Supreme Court of India
M/S DALMIA POWER LIMITED & ANR.versusTHE ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE 1, TRICHY
- Citation
- 2019 INSC 1410
- Decided
- 18 December 2019
- Disposal
- Appeal(s) allowed
Holding
Section 139(5) does not apply where the delay in filing revised returns is due to obtaining NCLT approval for a scheme of arrangement, and the Department must accept the revised returns filed under the scheme.
Summary
M/s Dalmia Power Ltd. and M/s Dalmia Cement (Bharat) Ltd. filed original income tax returns for AY 2016-17 and later entered into schemes of arrangement and amalgamation with nine other companies, which were approved by the NCLT only in April-May 2018. The companies filed revised returns on 27 November 2018, beyond the statutory deadline of 31 March 2018, and the Income Tax Department rejected them, insisting on a condonation application under Section 119(2)(b) and the CBDT circular. The appellants challenged the rejection in writ petitions; a Single Judge allowed the filings, but a Division Bench reversed that decision. The Supreme Court examined whether Section 139(5) of the Income Tax Act applies when the delay is caused by the time taken to obtain NCLT approval, and whether Section 119(2)(b) can be invoked in such circumstances. The Court held that Section 139(5) is inapplicable because the revised returns were not filed due to an omission or mistake, and the delay was unavoidable; consequently, the Department must accept the revised returns filed under the scheme. The appeals were allowed, restoring the Single Judge’s order and directing the Department to assess the income of the successor companies taking the scheme into account.
Issues considered
- Whether Section 139(5) of the Income Tax Act, 1961 applies to the filing of revised returns when the delay is caused by the time taken to obtain NCLT approval for a scheme of arrangement and amalgamation.
- Whether the Department can require the assessee to seek condonation of delay under Section 119(2)(b) and the CBDT circular when the revised return is filed pursuant to an approved scheme.
- Whether the Department is obligated to accept revised returns filed under the provisions of a scheme of arrangement despite non‑compliance with the procedural requirements of Section 139(5) and the Income Tax Rules.
Legislation cited
- Companies Act, 2013s. 230-252, s. 230(5)
- Income Tax Act, 1961s. 119(2)(b), s. 139(5), s. 143(2), s. 170(1)
Subjects
Income TaxSection 139Section 119Companies ActScheme of ArrangementAmalgamationRevised ReturnCondonation of delayNCLTSuccessionTax assessment
Judgment
1236 [2019] REPORTS
SUPREME COURT 18 S.C.R. 1236 [2019] 18 S.C.R.
A M/S DALMIA POWER LIMITED & ANR.
v.
THE ASSISTANT COMMISSIONER
OF INCOME TAX CIRCLE 1, TRICHY
B (Civil Appeal Nos. 9496-99 of 2019)
DECEMBER 18, 2019
[UDAY UMESH LALIT AND INDU MALHOTRA, JJ.]
Income Tax Act, 1961 – ss.139 (5), 143(2) – Companies Act,
2013 – ss.230-252 – Appellant Nos. 1 & 2 filed its original return
C
of Income u/s. 139(1) of the Act, 1961 for A.Y. 2016-17 on
30.09.2016 and 30.11.2016 respectively – The appellants entered
into schemes of arrangement and amalgamation with 9 companies
– The appointed date as per the schemes was 01.01.2015 – The
Schemes were sanctioned and approved by NCLT – Consequent to
D which, the appellants/transferee companies manually filed revised
Returns of Income on 27.11.2018 with the Department – The
Department contended that the appellant did not file application
for condonation of delay and sought permission from CBDT, before
filing the revised Returns beyond the statutory period of 31.03.2018
– The notice issued by the Department u/s. 143(2) of the Act, 1961
E
to give effect to the approval of the scheme was also withdrawn –
Appellants filed writ petitions – The Single Judge of the High Court
enabled the appellants to file their revised Returns of Income beyond
the prescribed period under the Income Tax Act – However, the
Division Bench of the High Court reversed the Judgment of the
F Single Judge – On appeal, held: The s.139 (5) of the Income Tax
Act is not applicable to the facts and circumstances of the case
since the revised returns were not filed on account of an omission
or wrong statement – The delay occurred on account of the time
taken to obtain sanction of the schemes of arrangement and
amalgamation from the NCLT – It was impossible for the assessee
G
companies to have filed the revised returns of Income for the A.Y.
