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1997(6) Supreme 115
SUPREME COURT OF INDIA
B.P. Jeevan Reddy & Suhas C. Sen, JJ.
Marshall Sons & Co. (India) Ltd. -Appellant
versus
Income Tax Officer -Respondent
Civil Appeal Nos. 1661-62 of 1992
Decided on 27-11-1996
Held : Every scheme of amalgamation has to necessarily provide a date with effect from which the amalgamation/ transfer shall take place. The scheme concerned herein does so provide viz., January 1, 1982. It is true that while sanctioning the scheme, it is open to the Court to modify the said date and prescribe such date of amalgamation/transfer as it thinks appropriate in the facts and circumstances of the case. If the Court so specifies a date, there is little doubt that such date would be the date of amalgamation/date of transfer. But where the Court does not prescribed 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 394-A 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) shall be deemed to have carried on the business for and on behalf of the Transferee Company (Holding Company) with all attendant consequences. It is equally relevant to notice that the Courts have not only sanctioned the scheme in this case but have also not specified any other date as the date of transfer/amalgamation. In such a situation, it would not be reasonable to say that the scheme of amalgamation takes effect on and from the date of the order sanctioning the scheme. We are, therefore of the opinion that the notices issued by the Income Tax Officer (impugned in the writ petition) were not warranted in law. The business carried on by the Transferor Company (Subsidiary Company) should be deemed to have been carried on for and on behalf of the Transfer Company . This is the necessary and the logical consequence of the court sanctioning the scheme of amalgamation as presented to it. The order of the Court sanctioning the scheme, the filing of the certified copies of the orders of the Court before the Registrar of Companies, the allotment of shares etc. may have all taken place subsequent to the date of amalgamation/transfer, yet the date of amalgamation in the circumstances of this case would be January 1, 1982. (Para 14)
JUDGMENT
B.P. Jeevan Reddy, J.-These appeals are preferred by Marshall Sons and Company (India) Limited (hereinafter referred to as the "Holding Company") as successors to Marshall Sons and Company (Manufacturing) Limited (hereinafter referred to as the "Subsidiary Company") against the judgment and order of the Madras High Court dismissing the writ petitions filed by them. The matter arises under the Income Tax Act.
2. The Holding Company had its registered office at 33-A, Chowranghee Road, Calcutta while the Subsidiary Company had its registered office at Madras. For the purposes of assessment under the Income Tax Act, while the accounting year of the Holding Company was the year ending on 30th June, the accounting year of the Subsidiary Company was the calender year. On Ist December, 1982, two letters were addressed by the Subsidiary Company to the Income Tax Officer stating that the company is desirous of effecting a change in the accounting year. They stated that they would wish to close their accounts of June 30, 1983 for the eighteen months period (January 1, 1982 to June 30, 1983) instead of closing the accounts on December 31, 1982. It was also stated that since the accounting year of the Holding Company ends on June 30, they too would like to follow the same practice. In response to said letters, the Income Tax Officer asked for certain particulars which were supplied. On February 3, 1983, the Income Tax Officer permitted the Subsidiary Company to change the accounting year form December 12, 1982 to June 30, 1983 subject to the conditions mentioned therein, viz.:
"As a consequence to the change, the income of the period of 18 months from 1.1.82 to 30.6.83 will be assessed for the asstt. year 1984-85. Any relief that may be withdrawn in the future legislation with effect from asstt. year 1984-85 will be made applicable to the entire income for the asst. year 1984-85 and depreciation will be allowed proportionately as per rules.
The asstt. year 1983-84 which is slipped on account of the change of the previous year will, however, be treated as one assessment year for the purposes of set off of carried forward losses, relief u/s. 80J of the Income Tax Act, 1961, if any."
3. In December, 1982, the Subsidiary Company passed a resolution proposing to amalgamate with the Holding Company with effect from January 1, 1982. An application was made to the Company Court and pursuant to the orders of the Court, a meeting of the shareholders was held on February 11, 1982 whereat a resolution was passed approving the amalgamation of the Subsidiary Company with the Holding Company. A similar resolution was passed by the shareholders of the Holding Company on May, 7, 1983. The Company Court (Madras High Court) sanctioned the scheme of amalgamation by its order dated November 21, 1983 in C.P.No. 23 of 1983. On a similar application filed before the Calcutta High Court, C.P. No. 284 of 1983, that High Court (Company Court) too sanctioned the scheme of amalgamation by its order dated January 11, 1984. In both the orders, it was directed that certified copies of the said orders shall be delivered to the Registrars of Companies at Madras and Calcutta within thirty days therefrom. Accordingly, certified copies of the orders were filed before the Registrars of Companies on January 29, 1984 at Madras and on February 24, 1984 at Calcutta. The name of the Subsidiary Company was struck off the register of Companies, maintained by the Registrar of Companies at Madras, On January 21, 1986.
4. On November 25, 1984, a notice under Section 139(2) of the Income Tax Act was issued to the Subsidiary Company calling upon it to file a return of its income for the Assessment Years 1984-85 (for the year ending June 30, 1983) and for 1985-86 (year ending June 30, 1984). The Subsidiary Company replied stating that inasmuch as the Subsidiary Company has been amalgamated with the Holding Company under a scheme of amalgamation sanctioned by the Company Courts of Mad
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