| Query | ABC Ltd has got merged into XYZ Ltd on 1 April 2010. Both the companies have pending litigation. |
| Answer | It is settled legal position that post appointed date, the amalgamating company ceases to exist in the eyes of law and all pending proceedings of the amalgamating company would become the proceedings of amalgamated company as a successor.
a) and b) The scheme of settlement under VSV is “appeal based". Appeals in relation to assessment or reassessment for the same assessment year can be settled independently (FAQ 19). Further, CBDT has also clarified that taxpayer has an option to settle either taxpayer’s appeal or tax departments appeal or both (FAQ 40). Based on same, it may need to be clarified by CBDT that appeal in relation to amalgamating company can be settled by amalgamated company independent of its own appeal (including for same year). Each appeal of ABC Ltd and XYZ Ltd will need to be treated separately. c) In case of death of person, the registered legal representative, who is filing or required to file the return on behalf of the deceased person, can file the VSV declaration.
In case of conversion of firm into company, the successor company can file declaration in respect of the pending litigation of Firm, as post conversion firm will cease to exist and all pending proceedings of firm will be carried to the successor company. Again need to be clarified by CBDT that there would be separate appeals for firms as sucessors and for its own appeal.
d) Declaration is to be filed by Amalgamated company with its PAN. as a successor to amalgamating entity. Declaration to be signed by MD/ Director of amalgamated entity. Payment to be made in name of amalgamated entity as a succesory to amalgamating entity. Sec 159 of the IT Act will be applicable. Accordingly, declaration for ABC’s appeal will filed in PAN of XYZ as successor of ABC and will be signed by MD/ director of XYZ being successor to ABC.
|
| Query | In case of taxpayer, an addition has been made, whereby demand of Rs.10 lakh is raised including interest of Rs.3 lakh. The taxpayer has filed appeal before CIT(A), which is pending as on 31 January 2020. The taxpayer has paid the entire demand including interest due. If the taxpayer settles the matter under VSV Scheme and tax due under VSV is settled against the demand already paid by taxpayer, whether taxpayer will be eligible to get refund of tax (including interest)?? |
| Answer | Though taxpayer has paid entire tax and interest, the appeal is eligible for settlement under VSV. It appears that there will be no separate challan for VSV payment but the same tax payment challan is to be used. It is likely that direction may be given to the field officers to update the tax records.
Where tax paid (including interest) is more than amount payable as worked out under VSV, the balance amount will be refunded but no interest u/s 244A of the Act will be eligible – Refer Q5 of the FAQ dt 4 March 2020. |
| Query | Whether the settlement is qua issue or qua appeal? Whether there should be tax payable by taxpayer in order to avail the scheme? How to compute disputed tax in loss cases? |
| Answer | The settlement can be done only qua appeal and not issue wise.
As clarified by FAQ no 9 of CBDT Circular dated 4 March 2020, taxpayer can opt for VSV scheme, irrespective of whether tax arrear has been paid either partly or fully or are outstanding.
In cases where taxpayer has incurred losses, he can opt VSV scheme and settle the dispute under following options:
Option 1 – Pay tax on such loss and carry forward the full loss. Option 2 – Carry forward the reduced the loss without paying any tax.
CBDT will prescribe the manner of computation in such cases. |