2016-2017 before the due date of 31.03.2018, since the NCLT had
passed the last orders granting approval and sanction of the schemes
only on 22.04.2018 and 01.05.2018 – The Single Judge of the High
Court had rightly allowed the writ petitions – Accordingly, the
H Judgment of the Division Bench of the High Court set aside.
1236
M/S DALMIA POWER LTD. v. THE ASSISTANT COMMR. OF 1237
INCOME TAX CIRCLE 1, TRICHY
Allowing the appeals, the Court A
HELD: 1. In view of this Court, this s.139(5) of the Income
Tax Act, 1961 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 B
sanction of the Schemes of Arrangement and Amalgamation from
the NCLT. [Para 7][1253-F]
2. In the facts of the present case, it was an impossibility
for the assessee companies to have filed the revised Returns of
Income for the A.Y. 2016-2017 before the due date of 31.03.2018, C
since the NCLT had passed the last orders granting approval
and sanction of the Schemes only on 22.04.2018 and 01.05.2018.
[Para 8][1253-G]
3. The counsel appearing for the Department submitted
that the Appellants ought to have made a representation to the D
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 E
stipulated period under the Income Tax Act. [Para 9][1254-A-B]
4. On a plain reading of Section 119(2)(b), this Court finds
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 F
any objection from the Department. Rules of procedure have been
construed to be the handmaiden of justice. The purpose of
assessment proceedings is to assess the tax liability of an assessee
correctly in accordance with law. [Para 9][1254-E-F]
5. In the present case, the predecessor companies/ G
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
H
1238 SUPREME COURT REPORTS [2019] 18 S.C.R.
A Department is required to assess the income of the Appellants
after taking into account the revised Returns filed after
amalgamation of the companies. [Para 10][1255-D-E]
J.K. (Bombay) (P) Ltd. v. New Kaiser-I-Hind Spg. and
Wvg. Co. Ltd. [1969] 2 SCR 866; Pr. Commissioner of
B Income Tax, New Delhi v. Maruti Suzuki India Limited
2019 (10) SCALE 21; Marshall Sons & Co. (India)
Ltd. v. ITO (1997) 2 SCC 302 : [1996] 9 Suppl. SCR
216; Kailash v. Nankhu (2005) 4 SCC 480 : [2005] 3
SCR 289; State of Punjab v. Shamlal Murari (1976) 1
SCC 719 : [1976] 2 SCR 82; National Thermal Power
C
Co. Ltd. v. Commissioner of Income Tax (1997) 7 SCC
489 – referred to.
Case Law Reference
[1969] 2 SCR 866 referred to Para 4.6
D 2019 (10) SCALE 21 referred to Para 4.7
[1996] 9 Suppl. SCR 216 referred to Para 4.8
[2005] 3 SCR 289 referred to Para 9
(1976) 1 SCC 719 referred to Para 9
E
(1997) 7 SCC 489 referred to Para 9
CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 9496-
9499 of 2019.
From the Judgment and Order dated 04.07.2019 of the High Court
F of Madras at Madurai in W.A. Nos. 566, 567, 568 and 569 of 2019.
S. Ganesh, Sr. Adv., Anand Sukumaran, S. Sukumaran, Bhupesh
Kr. Pathak, Ms. Meera Mathur, Advs. for the Appellants.
Arijit Prasad, Sr. Adv., S.A. Haseeb, Amit Kr., Prem Prakash,
Anas Zaidi, Mrs. Anil Katiyar, Ms. Seema Begnani, Advs. for the
G Respondent.
