Dalmia Power Limited Vs ACIT (Supreme Court of India)
When the companies merged and amalgamated into another, the amalgamating companies lost their separate identity and character, and ceased to exist upon the approval of the Schemes of Amalgamation.
Every scheme of arrangement and amalgamation must provide for an Appointed Date. The Appointed Date is the date on which the assets and liabilities of the transferor company vest in, and stand transferred to the transferee company. The Schemes come into effect from the Appointed Date, unless modified by the Court.
Pursuant to the Scheme of Arrangement and Amalgamation, the assessment of the Transferee Company must take into account the income of both the Transferor and Transferee Companies.
In the present case The Schemes incorporated provisions for filing the revised Returns beyond the prescribed time limit since the Schemes would come into force retrospectively from the Appointed Date i.e. 01.01.2015. Accordingly, the Appellants filed their Revised Returns on 27.11.2018.
The counsel appearing for the Department relied on Section 139(5) and 119(2)(b) of the Income Tax Act r.w. Circular No.9 of 2015 issued by the CBDT to contend that the Appellant ought to have made an application for condonation of delay, and sought permission from the CBDT, before filing the revised Returns beyond the statutory period of 31.03.2018. The Appellants having belatedly filed their revised Returns on 27.11.2018, which was beyond the due date of 31.03.2018 for A.Y. 2016-2017, the assessment could only be done on the basis of the original Returns filed by the Appellants.
Hon’ble Supreme Court held that provisions of Section 139(5) is not applicable to the facts and circumstances of the present case since the revised Returns were not filed on account of an omission or wrong statement or omission contained therein. The delay occurred on account of the time taken to obtain sanction of the Schemes of Arrangement and Amalgamation from the NCLT.
The counsel appearing for the Department submitted that the Appellants ought to have made a representation to the Board under Section 119(2)(b) of the Income Tax Act for condonation of delay while filing the revised Returns. A perusal of Section 119(2)(b) shows that it is applicable in cases of genuine hardship to admit an application, claim any exemption, deduction, refund or any other relief under this Act after the expiry of the stipulated period under the Income Tax Act.
On a plain reading of Section 119(2)(b), we find that this provision would not be applicable where an assessee has restructured their business, and filed a revised Return of Income with the prior approval and sanction of the NCLT, without any objection from the Department.
Subsection (1) of Section 170 makes it clear that it is incumbent upon the Department to assess the total income of the successor in respect of the previous assessment year after the date of succession.
In the present case, the predecessor companies/transferor companies have been succeeded by the Appellants/transferee companies who have taken over their business along with all assets, liabilities, profits and losses etc.
In view of the provisions of Section 170(1) of the Income Tax Act, the Department is required to assess the income of the Appellants after taking into account the revised Returns filed after amalgamation of the companies.
The Department is 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.
FULL TEXT OF THE SUPREME COURT JUDGEMENT
Leave granted.
1. The issue which arises for consideration in the present Civil Appeals is whether the Department ought to have permitted the assessee companies to file the revised Income Tax Returns for the Assessment Year 2016-2017 after the expiry of the due date prescribed under Section 139(5) of the Income Tax Act, 1961 on account of the pendency of proceedings for amalgamation of the assessee companies with other companies in the group under Sections 230-232 of the Companies Act, 2013.
2. The factual background of this case briefly stated, is that:
2.1 The Appellant No.1 M/s Dalmia Power Limited and Appellant No.2 M/s Dalmia Cement (Bharat) Limited are public limited companies, incorporated under the Companies Act, 1956. The Appellants have their registered offices at Dalmiapuram Lalgudi Taluk, Dalmiapuram, District Tiruchirappalli, Tamil Nadu.
2.2 The Appellant No.1 is engaged in the business of building, operating, maintaining, and investing in power and power related businesses, directly or through downstream companies. The Appellant No.2 is engaged in the business of manufacturing and selling of cement, generation of power, maintaining and operating rail systems and sold waste management system which provide services to the cement business.
2.3 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/).
2.4 With a view to restructure and consolidate their businesses, and enable better realisation of the potential of their businesses, which would yield beneficial results, and enhanced value creation for their shareholders, better security to their creditors and employees, the Appellants (also referred to as “Transferee Companies” or “Amalgamated Companies”) 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. (also referred to as “Transferor Companies” or “Amalgamating Companies”) 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.
2.5 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.
On the coming into force of the Companies Act, 2013, the Company Petitions were transferred to NCLT, Chennai and NCLT, Guwahati.
2.6 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.
2.7 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 taxguru.in 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/.
2.8 The Appellants submit that the revised Returns were filed after the due date for filing revised Returns of Income u/S. 139(5) for the Assessment Year 2016-2017 since the NCLT passed the final Order on 01.05.2018. Consequentially, it was an impossibility to file the revised Returns before the prescribed date of 31.03.2018.
2.9 A summary of the dates relevant to the case of Appellant No.1 are tabulated as under:
