Case Law Details

Case Name : EADS India (P) Ltd. Vs Dy. CIT (ITAT Bangalore)
Appeal Number : ITA Nos. 764/Del/2015, 1856 & 2638/Del/2014, IT(TP)A No. 95/Bang/20l6
Date of Judgement/Order : 17/10/2017
Related Assessment Year :
Courts : All ITAT (5188) ITAT Bangalore (251)

EADS India (P) Ltd. Vs Dy. CIT (ITAT Bangalore)

In case of amalgamation, assessee was required to file the revised Form No. 36 in accordance with rules, to continue its appeal in the name of new entity. In the absence of any amended Form 36/memo of parties, the present appeals were not maintainable.

It is abundantly clear that the proceedings initiated by EADS India (P) Ltd. can only be continued by the transferee company i.e., Airbus Group India (P) Ltd. in its own name.

In our view, as the rights and liabilities of EADS India (P) Ltd. are transferred to Airbus Group India (P) Ltd. , therefore it is essential to move an application for filing on record the amended memo of parties and also to file a fresh form 36, mentioning the amalgamation of the assessee company with Airbus Group India (P) Ltd. and peruse appeals in the name of new entity.

FULL TEXT OF THE ITAT JUDGMENT

These appeals are filed by the assessee, namely, EADS India (P) Ltd. for the assessment years 2008-09, 2009-10, 2010-11 and 2011-12.

2. At the time of hearing on 16-10-2017, it came to the notice of the bench that vide order dated 19-3-2015, the assessee company amalgamated with three other group entities, namely, Airbus Group India (P) Ltd. EADS India (P) Ltd. and Urocopter India (P) Ltd. As per the scheme approved by the Hon’ble High Court, the appointed date of merger was 1-4-2014 and the effective date of merger was 1-4-2015.

3. As the assessee company got merged with Airbus Group India (P) Ltd. therefore the bench has directed on 16-10-2017 to the Counsel appearing on behalf of the assessee to file the amended Memo of Parties, along with amended form 36 in the name of new entity on the nest date of hearing i.e., 17-10-2017 or in alternative make submission about the maintainability and continuity of the appeal in the name of old entity.

4. Today i.e., on 17-10-2017 , the learned Counsel appealing for the assessee had intimated to the bench that the power attorney had duly been filed in the name of the new entity i.e., Airbus Group India (P) Ltd. However, it was the submission of the learned Counsel that there is no requirement of law or under the Rules framed under the Income Tax Act to file amended Memo of Parties or to file the amended form 36 in the name of M/s. Airbus Group India P. . The learned Counsel has relied upon rule 26 and rule 9 of the ITAT Rules and has submitted that neither rule 26 nor rule 9 is applicable to the amalgamated company. In the present case there is no change of address, therefore rule 9 is not attracted. Similarly rule 26 is only applicable to the amalgamated company, as is only applicable to a company wound up. It was submitted by the learned Counsel that the assessee had intimated to the Registrar of Companies, assessing officer at Delhi and TPO at Bangalore about the amalgamation and about the scheme of amalgamation. However, the learned Counsel on instructions again stated that the assessee is not willing to file an application either for seeking time to file the amended form 36 or memo of parties on record, as it was not the requirement of law.

5. Per contra, the learned Departmental Representative submitted that the assessee is duty-bound to file the revised form no. 36 in accordance with rules and in the absence of any amended form 36/memo of parties, the present appeal are not maintainable

6. We have heard the rival contentions and perused the record. Rule 26 of the ITAT Rules provides as under :–

Where an assessee whether he be an appellant or the respondent to an appeal dies or is adjudicated insolvent or in the case of a company being wound up, the appeal shall not abate and may, if the assessee was the appellant, be continued by, and if he was the respondent be continued against, the executor, administrator or other legal representative of the assessee or by or against the assignee, receiver or liquidator, as the case may be :–

Provided that (i) The assessee files a revised Form No. 36 duly filled up giving revised name of the party duly verified in the same manner as required by rule 47 of the Income Tax Rules, 1962 ; (ii) The revised Form No. 36 shall specify the appeal number as originally assigned or, in the event of non-availability of such number on the date of filing the appeal shall be mentioned in the covering letter to enable the Registrar to place fresh Form No. 36 in the original file.

Rule 26 envisages three situations when the appeal filled by the assessee or revenue will not abate :–

(i) The appellant./respondent dies

(ii) The appellant/respondent is adjudicated insolvent

(iii) The company being wound-up

Thus it is clear, if the assessee, whether he be an appellant or respondent whether natural or jurist person to an appeal dies or is adjudicated insolvent, then the appeal shall not abate subject to assessee filling revised Form No. 36 duly filled up giving revised name of the party duly verified in the same manner as required by rule 47 of the Income Tax Rules, 1962. But in the case of amalgamation the transferee company ceases to exist and transfer all its rights to the amalgamated company as per transfer scheme.

In the opinion of the bench, the case of amalgamation of companies may not strictly falls under first limb of rule 26 i.e., if the appellant or the respondent to an appeal dies but for this extinction, surrender or transfer of right the applicable provision under Civil Procedure Code Order 22 rule 10 along r.w.s.255(6) of Income Tax Act, as under :–

10. Procedure in case of assignment before final order in suit–. (1) In other cases of an assignment, creation or devolution of any interest during the pendency of a suit, may, by leave of the Court, be continued by or against the person to or upon whom such interest has come or devolved. (2) The attachment of a decree pending an appeal therefrom shall be deemed to be an interest entitling the person who procured such attachment to the benefit of sub-rule (1).

In the opinion of Bench, order 22 rule 10 of CPC is applicable as, tribunal rules are silent on this aspect.

Further reading of section 394 of the Companies Act and other provisions of the Companies Act, made it abundantly clear, as a result of amalgamation of two companies into one, the transferor company loses its entity as it ceases to have its business and also the respective rights and liabilities under the scheme of amalgamation. Thus the transferor company ceases to exist with effect from the date of amalgamation is made effective. We also draw support from the following judgments of Delhi High court.

7. The Hon’ble Delhi High Court m the matter of Yapi Kredi Bank (Deutschland) AG v. Mr. Ashok. K. Chaahan and Ors. (17-1-2013-Del-HC) in paras 16 and 17, had noted as under :–

16. The distinction noticed by this Court between a corporate death, as a consequence of final winding up order, under section 481 of the Companies Act, on the one hand, and the extinguishment of the corporate personality of the transferee (or amalgamating/merging) company cannot be lost sight of, because the element of voluntariness inherent in the latter circumstance together with the willingness of the transferee company to “take over” the property, liabilities and functioning of the transferee company is lacking in the case of a company which is dissolved after all steps to wind it up are completed. In the latter eventuality, the question of any loose threads in the form of liabilities or assets for which no provision is made would not arise; the Liquidator who takes charge of its assets and affairs would have, in the course of the winding up process, provided for, or sought orders in respect of each eventuality. The Court is also mindful of section 394 (2) which provides for the transfer of liabilities or properly of the transferee company to the transferor company. In Saraswati Industrial Syndicate, this was precisely noticed, when the Supreme Court held that the “..true effect and character of the amalgamation largely depends on the terms of the scheme of merger. But there can be any doubt that when two companies amalgamate and merge into one the transferor company loses its entity as it ceases to have its business. However, their respective rights or liabilities are determined under the scheme of amalgamation.” This position-was again underscored in Singer (supra).-

17. The question identical to the one posed to this Court in this case arose for consideration before the Bombay High Court. A learned Single Judge of that Court in Re Delta Distilleries Limited, Mumbai v. (1) Shaw Wallace and Company Limited, Calcutta; (2) Shaw Wallace Distilleries Limited; (3) United Spirits Limited (MANU/MH/1022/2007 • 2008 (1) MahJJ 899) held that :–

The effect of a Scheme of Amalgamation, as held by the Supreme Court in Singer India Ltd. v. Chander Mohan Chadha, MANU/SC/062672004 : (2004) 7 SCC 1 is that as a result of amalgamation of two Companies into one, “the Transferor Company loses its entity as it ceases to have its business”. The respective rights or liabilities are determined under the Scheme of Amalgamation but the corporate entity of the Transferor Company ceases to exist with effect from the date the amalgamation is made effective. The concept of abatement is inapposite where a merger takes place in the course of a Scheme of Amalgamation in pursuance of a sanction received from the Company Court. The transferor in such a case merges with the transferee who becomes the successor in interest of the assets, liabilities and business to the extent contemplated in the Scheme. There is in other words a devolution of interest. In law, what takes place in the course of a Scheme of Amalgamation is the devolution of the interest of the Transferor upon the Transferee.