H
M/S DALMIA POWER LTD. v. THE ASSISTANT COMMR. OF 1239
INCOME TAX CIRCLE 1, TRICHY
The Judgment of the Court was delivered by A
INDU MALHOTRA, J.
Leave granted.
1. The issue which arises for consideration in the present Civil
Appeals is whether the Department ought to have permitted the assessee B
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. C
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 D
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
E
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. F
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 G
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/-).
H
1240 SUPREME COURT REPORTS [2019] 18 S.C.R.
A 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
B
“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.,
C 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.
D 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.
E 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
F 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
G 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
H
M/S DALMIA POWER LTD. v. THE ASSISTANT COMMR. OF 1241
INCOME TAX CIRCLE 1, TRICHY [INDU MALHOTRA, J.]
Income, the Appellant No.1 claimed losses in the current A
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 B
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.
C
2.9 A summary of the dates relevant to the case of Appellant
No.1 are tabulated as under:
Sl. No. Particulars A.Y. 2016-17
1. Appointed Date of the Scheme 01.01.2015
D
2. Filing of original Return of 30.09.2016
Income under Section 139 (1)
3. Due date for filing revised 31.03.2018
Return of Income u/s 139(5)
4. Effective Date of the Scheme 30.10.2018
5. Date of filing revised Return of 27.11.2018
Income to give effect to
approval of the scheme E
2.10 A summary of the dates relevant to the case of Appellant
No.2 are tabulated as under:
Sl. No. Particulars A.Y. 2016-17 F
1. Appointed Date of the Scheme 01.01.2015
2. Filing of original Return of 30.11.2016
Income
3. Due date for filing revised 31.03.2018
Return of Income u/s 139(5)
4. Effective Date of the Scheme 30.10.2018
5. Date of filing revised Return of 27.11.2018
G
Income to give effect to
approval of the scheme
H
1242 SUPREME COURT REPORTS [2019] 18 S.C.R.
A 2.11 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.
2.12 On 05.12.2018, the Department recalled the Notice dated
04.12.2018 on the ground that the Appellants had belatedly
B filed their revised Returns without obtaining permission
from the Central Board of Direct Taxes (“CBDT”) 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.
C 2.13 On 28.12.2018, the Department passed an Assessment
Order u/S. 143(3) of the Income Tax Act, stating that in
view of the Scheme of Arrangement and Amalgamation,
the notice issued under Section 143(2), and the assessment
proceedings for A.Y. 2016-2017 had become infructuous
with respect to Appellant No.2.
D
2.14 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
E 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.
2.15 The learned Single Judge of the Madras High Court vide
F common Judgment and Order dated 30.04.2019 allowed
the Writ Petitions filed by the Appellants, and quashed
the Order dated 05.12.2018 passed by the Department.
The Single Judge held that Clause 64 (c) of the Scheme
enabled the Appellants to file their revised Returns of
G Income beyond the prescribed period under the Income
Tax Act. The Department could not override an approved
Scheme of Arrangement and Amalgamation, which has
statutory force, by rejecting the revised Returns of Income
filed by the Appellants as being invalid.
H
M/S DALMIA POWER LTD. v. THE ASSISTANT COMMR. OF 1243
INCOME TAX CIRCLE 1, TRICHY [INDU MALHOTRA, J.]
The Department did not object to the Schemes A
notified under Section 230(5) of the Companies Act, 2013.
Sections 139(5) and 119(2)(b) of the Income Tax Act as
well as the Circular No. 9/2015 issued by the CBDT are
not applicable to a case where a revised Return of Income
has been filed pursuant to a Scheme of Arrangement and
B
Amalgamation, which has been approved and sanctioned
by the NCLT.
The Department was not justified in rejecting the
revised Return of Income on the ground that it had been
filed manually, instead of being filed electronically. Rule
12(3) of the Income Tax Rules requires filing of revised C
Returns of Income electronically, which is not applicable
where revised Returns of Income are filed by the assessee
pursuant to a Scheme of Arrangement and Amalgamation
approved and sanctioned by the NCLT.
