Re: Amalgamation – Conversion of firm into LLP

ABC Ltd has got merged into XYZ Ltd on 1 April 2010. Both the companies have pending litigation.
a) Assuming both the companies have litigation for AY 2008-09 only. Whether for settlement for AY 2008-09, should all appeals of both the companies are to be considered together or both companies can file separate applications?
b) Assuming both the companies have multiple years in litigation. Will the answer be same as part a)
c) In case of death of a person or conversion of firm into LLP, whether same principle will apply?
d) In whose name and PAN declaration is to be filed, who could be signatory to sign the declaration, payment of disputed tax is made in whose name, how credit for prepaid taxes of amalgamating company be considered while computing disputed tax, etc.? Whether section 159 of the Income tax Act, 1961 (legal representative) will be applicable here?

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.  

 

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