The above views of the learned Single judge were confirmed by the Division Bench, of the Bombay High Court by its decision dated 71-2-201.0 in Appeal No. 26/2008.

8. Similarly, the Hon’ble Delhi High Court in the matter of International Tractors Ltd. and Ors. v. Punjab Tractors Limited and Ors. (29-2-2016–DELHC) : MANU/DE/0473/2016, in paras 10 and 11 held as under :–

10. Order XXII rule 10 CPC specifically deals with the assignment, creation or devolution of any interest during the pendency of the suit. Supreme Court in the decision reported as MANU/SC/0381/2001 : (2001) 6 SCC 534 Dhurandhar Prasad Singh v. Jai Prakash University & Ors. noting the distinction between Rules 3,4 & 10 of Order XXII held :–

“6. In order to appreciate the points involved, it would be necessary to refer to the provisions of Order 22 of the Code, rules 3 and 4 whereof prescribe procedure in case of devolution of interest on the death of a party to a suit. Under these Rules, if a party dies and right to sue survives, the court on an application made in that behalf is required to substitute legal representatives of the deceased party) for proceeding with a suit but if such an application is not filed within the time prescribed by law, the suit shall abate so far as the deceased party is concerned. Rule 7 deals with the case of creation of an interest in a husband on marriage and rule 8 deals with the case of assignment on the insolvency of a plaintiff rule 10 provides for cases of assignment, creation and devolution of interest during the pendency of a suit other than those referred to in the foregoing Rules and is based on the principle that the trial of a suit cannot be brought to an end merely because the interest of a parly in the subject-matter of the suit has devolved upon another during its pendency but such a suit may be continued with the leave of the court by or against the person upon whom, such interest has devolved. But, if no such step is taken, the suit may be continued with the original parly and the person upon whom the interest has devolved will be bound by and can have the benefit of the. decree, as the case may be, unless it is shown in a properly constituted proceeding that the original party being no longer interested in the proceeding did not vigorously prosecute or colluded with the adversary resulting in decision adverse to the party upon whom the interest had devolved. The legislature while enacting rules 3, 4 and 10 has made a clear-cut distinction. In cases covered by rules 3 and 4, if right to sue survives and no application for bringing the legal representatives of a deceased party is filed within the time prescribed, there is automatic abatement of the suit and procedure has been prescribed for setting aside abatement under rule 9 on the grounds postulated therein. In­cases covered by rule 10, the legislature has not prescribed any such procedure in the event of failure to apply for leave of the court to continue the proceeding by or against the person upon whom interest has devolved during the pendency of a suit which shows that the legislature was conscious of this eventuality and yet has not. prescribed that failure would entail dismissal of the suit as it was intended that the proceeding would continue by or against the original party although he ceased to have any interest in the subject of dispute in the event of failure to apply for leave to continue by or against the person upon whom the interest has devolved for bringing him on the record.

7. Under rule 10 Order 22 of the Code, when there has been a devolution of interest during the pendency of a suit, the suit may, by leave of the court, be continued by or against persons upon whom such interest has devolved and this entitles the person who has acquired an interest in the subject-matter of the litigation by an assignment or creation or devolution of interest pendente lite or suitor or any other person interested, to apply to the court for leave to continue the suit. But it does not follow that it is obligatory upon them, to do so. If a party does not ask for leave, he takes the obvious risk that the suit may not be properly conducted by the plaintiff on record, and yet, as pointed out by Their Lordships of the Judicial Commissioner in Moti Lal Karrabuldin (MANU/PR/0019/1897 : ILR (1898) 25 Cal 179 : 24 IA 170 : : 1 CWN 639 (PC)) he will be bound by the result of the litigation even thoughts he is not represented at the Hearing unless unless it is shown tha the litigation was not properly conducted by the original party or he colluded with the adversary. It I also plain that if the person who has acquired an interest by devlution, obtains leave to carry on the suit, he suit in has hands is not a new suit, for, as Lord Kingsdown of the Judicial Committee said in (MANU/PR/0006/ 1859 : (1857-60) 7 MIA 323), a cause of action is not prolonged by mere transfer of the title. It is the old suit earned on at his instance and he is bound by all proceedings up to the stage when he obtains leave to carry on the proceedings.”