Accordingly, the Single Judge directed the D
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 in
accordance with law within a period of 12 weeks. E
2.16 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 vide
the impugned Judgment dated 04.07.2019 allowed the Writ F
Appeals, and reversed the Judgment of the Single Judge.
The Division Bench directed the Appellants to comply
with the procedure for filing belated revised Returns of
Income, and held that Clause 64 of the Scheme can only
be construed as an enabling clause. It cannot be inferred G
that the Department agreed to consider the revised
Returns of Income, irrespective of whether it complies
with the procedural and statutory requirements under the
Income Tax Act, merely because Clause 64 of the
Scheme was not objected to the Department. The NCLT,
H
1244 SUPREME COURT REPORTS [2019] 18 S.C.R.
A while sanctioning the Schemes, clarified that the
Appellants would be required to approach the relevant
statutory authorities for obtaining necessary permissions
and compliances.
The Department did not consent to waive the
B 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.
2.17 The Department vide letter dated 11.07.2019 informed
the Appellants that in case they fail to file the revised
C 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.
D
2.18 The Appellants made a representation on 22.07.2019
stating that subsequent to the approval and sanction of
the Scheme of Arrangement and Amalgamation, the
income of the Transferor companies merged in the hands
of the Appellants w.e.f. 01.01.2015, being the Appointed
E Date as the “date of succession” under S. 170 of the
Act. Accordingly, the Appellants requested the
Department to give cognizance to the Scheme, and accept
the revised Return of Income filed on 27.11.2018, while
completing the assessment for the A.Y. 2016-2017.
F 2.19 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
G procedural requirement under Section 119(2)(b) read
with CBDT Circular No. 9 of 2015.
2.20 Aggrieved by the Judgment of the Division Bench, the
Appellants have filed the present common Civil Appeals
on 09.08.2019 before this Court.
H
M/S DALMIA POWER LTD. v. THE ASSISTANT COMMR. OF 1245
INCOME TAX CIRCLE 1, TRICHY [INDU MALHOTRA, J.]
3. We have heard Mr. S. Ganesh, Senior Counsel appearing for A
the Appellants, and Mr. Arijit Prasad, Senior Advocate appearing for the
Department. We have perused the pleadings and written submissions
filed by the parties.
4. Discussion and Analysis
4.1 A perusal of Clause 63 (c) of the Scheme of Arrangement B
and Amalgamation between DCB Power Ventures Ltd.,
Adwetha Cement Holdings Ltd., Appellant No.1 and
Appellant No.2 and their respective shareholders and
creditors, as approved and sanctioned by the NCLT, Chennai
vide Orders dated 16.10.2017, 20.10.2017 and Corrigendum C
dated 26.10.2017 shows that the Appellants were entitled to
file revised Returns of Income, after the prescribed time limit
for filing or revising the returns had lapsed, without incurring
any liability on account of interest, penalty or any other sum.
Clause 63 (c) of the said Scheme is set out hereinbelow D
for ready reference:
“(c) DCBL [Appellant No.2] shall be entitled to,
amongst others, file/or revise its income tax returns,
TDS/TCS returns, wealth tax returns, service tax,
excise duty, sales tax, value added tax, entry tax, E
cess, professional tax or any other statutory returns,
if required, credit for advance tax paid, tax deducted
at source, claim for sum prescribed under Section
43B of the Income Tax Act on payment basis, claim
for deduction of provisions written back by DCBL
previously disallowed in the hands of (i) DCB Power F
pertaining to Power Undertakings and (ii) ACHL
and/or pertaining to Amalgamating Undertaking 1,
under the Income Tax Act, credit of tax under Section
115JB read with Section 115JAA of the Income Tax
Act, credit of foreign taxes paid/withheld etc. if any, G
as may be required consequent to implementation of
this Scheme and where necessary to give effect to
this Scheme, even if the prescribed time limits for
filing or revising such returns have lapsed without
incurring any liability on account of interest, penalty
H
1246 SUPREME COURT REPORTS [2019] 18 S.C.R.
A or any other sum. DCBL shall have the right to claim
refunds, tax credits, set-offs and/or adjustments
relating to its income or transactions entered into by
it by virtue of this Scheme with effect from Appointed
Date I and Appointed Date II, as applicable. The
taxes or duties paid by, for, or on behalf of the Power
B
Undertakings and Amalgamating Undertaking 1
relating to the period on or after Appointed Date I
and Appointed Date II respectively shall be deemed
to be the taxes or duties paid by DCBL, and
accordingly DCBL shall be entitled to claim credit
C or refund for such taxes or duties.
