Facts

The merger scheme of the Companies was finalised in December 1982 and resolution was passed proposing to amalgamate with effect from 1-1-1982. The High Courts of Madras and Calcutta accorded sanction to the scheme and transfer of assets on 21-11-1983 and 11-1-1984, respectively. The orders sanctioning the scheme of amalgamation did not specify  the  date of amalgamation. The  name of the assessee was, struck off from the register of companies on  21-1-1986. The AO issued the notice under section 142(1) to the  subsidiary-company for the AYs 1984-85, 1985-86. The  holding-company claiming  itself as  successor to the assessee filed writ petitions against the proceedings for  assessment on  the ground that the assessee was not in existence since 1-1-1982 when it had  been amalgamated with it. The High  Court dismissed the  petition holding  that the amalgamation became effective only when the  Court  approved  the  scheme of amalgamation and not at any earlier point of time. The High Court held that     the operative dates would be 20-1-1984 and 24-2-1984, on which dates the High Courts of Madras and Calcutta High Courts approved the scheme and as the order was silent as regards the effective date being1-1-1982, the subsidiary company was in existence till 21-1-1986 in the register of companies, and it did not cease     to exist as of fact on 1-1-1982.

Issue

Where a date of amalgamation is specified in scheme of amalgamation and the scheme of amalgamation is duly approved by Company Court without specifying any other date, could the date specified in scheme should be taken as ‘transfer date’?

View

A reading of the above clauses of the scheme shows that according to the scheme, the entire undertaking of the subsidiary company shall be transferred to the holding company with effect from the transfer date and that the subsidiary company shall be  amalgamated with the holding company with effect from  the said date. Every scheme of amalgamation has to  necessarily provide a  datewith effect from which the amalgamation/transfer shall take place. The

scheme concerned herein does so provide, namely 1-1-1982. It is true that while sanctioning the scheme, it is open to the Court tomodify the said date and prescribe such date of amalgamation/transfer as it thinks appropriate in the facts and circumstances of 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 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.

Held

On appeal reversing the judgement the Court held that where a date of amalgamation is specified in a scheme of amalgamation and the scheme of amalgamation is duly approved by the Court without specifying any other date, date specified in scheme should be taken as transfer date. (AY. 1984-85, 1985-86) (CA Nos. 1661 & 1662 of 1992 dt. 27-11-1996)

Editorial: Marshall Sons and Co. (India) Ltd. v. ITO (1992) 195 ITR 417 (Mad) (HC) reversed. In Dalmia Power Ltd v.  ACIT [2020] 420 ITR 339/269 Taxman  352 (SC) the Court held that where pursuant to scheme of amalgamation approved  by NCLT, transferor companies had been succeeded by appellants/transferee companies after due date for filing revised return, Department was to consider revised returns filed beyond prescribed timeline after taking into account scheme  of amalgamation as sanctioned by NCLT. In PCIT v. Maruti Suzuki India Ltd. (2019) 416 ITR 613/265 Taxman 515/309 CTR 433/180 DTR185 (SC) the Court

held that the notice issued in the name of amalgamating entity after amalgamation    is void. The amalgamating entity ceases to exist-Participation in the proceedings   by the assessee cannot operate as an estoppel against law.

In Hindustan Lever & Anr v. State of Maharastra & Anr (2004) 9 SCC 438, the Court held that an order sanctioning a scheme of amalgamation u/s 394 read with section 391 of the Companies Act, 1956 is liable to be stamped in accordance  with the provisions of the Bombay Stamp 1958 Act  in its application in the State  of Maharashtra

“I look only to the good qualities of men. Not being faultless myself, I won’t presume to probe into the faults of others.”

– Mahatma Gandhi