Impactful Judgement: Filing of Revised Income Tax Returns Post Amalgamation

In a significant ruling by the Supreme Court of India, a judgement was passed regarding the filing of revised income tax returns after the amalgamation of companies M/s Dalmia Power Limited and M/s Dalmia Cement (Bharat) Limited. The Court’s decision has far-reaching implications in the realm of income tax compliance and corporate restructuring. This case sheds light on the intersection of tax laws and company amalgamation processes, impacting the business landscape for many entities.

Facts

• The Appellants, Transferor and Transferee Companies filed Company Petitions under Sections 391 to 394 of the Companies Act, 1956 before the Madras and Guwahati High Courts, which were later transferred to NCLT, Chennai and NCLT, Guwahati.
• The Appellants, engaged in power and cement businesses, entered into Schemes of Arrangement and Amalgamation with other companies to restructure and consolidate their businesses.
• The Department issued a Notice under Section 143(2) of the Income Tax Act on 04.12.2018, which was later recalled on 05.12.2018 due to alleged belated filing of revised Returns without permission from CBDT.
• The Appellants filed Writ Petitions before the Madras High Court to challenge the rejection of their revised Returns and requested completion of assessment for A.Y. 2015-2016 and A.Y. 2016-2017.
• The NCLT sanctioned the Schemes of Arrangement clarifying that necessary permissions and compliances were required, and the Department rejected the revised Returns citing procedural reasons.
• The Appellants filed revised Returns manually on 27.11.2018, which the Department deemed invalid due to not being filed electronically as per Rule 12(3) of the Income Tax Rules.
• The Single Judge directed the Department to receive and consider the revised Returns filed after NCLT approval for completing the assessments for A.Y. 2015-2016 and A.Y. 2016-2017 within 12 weeks.
• The Department informed the Appellants that the revised Returns were invalid as per procedural requirements under the Income Tax Act and CBDT Circular No 9/2015.
• The Appellants claimed losses in the revised Returns after setting off Brought Forward Losses, and the Department warned of conducting assessment based on original Returns if revised Returns were not filed within the limitation period.
• The Appointed Date of the Schemes was 01.01.2015, and the revised Returns were filed to reflect the merged income of the Transferor/Amalgamated Companies.
• The Single Judge held that Clause 64(c) of the Scheme allowed the Appellants to file revised Returns of Income beyond the prescribed period under the Income Tax Act.
• The Division Bench of the Madras High Court in the impugned Judgment dated 04.07.2019 reversed the Single Judge’s decision and allowed the Writ Appeals.
• The Division Bench emphasized that Clause 64 of the Scheme should be viewed as an enabling clause, directing the Appellants to follow the procedure for filing belated revised Returns of Income.

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Issue

• Department’s refusal to permit filing of revised Income Tax Returns after due date
• Assessee companies sought to file revised returns due to pending amalgamation proceedings
• Issue of whether Department should have allowed filing of revised returns examined
• Background of companies – M/s Dalmia Power Limited and M/s Dalmia Cement (Bharat) Limited
• Incorporation details of the appellant companies under the Companies Act, 1956

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Analysis

• The Schemes of Arrangement and Amalgamation were sanctioned by NCLT, Chennai and Guwahati, attaining statutory force inter se the Transferor and Transferee Companies as well as in rem without objections from authorities.
• Revised Returns were filed post NCLT approval beyond the statutory deadline, as the last orders were passed only on 22.04.2018 and 01.05.2018.
• Provisions in the Scheme allowed for filing revised returns beyond the time limit without incurring penalties.
• Such revised returns were filed due to restructuring business and with prior NCLT approval.
• The Appellants, being the Transferee Companies, were required to file revised returns post amalgamation as per the Schemes sanctioned by NCLT.
• The assessment had to consider the income of both Transferor and Transferee Companies, as they merged without objections from relevant authorities.
• The scheme of amalgamation needed to provide a specific date for the amalgamation/transfer to take place, as per court specifications.
• The Appellants were entitled to claim refunds, tax credits, set-offs, etc., post amalgamation as per the Schemes.
• The Department did not object within the stipulated period despite notices being served under the Companies Act, 2013.
• The amalgamating Companies ceased to exist once the Schemes were approved, transferring assets, profits, and losses to the Appellants/Tansferee Companies.
• Section 119(2)(b) of the Income Tax Act allows the subordinate authorities to consider applications for exemptions or refunds even after the specified period.
• Sub-section (5) of Section 230 of the Companies Act, 2013 mandates sending notices and documents to various authorities including the Income Tax Department, RBI, SEBI, etc. for any compromise or arrangement.
• Section 170(1) of the Income Tax Act defines the assessment of a predecessor and successor in case of business succession.
• In case no representations are received from statutory authorities within thirty days regarding a proposed scheme, it will be presumed that they have no objections.
• Rule 8 of the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 outlines the procedure for authorities to make representations in such cases.
• Date of amalgamation/transfer is the date specified in the scheme as “the transfer date”
• The Court does not prescribe any specific date, but sanctions the presented scheme
• Learned Single Judge allowed the Writ Petitions.
• The decision was found to be right.
• The judgement was in favor of the Writ Petitions.

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Decision

• The impugned Judgment and Order dated 04.07.2019 passed by the Division Bench is set aside.
• The judgment dated 30.04.2019 passed by the Single Judge is restored.
• The Civil Appeals are allowed.
• The Department is directed to receive the revised Returns of Income for A.Y. 2016-2017 and complete the assessment considering the Schemes of Arrangement and Amalgamation approved by the NCLT.
• Any pending applications are disposed of accordingly.

Case Title: M/S DALMIA POWER LTD. Vs. THE ASSISTANT COMMISSIONER OF INCOME TAX

Case Number: C.A. No.-009496-009499 / 2019

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