2019 Supreme(SC) 1387

SUPREME COURT OF INDIA
UDAY UMESH LALIT, INDU MALHOTRA, JJ.
M/s Dalmia Power Limited & Anr – Appellant
Versus
The Assistant Commissioner of Income Tax Circle 1, Trichy – Respondent
Civil Appeal Nos.9496-99 of 2019 (Arising out of SLP (C) Nos.19678-681 of 2019)
Decided On : 18-12-2019

IMPORTANT POINTS
On sanction of schemes for arrangement / amalgamation transferred companies lose their separate identity and character, and cease to exist on appointed date.
Assessment of the Transferee Company must take into account the income of both the Transferor and Transferee Companies.
Section 139(5) is applicable only when revised Returns were not filed on account of an omission or wrong statement or omission contained therein. Not applicable where filing of revised returns becomes impossibility.
Section 119(2)(b) applicable in cases of genuine hardship to admit an application, claim any exemption, deduction, refund or any other relief after expiry of stipulated period under the Act.

Headnote:

(a) Companies Act, 2013 - Section 230(5) r/w Rule 8(3), Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 - Notice for schemes for arrangement / amalgamation duly served to Department - Department not objecting within stipulated period - Schemes sanctioned by NCLT - Attaining statutory force - Transferred companies losing their separate identity and character, and ceased to exist on appointed date. (Para 4)

(b) Companies Act, 2013 - Section 230(5) r/w Rule 8(3), Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 - Section 139(5) - Sanction of scheme of Arrangement and Amalgamation - Assessment of the Transferee Company must take into account the income of both the Transferor and Transferee Companies - Instantly Appellant Nos.1 and 2/Transferee Companies filing their original Returns of Income on 30.09.2016 and 30.11.2016 respectively - Thereafter entering into Schemes of Arrangement and Amalgamation with 9 Transferor Companies in 2017 - Schemes finally sanctioned and approved by the NCLT on 20.04.2018 and 01.05.2018 with appointed Date as 01.01.2015 - Transferor/ Amalgamating Companies ceased to exist with effect from the Appointed Date, and their assets, profits and losses etc. stood transferred to books of Appellants/ Transferee Companies/ Amalgamated Companies - Schemes incorporating provisions for filing the revised Returns beyond the prescribed time limit - Appellants filing their Revised Returns accordingly on 27.11.2018 - Recomputation would have a bearing on the total income of the Appellants with respect to the A.Y. 2016-2018, particularly on matters in relation to carrying forward losses, unabsorbed depreciation etc. (Para 4)

(c) Income Tax act, 1961 - Section 139(5) - Providing for filing of revised return at any time before the expiry of one year from the end of the relevant assessment year or before the completion of the assessment, whichever is earlier - Applicable only when revised Returns were not filed on account of an omission or wrong statement or omission contained therein - Presently delay occurring on account of time taken to obtain sanction of Schemes of Arrangement and Amalgamation from the NCLT - NCLT passing last orders granting approval and sanction of Schemes only on 22.04.2018 and 01.05.2018 - Filing revised returns for A.Y. 2016-2017 before due date of 31.03.2018 becoming impossibility. (Para 7, 8)

(d) Income Tax act, 1961 - Section 119(2)(b) r/w CBDT Circular No.9 of 2015 - Condonation of delay - Representation to CBDT - Section 119(2)(b) applicable in cases of genuine hardship to admit an application, claim any exemption, deduction, refund or any other relief after expiry of stipulated period under the Act - Presently that not being the case section 119(2)(b) not applicable. (Para 9)

(e) Income Tax act, 1961 - Section 170(1) - Incumbent upon Department to assess total income of successor in respect of previous assessment year after date of succession - Presently predecessor companies/transferor companies succeeded by Appellants/transferee companies - Department required to assess income of the Appellants after taking into account revised Returns filed after amalgamation of the companies. (Para 10)

Facts of the case:

The Appellant No.1 filed its original Return of Income under Section 139 (1) of the Income Tax Act on 30.09.2016 for A.Y. 2016-2017 declaring a loss of Rs.6,34,33,806/-. Similarly, Appellant No.2 filed its original Return of Income under Section 139 (1) of the Income Tax Act on 30.11.2016 for A.Y. 2016-2017 declaring NIL income (after setting off Brought Forward Loss amounting to Rs.56,89,83,608/- against Total income of Rs. 56,89,83,608/-).

