@JUDGMENTTAG-ORDER
Chitra Venkataraman, J.@mdashCompany Appln. No. 330 of 2009 is filed to direct the Respondent to implement Clause 7.2 of the scheme
sanctioned by this Court vide order dated 12-10-2004/8-11-2004 in Company Petn. No. 167 of 2004 and dated 29-11-2007 in Company
Appln. No. 2975 of 2007 with effect from 1-1-2004 as per Clause 1.2 of the scheme for effectively implementing the sanctioned scheme and
accept to the revised returns for the assessment years 2001-02, 2002-03, 2003-04 and 2004-05 filed by the applicant.
2. Company Appln. No. 331 of 2009 is to grant injunction restraining the Respondent from taking any further action against the applicant in
respect of the revised returns for the assessment years 2001-02, 2002-03, 2003-04 and 2004-05 pending disposal of the application for
implementation of Clause 7.2 and Clause 1.2 of the scheme sanctioned by this Court.
3. Company Appln. No. 332 of 2009 is filed to direct the Respondent to implement Clause 7.2 of the scheme sanctioned by this Court vide order
dated 12-10-2004/ 8-11-2004 in Company Petn. No. 171 of 2004 and dated 29-11-2007 in Company Appln. No. 2979 of 2007 which is final
and conclusive w.e.f. 1-1-2004 as per Clause 1.2 of the scheme for effectively implementing the sanctioned scheme and accept the revised returns
for the assessment year 2005-06.
4. Company Appln. No. 333 of 2009 is to grant injunction restraining the Respondent from taking any further action against the applicant insofar
as the assessment years 2004-05 and 2005-06 are concerned pending disposal of the application for implementation of Clause 7.2 and Clause 1.2
of the scheme sanctioned.
5. The cause for filing of the above applications had arisen on account of the Respondent failing to take note of the.fact that the revised returns filed
by the Assessee/the Petitioner herein, while considering the reassessment for the assessment year 2004-05. Learned Counsel appearing for the
Petitioner pointed out that when the revised returns had been filed immediately upon the sanctioning of the modified scheme and the annual general
meeting approving the annual accounts giving effect to the modifications, the revision of the assessment should have been granted to the Petitioner
in terms of Clause 7.2 of the sanctioned scheme. In the circumstances, any order passed in the assessment of the Petitioner u/s 139 of the Income
Tax Act not taking note of the effective date of the scheme is totally unsustainable. Learned Counsel for the Petitioner pointed put that such a
course of action goes against the provisions of Section 72A of the Income Tax Act, 1961.
6. On notice, the Respondents have filed a counter wherein it is stated that in respect of assessment year 2004-05, the original assessment was
completed on 28-12-2006, but the Petitioner filed revised returns on 12-1-2007 and 27-12-2007 after completion of the assessment. It is further
stated that the return filed pursuant to the notice u/s 148 of the Income Tax Act cannot be treated as a revised return, since as per Section 139(5)
of the Act, the revised return should have been filed before the expiry of one year from the end of the relevant assessment year or before the
completion of the assessment, whichever is earlier. Learned standing counsel appearing for the revenue, placing reliance on the abovesaid
provisions, pointed out that the question of acceptance of the revised returns filed by the Petitioner did not arise in this case. Quite apart, from that,
at the time of completion of scrutiny of the assessment for the assessment year 2004-05 on 28-12-2006, the revised return was not filed by, the
Assessee and the same was filed only on 12-1-2007. It is further stated that the order of the appellate authority dated 11-1-2008 in the case of
M/s Pentamedia Graphics Ltd. is not accepted by the revenue for granting relief to the Petitioner as the same has been appealed against relying on
the apex court decision reported in Commissioner of Income Tax Vs. M/s. Sun Engineering Works (P.) Ltd., . In the abovesaid circumstances,
learned standing counsel for the Respondent submits that guided by the provisions of Sections 139(5) and 108 of the Income Tax Act, the returns
filed by the Petitioner had been rightly rejected and the assessment was completed. The case of the Petitioner is not supported by any provision of
law.
7. It is seen from the order passed by this Court dated 29-11-2007 that the scheme was to come into existence on 1-1-2004. A perusal of the
documents filed before this Court shows that originally a composite scheme of amalgamation, arrangement and compromise was presented before
this Court in Company Petn, Nos. 167 to 171 of 2004. By virtue of this scheme, the Animation and Num TV Divisions of Pentamedia Graphics
Ltd. were proposed to be demerged and vested in Mayajaal Entertainment Ltd. The remaining three transferor companies viz., Media Dreams
Ltd., Kris Srikkanth Sports Entertainment Ltd. and Intel Msion Ltd. were sought to be merged with Mayajaal Entertainment Ltd. By orders dated
12-10-2004 and 8-11-2004, this Court granted the scheme with effect from 1-1-2004 subject to the Petitioners therein complying with the
various conditions. The effective date for the scheme enforceability was fixed at 1-1-2004: The Petitioners approached the Bombay Stock
Exchange for listing of the equity share of Mayajaal Entertainment Ltd. In Company Appln. Nos. 1077 to 1081 of 2006, the Petitioners
approached this Court for a direction to the Bombay Stock Exchange for listing the equity shares of Mayajaal. By order dated 30-10-2006, this
Court, however, dismissed the said applications and directed the Petitioners to approach the Securities Appellate Tribunal. In the meantime, the
Petitioners decided to forego the listing. Accordingly, the Bombay Stock Exchange, in its communication dated 31-10-2007,expressed no
objection to the said clause. Based on these facts, the Petitioners filed Company Appln. No. 2975 of 2007 for modification of the scheme
sanctioned under orders dated 12-10-2004 and 8-11-2004. By order dated 29-11-2007, this Court granted its approval to the modified scheme.
8. It is a matter of record that the merger and the scheme was reflected in the annual account of the applicant in the accounts relating to 2004-05.
9. The modification sought for to the sanction granted centered on the dropping of the issue of listing of shares of Mayajaal. Barring this
modification, other clause remained as it is.
10. In this background, when the modified scheme was presented, this Court passed an order on 29-11-2007 and sanctioned the modified
scheme of amalgamation, arrangement and compromise. The scheme originally sanctioned as effective from 1-1-2004 remained as it is in the
modified scheme too. Clause 1.6 in the original scheme as well as in the modified scheme defines effective date to mean the last of the dates on
which the sanctions, approvals or orders specified in Clause 7.6 under the original scheme and the modified scheme remained the same and it
reads as follows:
7.6 The scheme is conditional upon and subject to its being sanctioned by the Honble High Court of judicature at Madras and certified copies of
the orders sanctioning the scheme being filed with the RoC, Tamil Nadu, Chennai. The Scheme shall become operative on the date or the last of
the dates on which the certified copies of the orders of the Honble court sanctioning the Scheme are filed by PMGL, MDL, KSSEL, Intelivision
and Mayajaal with the RoC, Tamil Nadu, Chennai. Such date shall be known as the effective date.
Appointed date defined in Clause 1.2 is as follows:, ""Appointed date"" means the 1-1-2004 or such other date as may be approved by the Honble
High Court of judicature at Madras or if the Boards of directors of the transferor companies and the transferee company require any other date
subsequent to 1-1-2004 and/or the High Court of judicature at Madras modifies the appointed date to such other date, then the same shall be the
appointed date.
11. Going by the order of this Court sanctioning the original scheme under order dated 12-10-2004 and 8-11-2004 and the sanction order in the
modified scheme dated 29-11-2007, dropping the clause on listing the shares of Mayajaal and with the other clauses remaining the same, including
the ""effective date"", it stands to reason that for all purpose, the effective date given as per the orders of this Court remains as 1-1-2004. Hence, the
reflection and the treatment of the transaction as on that date for all purposes as regards the companies involved in the process of amalgamation
etc. have to be in tune with the sanction granted under order of this Court.
12. The Income Tax Officer originally considered the return of income dated 30-10-2004 relating to the assessment year 2004-05 declaring loss.
The return filed was with reference to the income of the applicant company alone and the combined income and expenses of five group companies
were not considered. It is stated by the applicant that as the accounts were not finalised or awaiting the sanction, the returns contain the details of
the applicant company alone. The assessment was completed u/s 143(3) of the Income Tax Act on 28-12-2006 determining the total loss at Rs.
98,38,891. The assessment was however reopened on 18-1-2007. The applicant filed the revised returns on 27-12-2007 consequent on the
sanction order dated 29-11-2007 approving the modified scheme. The applicant stated that the revised returns filed on 12-1-2007 could be
treated as revised returns in response to the notice. The Income Tax Officer pointed out that the Assessee had filed a revised return on 12-1-2007
only after the completion of the assessment proceedings on 28-12-2006 and that the Assessee had failed to comply with the direction of this Court
to file the revised returns within the specified time. Hence, the Income Tax Officer rejected the claim, thereby, the revised returns by the applicant.
It is seen that as against the original order of assessment dated 28-12-2006, the applicant preferred an appeal before the Commissioner
(Appeals). By order dated 31-12-2007, the Commissioner (Appeals) set aside the assessment and taking note of the order approving the
composite scheme of amalgamation, directed the Income Tax Officer to redo the assessment and pass a speaking order.