DPL [Appellant No.1] shall be entitled to,
amongst others, file/or revise its income tax returns,
TDS/TCS returns, wealth tax returns, service tax,
excise duty, sales tax, value added tax, entry tax,
D cess, professional tax or any other statutory returns,
if required, credit for advance tax paid, tax deducted
at source, claim for sum prescribed under Section
43B of the Income Tax Act on payment basis, claim
for deduction of provisions written back by DPL
previously disallowed in the hands of DCB Power
E pertaining to Amalgamating Undertaking 2 under
the Income Tax Act, credit of tax under Section 115JB
read with Section 115JAA of the Income Tax Act,
credit of tax under Section 115JB read with Section
115 JAA of the Income Tax Act, credit of foreign tax
F paid/withheld etc., if any, pertaining to Amalgamating
Undertaking 2 as may be required consequent to
implementation of this Scheme and where necessary
to give effect to this Scheme, even if the prescribed
time limits or revising such returns have lapsed
without incurring any liability on account of interest,
G penalty or any other sum. DPL shall have the right
to claim refunds, tax credits, set-offs and/or
adjustments relating to its income or transactions
entered into by it by virtue of this Scheme with effect
from Appointed Date I. The taxes or duties paid by,
H for, or on behalf of the Amalgamating Undertaking
M/S DALMIA POWER LTD. v. THE ASSISTANT COMMR. OF 1247
INCOME TAX CIRCLE 1, TRICHY [INDU MALHOTRA, J.]
2 relating to the period on or after Appointed Date I A
shall be deemed to be the taxes or duties paid by
DPL, and accordingly DPL shall be entitled to claim
credit or refund for such taxes or duties.”
[emphasis supplied]
4.2 Similarly, Clause 64 (c) of the Scheme of Arrangement and B
Amalgamation between Odisha Cement Ltd., OCL India
Limited, Dalmia Cement East Ltd., Shri Rangam Securities
& Holdings Ltd., Dalmia Bharat Cement Holdings Ltd.,
Appellant No.1 and Appellant No.2 and their respective
shareholders and creditors, as approved and sanctioned by C
the NCLT, Chennai on 20.04.2018 and 01.05.2018, shows
that provisions were incorporated to enable the Appellants to
file revised Returns even after the prescribed time limit for
filing or revising such Returns had lapsed, without incurring
any liability on account of interest, penalty or any other sum.
D
Clause 64 (c) of the said Scheme is extracted hereinbelow
for ready reference:
“(c) Amalgamated Company and Transferee [Appellant
Nos. 1 and 2 ] Company shall be entitled to, amongst
others, file/or revise its income tax returns, TDS/TCS E
returns, wealth tax returns, service tax, excise duty, sales
tax, value added tax, entry tax, cess, professional tax or
any other statutory returns, if required, credit for advance
tax paid, tax deducted at source, claim for sum prescribed
under Section 43B of the Income Tax Act on payment
basis, claim for deduction of provisions written back by F
Amalgamated Company and Transferee Company
previously disallowed in the hands of Amalgamating
Company and Transferor Company (relating to the
Transferred Undertaking) respectively under the Income
Tax Act, credit of tax under section 115JB read with G
section 115JAA of the Income Tax Act, credit of foreign
tax paid/withheld, if any, pertaining to Amalgamating
Company and Transferor Company (relating to the
Transferred Undertaking) as may be required consequent
to implementation of this Scheme and where necessary to
H
1248 SUPREME COURT REPORTS [2019] 18 S.C.R.
A give effect to this Scheme, even if the prescribed time
limited for filing or revising such returns have lapsed
without incurring any liability on account of interest,
penalty or any other sum. Amalgamated Company and
Transferee Company shall have the right to claim refunds,
tax credits, set-offs and/or adjustments relating to the
B
income or transactions entered into by them by virtue of
this Scheme with effect from Appointed Date. The taxes
or duties paid by, for, or on behalf of, Amalgamating
Company and Transferor Company (pertaining to
Transferred Undertaking) relating to the period on or
C after Appointed Date, shall be deemed to be the taxes or
duties paid by the Amalgamated Company and Transferee
Company respectively and Amalgamated Company and
Transferee Company shall be entitled to claim credit or
refund for such taxes or duties.”
D [emphasis supplied]
4.3 In compliance with Section 230(5) of the Companies Act,
2013, notices under Form No. CAA. 3 under sub-Rule (1) of
Rule 8 of the Companies (Compromises, Arrangements and
Amalgamations) Rules, 2016 were sent to the Department.
E Sub-Section (5) of Section 230 of the Companies Act, 2013
provides as under:
“(5) A notice under sub-section (3) along with all the
documents in such form as may be prescribed shall also
be sent to the Central Government, the income-tax
F authorities, the Reserve Bank of India, the Securities and
Exchange Board, the Registrar, the respective stock
exchanges,the Official Liquidator, the Competition
Commission of India established under sub-section (1)
of section 7 of the Competition Act, 2002, if necessary,
G and such other sectoral regulators or authorities which
are likely to be affected by the compromise or arrangement
and shall require that representations, if any, to be made
by them shall be made within a period of thirty days from
thedate of receipt of such notice, failing which, it shall
H
M/S DALMIA POWER LTD. v. THE ASSISTANT COMMR. OF 1249
INCOME TAX CIRCLE 1, TRICHY [INDU MALHOTRA, J.]
be presumed that they have no representations to make A
on the proposals.”
[emphasis supplied]
Sub-section (5) of Section 230 requires that a notice of the meeting
under sub-section (3) of Section 230 along with all the documents
pertaining to the scheme, shall be sent to the Central Government, and B
statutory authorities such as the Income Tax Department, RBI, SEBI,
ROC etc. and such other sectoral regulators or authorities which are
likely to be affected by the compromise or arrangement. The statutory
authorities could raise objections within 30 days from the date of receipt
of the notice, failing which, it would be presumed that they had no C
representation to make on the proposed schemes of compromise,
arrangements and amalgamations.
4.4 Similarly, Rule 8(3) of the Companies (Compromises,
Arrangements and Amalgamations) Rules, 2016 provides that
any representation made to the statutory authorities notified D
under Section 230(5), shall be sent to the NCLT within a
period of thirty days from the date of receipt of such notice,
and a copy of such representation shall simultaneously be
sent to the concerned companies. In case no representation
is received within thirty days, it shall be presumed that the
statutory authorities have no representation to make on the E
proposed scheme of compromise or arrangement.
Rule 8 of the Companies (Compromises, Arrangements
and Amalgamations) Rules, 2016 is set out hereinunder for
ready reference:
F
“(3) If the authorities referred to under sub-rule (1) desire
to make any representation under sub-section (5) of
section 230, the same shall be sent to the Tribunal within
a period of thirty days from the date of receipt of such
notice and copy of such representation shall
simultaneously be sent to the concerned companies and G
in case no representation is received within the stated
period of thirty days by the Tribunal, it shall be presumed
that the authorities have no representation to make on
the proposed scheme of compromise or arrangement.”
[emphasis supplied] H
1250 SUPREME COURT REPORTS [2019] 18 S.C.R.
A 4.5 The Department did not raise any objection within the
stipulated period of 30 days despite service of notice.
