 31, 1986, drew attention to the order passed by the Calcutta High Court and stated that, having regard to the date of the order passed, it could have been filed with the Registrar of Companies on February 6, 1984, at the earliest and required Marshall Sons and Co. (Mfg.) Ltd. to state the reason for a "nil" return and further required the filing of the audited profit and loss account and balance-sheet. Along with that notice, a notice under section 142(1) of the Income-tax Act was also enclosed requiring compliance by February 7, 1986, on which date, the Income-tax Officer directed the matter to be posted for hearing. It was at that stage that the petitioner filed the writ petition praying for the reliefs set out earlier. In the affidavit filed in support of the writ petition, the principal ground taken is that as the amalgamation had taken effect from January 1, 1982, the Income-tax Officer cannot take any steps for assessing the income of Marshall Sons and Co. (Mfg.) Ltd. for either of the assessment years in question or any other subsequent period. In the counter filed by the respondent, after referring to the grant of the request for a change in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n to clauses (1), (2) and (6)(b) in the scheme of amalgamation and the orders of the courts in C. P. Nos. 23 of 1983 and 294 of 1983, contended that the scheme of amalgamation took effect on and from January 1, 1982, on which date the subsidiary company ceased to exist and, therefore, there was no assessable entity in the shape of the subsidiary company during the relevant assessment years 1984-85 and 1985-86. Strong reliance in this connection was also placed upon the decision in CIT v. Swastik Rubber Products Ltd. [1983] 140 ITR 304 (Bom) and the order in S. L. P. (Civil) No. 1969 of 1980. On the other hand, learned counsel for the Revenue submitted that, on January 1, 1982, there was no scheme of amalgamation at all in contemplation and the date January 1, 1982, had been incorporated as an arbitrary and artificial date with no nexus whatever to the scheme of amalgamation and was intended only as a tax avoidance device. Referring to the clauses in the scheme of amalgamation, particularly, clauses (1) and (6) to (8), learned counsel pointed out that the whole scheme of amalgamation was subject to the provisions of the Act (Companies Act) and the date on which the assets, propertie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scheme is as follows: (1) The undertaking of the transferor company shall, with effect from and including the transfer date and without further act or deed, be transferred to the transferee-company pursuant to sections 391(2) and 394(2) of the Act and vest in the transferee-company with all the estate and interests of the transferor-company, but subject nevertheless to all charges affecting the same and, on the said date, the transferor-company shall be amalgamated with the transferee company." Clause (2)(a) of the scheme proceeds to set out what is comprised in the undertaking of the transferor-company and that takes in all the properties of the transferor-company immediately before the amalgamation wheresoever situate and all the liabilities of the transferor company immediately before the amalgamation. Clause (2)(b) of the scheme further elaborates what is included in the undertaking of the transferor by stating that it includes all rights, privileges, powers and authorities and all properties, movable or immovable, real or personal corporeal or incorporeal, in possession or reversion, present or contingent, of whatsoever nature and wheresoever situate including leases and tenan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut. In the order passed in C. P. No. 294 of 1983 on January 11, 1984, there is a reference to the order passed by this court in C. P. No. 23 of 1983 dated November 21, 1983, and thereafter the order proceeds to sanction the scheme of amalgamation set forth in annexure G to the orders and specified in the schedule. It is in the background of the aforesaid provisions in the scheme of amalgamation and court orders and the relevant provisions of the Act that the precise date of amalgamation of the subsidiary company with the petitioner-company has to be ascertained. Though in the scheme of amalgamation, the transfer date has been stated as January 1, 1982, it is seen that that date has really no connection whatever with the scheme of amalgamation. It is seen that the terms of the scheme of amalgamation appear to have been finalised some time in December, long after the transfer date January 1, 1982, as provided in the scheme. There is no indication in the terms of the scheme as to why this date January 1, 1982, has been thought of. When there was no scheme of amalgamation in contemplation till at least the beginning of December, 1982, how the transfer date had been pushed back to Jan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be January 20, 1984, and February 24, 1984. The provision for making available amounts for the declaration of any dividend after January 20, 1984, and February 24, l984, subject again to the provisions of the Companies Act, would appear to indicate that only after the transfer and vesting orders are passed by the court under section 394(2) of the Act and the certified copies thereof are filed before the Registrars of Companies at Madras and Calcutta, under section 394(3) of the Act, the amalgamation under the scheme becomes effective. There are two other conditions also which would clearly establish that the date of amalgamation of the subsidiary company with the amalgamated company could not be January 1, 1982. Under clause (7) of the scheme, the implementation of the scheme is made conditional upon the sanction of the scheme by court under section 391 of the Act and the passing of orders for implementation under section 394 by the High Courts. This provision also clearly envisages that the passing of orders by the courts had been thought of as an essential condition and, if that be so, only by virtue of the order of court under section 394(2) of the Act, the transfer of assets co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stinction, for the liability for payment of stamp duty arose in the context of the transfer of the assets and liabilities of the company under an arrangement under section 153A of the Indian Companies Act, 1913, and sanctioned by the court and it became necessary to consider the effect of the passing of the order by the court, transferring the assets and liabilities to another company on the question of payment of stamp duty on the documents on the basis of which suits came to be instituted. In United India Life Assurance Co. Ltd. v. CIT [1963] 49 ITR 965, the question arose as to when a Swiss company became merged with the assesseecompany losing all rights of ownership in its assets. It was maintained on behalf of the assessee that the transfer took effect on January 1, 1952, though the court passed orders on July 10, 1954, and, therefore, in respect of the assessment years 1953-54 and 1954-55, it would not be open to the Revenue to treat the businesses as those of two companies, and apply either rule 2(a) or rule 2(b) of the Schedule or both. This was rejected by the authorities below and, on a reference, this court, after referring to the terms in the scheme of amalgamation, pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... specified the date as July 1, 1971, the amalgamation and the transfer of assets and liabilities would also be effective from that date, as per the order of the court, for under section 394(2), by virtue of the order passed on July 1, 1971, and effective from that date, the transfer of the assets and liabilities took place. In the present case, it had already been pointed out that neither in the order passed in C. P. No. 23 of 1983 by this court nor in C. P. No. 204 of 1983 by the High Court of Calcutta had any particular date been specified, but the court merely proceeded to sanction the scheme contained in the annexure to the petition and, therefore, the decision in CIT v. Swastik Rubber Products Ltd. [1983] 140 ITR 304 (Bom), relied on by learned counsel for the petitioner, would not be of any assistance. Equally, the circumstance that a special leave petition in S. L. P. (Civil) No. 1969 of 1980 had been dismissed by the Supreme Court on November 17, 1982 would not be of any assistance to the petitioner. The dismissal of the special leave petition by the Supreme Court was in the exercise of its discretion under article 136 of the Constitution of India. As pointed out by the Supr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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