The Appellants entered into 4 interconnected Schemes of Arrangement and Amalgamation with 9 companies viz. DCB Power Ventures Ltd., Adwetha Cement Holdings Ltd., Odisha Cement Ltd., OCL India Ltd., Dalmia Cement East Ltd., Dalmia Bharat Cements Holdings Ltd., Shri Rangam Securities & Holdings Ltd., Adhunik Cement Ltd., Adhunik MSP Cement (Assam) Ltd. and their respective shareholders and creditors.

The Appointed Date of the Schemes was 01.01.2015, and would come into effect from 30.10.2018.

The Transferor and Transferee Companies filed Company Petitions under Sections 391 to 394 of the Companies Act, 1956 before the Madras and Guwahati High Courts.

The Schemes were duly approved and sanctioned by the NCLT, Guwahati vide Orders dated 18.05.2017 and 30.08.2017. NCLT, Chennai sanctioned the Schemes vide Orders dated 16.10.2017, 20.10.2017, 26.10.2017, 28.12.2017, 10.01.2018, 20.04.2018 and 01.05.2018.

The Appellants/ Transferee Companies manually filed revised Returns of Income on 27.11.2018 with the Department after the Schemes were sanctioned and approval was granted by the NCLT. The revised Returns were based on the revised and modified computation of total income and tax liability of the Transferor/Amalgamated Companies. In the revised Returns of Income, the Appellant No.1 claimed losses in the current year to be carried forward amounting to Rs.2,44,11,837/; whereas Appellant No.2 claimed losses in the current year, to be carried forward, amounting to Rs.1105,93,91,494/.

On 04.12.2018, the Department issued a Notice under Section 143(2) of the Income Tax Act to give effect to the approval of the Scheme.

On 05.12.2018, the Department recalled the Notice dated 04.12.2018 on the ground that the Appellants had belatedly filed their revised Returns without obtaining permission from the Central Board of Direct Taxes for condonation of delay under Section 119(2)(b) of the Income Tax Act, 1961 read with CBDT Circular No. 9/2015 dated 09.06.2015.

On 28.12.2018, the Department passed an Assessment Order u/S. 143(3) of the Income Tax Act.

The Appellants filed Writ Petitions before the Madras High Court praying for quashing of the Order dated 05.12.2018, and for a direction to the Department to complete the assessment for A.Y. 2015-2016 and A.Y. 2016-2017 after taking into account the revised Income Tax Returns filed on 27.11.2018, as well as the Orders dated 20.04.2018 and 01.05.2018 passed by the NCLT, Chennai approving the Schemes of Arrangement and Amalgamation.

The Single Judge of the Madras High Court allowed the Writ Petitions filed by the Appellants, and quashed the Order dated 05.12.2018 passed by the Department.

The Single Judge directed the Department to receive the revised Returns filed pursuant to the approval of the Schemes of Arrangement and Amalgamation by the NCLT, Chennai and complete the assessment for A.Y. 2015-2016 and A.Y. 2016-2017.

The Department filed Writ Appeals under Clause 15 of the Letters Patent Act challenging the Judgment & Order dated 30.04.2019 passed by the Single Judge.

A Division Bench of the Madras High Court allowed the Writ Appeals, and reversed the Judgment of the Single Judge.

The Department did not consent to waive the procedures or statutory requirements prescribed under S.139(5) and 119(2)(b) of the Income Tax Act in respect of filing of revised Returns of Income and vide letter dated 11.07.2019 informed the Appellants that in case they fail to file the revised Returns before the expiry of the limitation period prescribed for completion of assessment in accordance with Explanation 1 to Section 153 r.w. Proviso (1) i.e. 60 days from the date of the impugned Judgment, the assessment for A.Y. 2016-2017 would be conducted on the basis of the original Returns filed by them.

The Department informed the Appellants on 05.08.2019 that since the revised Returns were not in accordance with Sections 139(5), 139(3) of the Act r/w Rule 12(3) of the Income Tax Rules, 1962, the revised Returns were invalid, and could not be considered in view of the procedural requirement under Section 119(2)(b) read with CBDT Circular No. 9 of 2015.

Finding of the Court:

Department directed to receive the revised Returns of Income for A.Y. 2016-2017 filed by the Appellants, and complete the assessment for A.Y. 2016-2017 after taking into account the Schemes of Arrangement and Amalgamation as sanctioned by the NCLT.

Result: Appeals allowed.