4.6 Pursuant thereto, the Schemes were sanctioned by the NCLT,
Chennai vide Orders 16.10.2017, 20.10.2017, 26.10.2017,
28.12.2017, 10.01.2018, 20.04.2018 and 01.05.2018; and, vide
B Orders dated 18.05.2017 and 30.08.2017 by the NCLT,
Guwahati. Accordingly, the Schemes attained statutory force1
not only inter se the Transferor and Transferee Companies,
but also in rem, since there was no objection raised either by
the statutory authorities, the Department, or other regulators
C or authorities, likely to be affected by the Schemes.
4.7 As a consequence, 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.2
D
4.8 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
E Date, unless modified by the Court.
This Court in Marshall Sons & Co. (India) Ltd. v.
3
ITO held that where the Court does not prescribe any specific
date but merely sanctions the scheme presented, it would
follow that the date of amalgamation/date of transfer is the
F
date specified in the scheme as “the transfer date”. It was
held that:
“14. Every scheme of amalgamation has to
necessarily provide a date with effect from which
G
1
J.K. (Bombay) (P) Ltd. v. New Kaiser-I-Hind Spg. and Wvg. Co. Ltd., (1969) 2 SCR
866 : AIR 1970 SC 1041 : (1970) 40 Comp Cas 689;
2
Pr. Commissioner of Income Tax, New Delhi v. Maruti Suzuki India Limited, Civil
Appeal No 5409 of 2019, decided on 25.07.2019.
3
Marshall Sons & Co. (India) Ltd. v. ITO (1997) 2 SCC 302
H
M/S DALMIA POWER LTD. v. THE ASSISTANT COMMR. OF 1251
INCOME TAX CIRCLE 1, TRICHY [INDU MALHOTRA, J.]
the amalgamation/transfer shall take place. The A
scheme concerned herein does so provide viz.
1-1-1982. 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 B
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 prescribe any specific date but merely
sanctions the scheme presented to it — as has
C
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 D
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 E
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 F
aspect also in the scheme of amalgamation.”
It was further held that 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. The Court observed as follows: G
“15. The counsel for the Revenue contended that if the
aforesaid view is adopted then several complications will
ensue in case the Court refuses to sanction the scheme of
amalgamation. We do not see any basis for this
H
1252 SUPREME COURT REPORTS [2019] 18 S.C.R.
A apprehension. Firstly, an assessment can always be made
and is supposed to be made on the Transferee Company
taking into account the income of both the Transferor and
Transferee Companies. Secondly, and probably the more
advisable course from the point of view of the Revenue
would be to make one assessment on the Transferee
B
Company taking into account the income of both of
Transferor or Transferee Companies and also to make
separate protective assessments on both the Transferor and
Transferee Companies separately. There may be a certain
practical difficulty in adopting this course inasmuch as
C separate balance-sheets may not be available for the
Transferor and Transferee Companies. But that may not
be an insuperable problem inasmuch as assessment can
always be made, on the available material, even without a
balance-sheet. In certain cases, best judgment assessment
may also be resorted to. Be that as it may, we need not
D
pursue this line of enquiry because it does not arise for
consideration in these cases directly.”
4.9 In the present case, Appellant Nos.1 and 2/Transferee
Companies filed their original Returns of Income on
30.09.2016 and 30.11.2016 respectively. Thereafter, they
E entered into Schemes of Arrangement and Amalgamation
with 9 Transferor Companies in 2017. The Schemes were
finally sanctioned and approved by the NCLT, Chennai vide
final orders dated 20.04.2018 and 01.05.2018. The Appointed
Date as per the Schemes was 01.01.2015. Consequently, the
F Transferor/ Amalgamating Companies ceased to exist with
effect from the Appointed Date, and the assets, profits and
losses etc. were transferred to the books of the Appellants/
Transferee Companies/Amalgamated Companies.
The Schemes incorporated provisions for filing the
G 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 re-computation would have a bearing on
H the total income of the Appellants with respect to the A.Y.
M/S DALMIA POWER LTD. v. THE ASSISTANT COMMR. OF 1253
INCOME TAX CIRCLE 1, TRICHY [INDU MALHOTRA, J.]
