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TMI Blog2021 (1) TMI 573X X X X Extracts X X X X X X X X Extracts X X X X ..... feror company No. 3) ; and People Combine Business Initiatives P. Ltd. (transferee company) and their respective share-holders and creditors. 2. The registered offices of the applicant-companies are situated in the State of Andhra Pradesh and therefore, they are within the jurisdiction of this Tribunal. 3. The petitioner-companies had filed C. A. (CAA) No. 22/230/AMR/2019 before this Bench seeking dispensation of convening meeting of equity shareholders, secured creditors and unsecured creditors of the petitioner-company. The Tribunal vide its order dated December 23, 2019 dispensed with the meetings of the equity shareholders and creditors of the petitioner-companies. 4. The petitioner-company then filed the present petition before this Tribunal seeking sanction of the scheme with appointed date as April 1, 2019. This Tribunal vide its order dated January 24, 2020 ordered notice of the hearing of the petition to be advertised in daily newspapers. Accordingly, the petitioner-company published notice hearing of the petition on January 29, 2020 in English newspaper, i. e., Business Standard and Telugu news-paper, i. e., Andhra Bhoomi. Notice of hearing of the petition was served o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce arrangement and the consequences in relation to tax arising there from would be determined. If the present scheme is approved by the Tribunal, and if it is subsequently found by the Income-tax Department that the scheme adopted by the petitioners is to obtain tax benefits, the Department will not be in a position to lift the corporate veil and examine whether any tax benefit would accrue to the petitioners and to whether any income chargeable to tax has escaped assessment. Further, the shares of transfer company No. 1 are not listed in the stock exchange, the value of the shares at Rs. 100 has been taken from the balance-sheet, as the companies have not submitted the valuation report and if the scheme is approved the total loss that would accrue to the Government of India would be Rs. 248.318 crores. In these circumstances it is prayed to reject the scheme. 8. In reply to the objections raised by the Income-tax Department, the petitioners filed reply/written submissions stating that : (i) It is well accepted principle that if a subsidiary company is amalgamated with its holding company, no consideration would be payable since the holding company cannot compensate itself. As p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ffected due to a cogent commercial rationale streamlining of business. (iii) By virtue of acquisition of shares of the transferee company, M/s. Nord Anglia Ed. Ltd., became the indirect holding company if its subsidiaries, i. e., indirectly held the shares of the transferor companies. The payments made by M/s. Nord Anglia Ed. Ltd., to the sellers of the shares of the transferee company have already been subjected to capital gain tax in accordance with the provisions of the Act. This transfer was subject to the provisions of section 56(2)(x) of the Income-tax Act, 1961 read with rule 11UA of the Income-tax Rules, 1962 which provides that the fair market value of the shares has to be calculated at net asset value. Thus, it considers the values of assets and liabilities for the purposes of computation. Further, the valuation of shares of the transferee company was also done as per the prescribed method under the FDI Regulations and the same has been accepted by the Reserve Bank of India and authorised dealer banker. The tax authorities have not appreciated that the transfer of investment has been done from the transferor companies to the transferee company and not to M/s. Nord Angli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ort with regard to the following and counsel for the petitioners vide affidavit dated June 4, 2020 answered the same as follows : Sl. No. Representative of the official liquidator Reply by the petitioner-company 1. The clause 1.11 of scheme provides for determining record date for the purpose of allotting new equity shares of transferee company, whereas, the scheme do not provide for allotment of shares by transferee company vide clause 12.1 to 12.4 of the scheme. Accordingly, clause 1.11 of the scheme needs to be deleted and hence the Tribunal may direct the amendment of scheme for deletion of clause 1.13 as it is contradictory to clause 12.1 to 12.4 of the scheme. The record date as stated in clause 1.11 conveys definition as a date for the purpose of determining shareholders to whom new equity shares of the transfer company are to be allotted, if any, in terms of the scheme. Therefore, record date will apply when equity shares to be allotted under the scheme, and since there are no equity shares that ate proposed to be allotted, having the definition of record date in scheme does not contradict the terms of the scheme and hence deletion of clause 1.11 is not required. 2. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e petitioner-companies is to run and maintain educational institutes schools, colleges, etc., none of the petitioner-companies are engaged in running and operating any educational institute. The petitioner-companies are only providing support services to its customers who are running educational institutes. The petitioner-companies business model is to provide value added solutions and other support services to its customers who own and run educational institution. Therefore, State Education Department does not have any jurisdiction over any of the petitioner-companies. 