11. In the present case admittedly PTL has merged with MML under a scheme of amalgamation in terms of section 394 (3) of the Companies Act pursuant to orders passed by the Bombay High Court and Punjab & Haryana High Court lhus we find no error in the impugned judgment dated 8-9-2015 holding that the provision of Order XXII rule 10 CPC applies in case of amalgamation and m.er9er of a company and not the provisions of Order XXII rules 2, 3 and 4 CPC’and once the provision of Order XXII rule 10 CPC applies and there is devolution of interest, there does not arise airy issue of limitation for filing an application under Order XXII rule 10 CPC as held by the Supreme Court in the decision reported as Dhurandhar Prasad Singh (supra) However we set aside the impugned order to the extent of imposition oj actual cost on the appellant by the learned Single Judge. We cannot lose sight of the fact that when the plea of suit having abated was taken by the appellant the judgment of the Single Judge in Yapi, Kredi Bank (Deutschland) was holding the fie learned

Similarly in BDR Builders & Developers (P) Ltd. in (W.P. (C) No. 2712 of 2016, dt. 26-7-2017) it was held by Hon’ble court as under :

21. The resultant position is that on 3-4-2012 who, the notice under section 148 of the Act was issued to VBPPL it was issued to an entity which was non-existent in the eve of law. In Spice Infotainment Ltd. v. CIT (2012) 247 CTR 500 (Delhi) the assessment in the name of non-existmg entity was held to be void. It was noticed in that case that despite the assessing officer being informed that the assessee. stood amalgamated with M. Corp. (P) Ltd. by the order of the High Court, the assessing officer completed the assessment against the assessee. i.e., Spice Entertainment Ltd. which was non-existent as on that day.

22. In similar circumstances in Rustagi Engg. Udvog (P) Ltd. v. Dy. CIT (2006) 382 ITR 443 (Delhi). This Court held that “a is well settled that in a case of amalgamation, the amalgamated company would stand dissolved from the date on which the amalgamation/transfer would take effect.” In that case, the Court was of the view that the notices impugned therein issued to the entity after it was amalgamated were liable to be set aside on that ground alone. The Court referred to the decision of this Court dated 3-8-2015 in ITA No. 471 of 2011 (Spice Infotainment Ltd. v. CIT) where the Court had upheld the order of the ITAT declaring the assessment against an Assessee after if was dissolved to be invalid. The Court termed it a ‘jurisdictional defect’.

From the reading of the above judgments of the Hon’ble Delhi High Court, it is crystal clear that after the amalgamation of the companies, the new company comes into existence and all the rights and liabilities of the existing company shall be governed by the scheme of amalgamation approved by the Hon’ble High Court and proceedings initiated against the old entities arc bad in law.

9. In the present case, if we look into the scheme of amalgamation, particularly para 4, which deals with the legal proceedings, it provides as under :–

4. Legal Proceedings :–

4.1 If any suit, appeal or other proceedings of whatever nature by or against the Transferor Companies is pending the same shall not abate or be discontinued or in any way be prejudicially affected by reason of this amalgamation or by anything contained in this Scheme, but the said suit, appeal or other legal proceedings may be continued, prosecuted and enforced by or against the Transferee Company in the same manner and to the same extent as it would or might have been continued, prosecuted and enforced by or against the Transferor Companies as if the Scheme had not been made.

4.2 On and from the Effective Dale, the Transferee Company shall, and may, if required, initiate, continue any legal proceedings in relation to the Transferor Companies.

In view of the scheme, it is abundantly clear that the proceedings initiated by EADS India (P) Ltd. can only be continued by the transferee company i.e., Airbus Group India (P) Ltd. in its own name.

In our view, as the rights and liabilities of EADS India (P) Ltd. are transferred to Airbus Group India (P) Ltd. , therefore it is essential to move an application for filing on record the amended memo of parties and also to file a fresh form 36, mentioning the amalgamation of the assessee company with Airbus Group India (P) Ltd. and peruse appeals in the name of new entity.

10. As assessee despite directions given by the bench, faded to file amended form 36 and washes to continue the appeal m the name of old entity namely EADS India (P) Ltd. despite its amalgamation with Airbus Group India (P) Ltd. with effective date of merger as 1-4-2015, bench is left with no option but to dismiss the appeals.

11. In the result, assessee’s appeals are dismissed.

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