2016-2018, particularly on matters in relation to carrying A
forward losses, unabsorbed depreciation etc.
5. 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 B
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.
C
6. Section 139(5) of the Income Tax Act, as it stood at the relevant
time, makes it clear that where an assessee furnishes a return under
sub-section (1) or sub-section (4) of Section 139, and later discovers an
omission or mistake therein, he may furnish a 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. D
Section 139(5) of the Income Tax Act is set out hereinunder for
ready reference:
“139(5). If any person, having furnished a return under sub-
section (1) or sub-section (4) of Section 139, discovers an E
omission or wrong statement therein, he may furnish a 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”
7. In our view, this provision is not applicable to the facts and F
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.
8. In the facts of the present case, it was an impossibility for the
G
assessee companies to have filed the revised Returns of Income for the
A.Y. 2016-2017 before the due date of 31.03.2018, since the NCLT had
passed the last orders granting approval and sanction of the Schemes
only on 22.04.2018 and 01.05.2018.
H
1254 SUPREME COURT REPORTS [2019] 18 S.C.R.
A 9. 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
B
the expiry of the stipulated period under the Income Tax Act.
Section 119(2)(b) of the Income Tax Act is reproduced hereinunder
for ready reference:
“119. Instructions to subordinate authorities.
C (2) Without prejudice to the generality of the foregoing
power,—
…
(b) the Board may, if it considers it desirable or expedient so
D to do for avoiding genuine hardship in any case or class of
cases, by general or special order, authorise any income-tax
authority, not being a Commissioner (Appeals) to admit an
application or claim for any exemption, deduction, refund or
any other relief under this Act after the expiry of the period
specified by or under this Act for making such application or
E claim and deal with the same on merits in accordance with
law.”
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
F of the NCLT, without any objection from the Department.
Rules of procedure have been construed to be the handmaiden of
justice.4 The purpose of assessment proceedings is to assess the tax
liability of an assessee correctly in accordance with law.5
10. Section 170(1) of the Income Tax Act, provides that the
G successor of an assessee shall be assessed in respect of the income of
4
Kailash v Nankhu (2005) 4 SCC 480; State of Punjab v Shamlal Murari (1976) 1 SCC
719
5
H National Thermal Power Co. Ltd. v. Commissioner of Income Tax, (1997) 7 SCC 489
M/S DALMIA POWER LIMITED v. THE ASSISTANT COMMISSIONER OF 1255
INCOME TAX CIRCLE 1, TRICHY [INDU MALHOTRA, J.]
the previous year after the date of succession. S.170(1) of the Income A
Tax Act provides as under:
“170. Succession to business otherwise than on death.
(1) Where a person carrying on any business or profession
(such person hereinafter in this section being referred to as
the predecessor) has been succeeded therein by any other B
person (hereinafter in this section referred to as the successor)
who continues to carry on that business or profession,-
(a) the predecessor shall be assessed in respect of the income
of the previous year in which the succession took place up to
the date of succession; C
(b) the successor shall be assessed in respect of the income
of the previous year after the date of succession.”
Sub-section (1) of Section 170 makes it clear that it is incumbent
upon the Department to assess the total income of the successor in D
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.
E
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.
11. In light of the aforesaid discussion, we find that the learned F
Single Judge had rightly allowed the Writ Petitions. We accordingly set
aside the impugned Judgment and Order dated 04.07.0219 passed by
the learned Division Bench, and restore the judgment dated 30.04.2019
passed by the learned Single Judge. Accordingly, the Civil Appeals are
allowed.
G
The Department is directed to receive the revised Returns of
Income for A.Y. 2016-2017 filed by the Appellants, and complete the
H
1256 SUPREME COURT REPORTS [2019] 18 S.C.R.
A assessment for A.Y. 2016-2017 after taking into account the Schemes
of Arrangement and Amalgamation as sanctioned by the NCLT.
12. Pending Applications, if any, are accordingly disposed of.
Ordered accordingly.
B
Ankit Gyan Appeals allowed.
END OF 2019
*******
C
D
E
F
G
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