5. Profit and loss account for the financial year 2018-19 of transferor company No. 1 discloses that an amount of Rs. 11.64 crores was recorded as exceptional item (loss) and it occurred pursuant to schedule 21 of the share subscription purchase agreement (SSPA). From the above disclosure, it is not clear whether transferor company No. 1 was a party to such SSPA or not as the copies of SSPA was not furnished to the official liquidator. Hence the Tribunal may be pleased to order transferor company No. 1 to furnish all material facts concerning the above including copies of the SSPA as to enable the official liquid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ple Combine Bhimavaram Ventures LLP. On account of inconsistent business activities and declining revenue of these entities, investments were written off on November 23, 2018 and adequate disclosures were made in the balance-sheet for the year ending March 31, 2019 of transferor company No. 1. The stated transactions compromise of loans and investments and appropriate disclosures were made in the financial, as per the requirements of Accounting Standard 18. Further, the statutory auditors of transferor company No. 1 have given unqualified audit reports for the year ending March 31, 2019 and in prior financial years too, which reinstates out submission that the company has made the loans and investments in compliance of the applicable provisions of the Act. 7. The Tribunal may be pleased to direct transferor company No. 2 to furnish full details to official liquidator in respect of related party transactions done during 2018-19 as in disclosed in note 22(b) of its balance-sheet as at March 31, 2019. The advance amounting to Rs. 134 crores was provided by transferee company in accordance with the provisions of the Companies Act, 2013 on February 18, 2019 to settle the bank loans a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ibunal may be pleased to direct the petitioner-companies, to comply with rule 17(2) of the Companies (Compromise, Arrangement and Amalgamations) Rules, 2013 with respect to filing of order for confirmation of scheme to be filed in form No. INC-28 with the concerned office of the Registrar of Companies. The report by Regional Director is informative in nature and do not warrant any reply. (c) Requested that the hon'ble Tribunal may be pleased to direct the petitioner-companies to preserve its books of account and papers and records and shall not be disposed off without the prior permission of the Central Government in terms of provisions of section 239 of the Act, 2013. The report by Regional Director is informative in nature and do not warrant any reply. (d) The Scheme is proposed to amalgamate two loss making transferor companies with profit making transferee company. The Tribunal may be pleased to direct the transferee company to state the effective revenue loss on Income-tax to the Government with respect to the said two transferor companies, if any if the scheme is approved by the Tribunal. The transferee company has already submitted an affidavit on March ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce-sheet of independent auditors report for the year ended March 31, 2019 of transferor company No. 1 there are pending disputed before the Income-tax Department amounting to Rs. 76,06,559. The Tribunal may be pleased to direct the transferee company to furnish an undertaking that as and when the demand arises from the above said departments, petitioner-company is ready to pay the said debts as per rules. The transferee company has already submitted an affidavit on March 13, 2020 to the office of the Deputy Commissioner of Income-tax, Visakhapatnam undertaking to participate in all the assessment/appellate/any other proceedings initiated/to be initiated against and discharging all the dues payable by the transfer companies under the provisions of the Income-tax Act, 1961, arising on account of the Scheme becoming effective. Further the transferee company agreed to undertake to indemnify the President of India against any loss that may be caused to the Income-tax authorities. In view of the above reply the petitioner-companies prayed this Tribunal to sanction the scheme. 11. The Regional Director (South East Region), Ministry of Corporate Affairs filed additional affidavit dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or taxes or any other charges and fees if pay able, or from any applicable permissions that may have to be obtained or compliances that may have to be made under law. (c) All concerned shall act on a copy of this order along with the Scheme duly authenticated by the Registrar of this Tribunal. The Registrar of this Tribunal shall issue the certified copy of this order along with the scheme forthwith. (d) The petitioner-company is directed to take appropriate steps to submit the said scheme to the Registrar of Companies within 30 days from the date of receipt of copy of this order. (e) The petitioner-company is directed to issue newspaper publication with respect to approval of the scheme of amalgamation, in the same newspapers in which previous publications were issued. (f) The petitioner-company is further directed to take all consequential and statutory steps required in pursuance of the approved scheme of amalgamation under the provisions of the Companies Act, 2013 and submit necessary compliance and undertaking relating to the objections raised by the Official Liquidator and the Regional Director (SER), MCA, GoI, Hyderabad. (g) Transferor company No. 1 shall transfer ..... X X X X Extracts X X X X X X X X Extracts X X X X
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