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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 ..... es and all concerned - Petition allowed. X X X X Extracts X X X X X X X X Extracts X X X X ..... he present scheme would be to the benefit of a single shareholder, a foreign company. It is further stated that the scheme has been adopted by the petitioners as the capital gains taxation on amalgamation and merger of companies is exempt under the provisions of the Income-tax Act and therefore the scheme formulated by the petitioners lacks commercial substance and is not for the benefit of the shareholders as portrayed by the petitioners and hence liable to be rejected. It is further submitted that in terms of provisions of Chapter X A of the Income-tax Act (sections 95 to 102) (General Anti Avoidance Rule) and section 144AB of the Income-tax Act, if a part of scheme is found to be a device to obtain tax benefit even though the main purpose of the scheme may not be to obtain tax benefit such an arrangement entered into can be declared as an impermissible avoidance 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that cost of acquisition in the cases of amalgamation of capital assets in the hands of amalgamated company would be the same cost as was in the hands of amalgamating company. (ii) The main objective of the amalgamation is to enable them to streamline the current organisation structure and achieve an optimized legal entity structure more aligned with the business and achieving greater efficiency in resource management cost savings resulting from rationalisation, standardisation and simplification of business processes and group structure. Since, the entities are engaged in a similar line of business and part of the same group and hence the amalgamation would enable them to achieve synergies of resources and overall business objective. The provisions of GAAR cannot be made applicable to the instant scheme of amalgamation as there is no tax benefit and the amalgamation is being affected 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 b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e transferor entities and post the amalgamation the only difference would be that the promoter will hold the shares directly in the transferee entity. It is also submitted that transferee company has furnished an affidavit/undertaking to the effect that rights and attached interests of the Income-tax Department would be protected and that the sanctioning of the scheme of amalgamation would not solely be used to challenge any tax consequence arising under the provisions of the Act. In view of the above, it is prayed to sanction the scheme. 9. The official liquidator vide his report dated March 17, 2020 while reiterating the averments made in the petition submitted that the affairs of the company appears to have not been conducted in a manner prejudicial to the interest of the members or to the public. The official liquidator made specific representation in paragraph 6 of his report 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 allot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... abilities did not appear exactly as approved. The petitioner-companies have modified paragraph 13.1 of the scheme to replace it with paragraph 13.1 to 13.8 and a copy of the amended scheme of amalgamation is attached with this affidavit. 4. Clause 4.16 (read with clause 8) of the petition states to the effect that none of the petitioner-companies have any sectoral regulators in view of the object clauses and hence 110 notice is required to be given to sectoral regulators. Whereas, the main objects of the transferor companies found to be running educational institutions. Further, clause 1.20(a) of the scheme seeks all licenses/permissions, etc., of transferor companies to be transferred to transferee company, Hence, Tribunal may be pleased to order issue of notice to Education Departments in terms of section 230(5) of the Companies Act, 2013. Even though one of the objects of the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... osed with this affidavit. 6. The Tribunal may be pleased to direct transferor company No. 1 to furnish full details to official liquidator in respect of related party transactions done during 2018-19 as in disclosed in note 37(b) of its balance-sheet as at March 31, 2019. Transferor company No. 1 had provided loan and advance to one of its wholly owned subsidiary company in the year 2015-16 in accordance with sections 185 and 186 of the Companies Act, 2013. On September 29, 2018 these advances, amounting to ₹ 4.08 crores and interest ₹ 58.89 lakhs were written off and details and details were provided in note 26 of the balance-sheet ending March 31, 2019. On September 29, 2018 M/s. College Street Education Technologies P. Ltd., ceased to be a subsidiary company of transferor company No. 1. Further, transferor company No. 1 had made investments in Oakwood Educational Initiatives LLP and People 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 com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ort from Income-tax has been furnished to the Regional Director. The Regional Director also made specific representation with regard to the following and counsel for the petitioner vide affidavit dated June 4, 2020 answered the same as below : Sl. No. Regional Director's observations Reply of the petitioner-companies by way of affidavit dated 4-6-2020 1. The Directorate has received letter dated 11-3-2020 from the Registrar of Companies, Vijayawada pointed out certain observations as under : The report by Regional Director is informative in nature and do not warrant any reply. (a) Requested that the hon'ble Tribunal may be pleased to direct the petitioner-companies to ensure statutory compliance of all applicable laws and also on sanctioning of the present scheme the applicant-company shall not be absolved for any of its statutory liability in any manner. (b) Requested that the hon'ble Tribunal 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 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earing the CSR report is attached to this affidavit. (g) The Tribunal may be pleased to direct the transferee company to furnish the compliance of section 188 of the Companies Act, 2013 with regard to compliance of related party transactions. Transferor company No. 2, transferor company No. 3 and transferee company have not been involved in any transaction falling under section 188 of the Companies Act, 2013 for the last two financial years. Further, transferor company No. 1 has furnished on February 24, 2020 the details of the transactions falling under section 188 of the Companies Act, 2013 to the Regional Director in response to their letter and a copy of the same is attached with this affidavit. 2. As per paragraph (vii)(c) of annexure-I referred to in paragraph 1 under the heading "Report on other legal and regulatory requirements" attached to the balance-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 ₹ 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the facts and circumstances of the case and on perusal of the scheme, the documents produced on record and the undertakings given by the petitioner-companies by way of affidavits, the scheme of amalgamation appears to be fair and reasonable and is not contrary to public policy and not violative of any provisions of law. All the statutory compliances have been made under sections 230 to 232 of the Companies Act, 2013. Hence ordered. ORDER The petition be and the same is allowed with the following directions : (a) The scheme of amalgamation with appointed date as April 1, 2019 is hereby sanctioned. The same shall be binding on the petitioners and their respective shareholders, secured creditors, unsecured creditors/trade creditors, employees and all concerned. (b) This order shall not be construed as an order granting exemption from payment of stamp duty 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 Trib ..... X X X X Extracts X X X X X X X X Extracts X X X X
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