13. It is further seen from the letter dated 26-12-2007 that the applicant herein, through its chartered accountant, pointed out to the assessing
authority, the notice issued on 18-1-2007 that since certain amendments were required in the scheme of amalgamation, approved by this Court on
8-11-2004, the company had gone for modification of the scheme and presented the same to this Court for approval of the modified scheme. This
Court passed an order on 29-11-2007 giving its approval to the modified scheme of amalgamation. The order copy was made available on 17th
Dec, 2007 and received by the Assessee company on 20-12-2007. Enclosing the copy of the order, the- applicant submitted that the revised
returns for the year 2004-05 could be filed only after the entire scheme as approved by this Court was given effect to. Consequently, -the
applicant enclosed the revised returns indicating the loss of the amalgamating companies available for set off at the hands of the applicant. In the
circumstances, the applicant sought for completion of the assessment based on the revised returns.
14. In the face of the assessing authority refusing to consider the composite scheme effective from 21-1-2004, the applicant has now come before
this Court seeking a direction that considering Clause 7.2 of the scheme sanctioned by this Court under orders dated 12-10-2004 and 8-11-2004
and the order dated 29-11-2007 taking the effective date of the scheme on and from 1-1-2004, the Respondents be directed to act on the revised
return filed.
15. Leaving aside the merits of the assessment on the principle of law that the assessment has to follow the scheme sanctioned by this Court, I
agree with the submission of the learned Counsel for the applicant.
Admittedly, the applicant has given effect to the scheme of amalgamation, demerger and arrangement in terms of Clause 7.9 as sanctioned by this
Court.
16. The decision reported in Marshall Sons and Co. (India) Ltd. Vs. Income Tax Officer, deals with a case of amalgamation, particularly with
reference to the effective date from which the amalgamation is to take place. The brief facts given in the reported decision are that the Assessee
therein had its holding company in Calcutta and the subsidiary company in Madras. In December, 1982, the subsidiary company passed a
resolution proposing to amalgamate with the holding company. An application by the holding company before the Calcutta High Court and an
application by the subsidiary company before the Madras High Court were made to grant the scheme of amalgamation that the entire undertaking
of the subsidiary company was to be transferred to the holding company with effect from the transfer date viz., 1-1-1982. The Scheme was
sanctioned on 21-11-1983 by the Madras High Court and on 11-1-1984 by the Calcutta High Court. On 25-12-1984, the Income Tax Officer
issued a notice u/s 139(2) of the Companies Act to the subsidiary company and called upon it to file the return of income for the assessment years
1984-85 and 1985-86. The Assessee/subsidiary company replied that there was no question of the subsidiary company filing returns for the
aforesaid period after the amalgamation sanctioned with effect from 1-1-1982. On appeal to the apex court as against the order of the dismissal of
the writ petition by the Madras High Court, the apex court pointed out that every scheme of amalgamation has to necessarily provide a date with
effect from which the amalgamation/transfer shall take place. In the decision, the Supreme Court pointed out thus:
Every scheme of amalgamation has to necessarily provide a date with effect from which the amalgamation/transfer shall take place 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 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. It must be remembered that before applying to the court u/s 391(1), a scheme has to be framed and such scheme has to
contain a date of amalgamation/transfer. The proceedings before the court make taker some time; indeed, they are bound to take some time
because several steps provided by Sections 391, 394A and the relevant rules have to be followed and complied 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 aspect also in the scheme of amalgamation
17. The Supreme Court further pointed out that when the court had not4 specified any date as the date of transfer or amalgamation, it would not
be reasonable to say that the scheme of amalgamation takes effect from only on and from the date of the order sanctioning the scheme. The apex
court pointed out that till the scheme is sanctioned and on the scheme being granted, the business carried on by the transferor company, namely,
subsidiary company in the reported decision, should be deemed to have been carried on for and on behalf of the transferee company and this is the
necessary and logical consequence of the court sanctioning the scheme of amalgamation as presented to it. The apex court further pointed out as
follows:
The order of the court sanctioning the scheme, the filing of the certified copies of the orders of the court before the RoC, the allotment of shares,
etc., may have all taken place subsequent to the date of amalgamation/ transfer, yet the date of amalgamation in the circumstances of this case
would be 1-1-1982. This is also the ratio of the decision of the Privy Council in Raghubar Dayal v. Bank of Upper India Ltd. AIR 1919 PC 9.
18. Going by the said decision, the effective date thus given as 1-1-2004 and going by Clause 7.2, the order of this Court sanctioning the scheme
originally under order dated 12-10-2004 and 8-11-2004 followed by the order dated 29-11-2007 modifying the scheme to be effective from 1-
1-2004, is binding on the Respondents also. Hence, applying the decision of the apex court in the above-referred to decision, the effectiveness of
the scheme as approved, hence, cannot be ignored by a reference to Section 139(5) of the IT Act, 1961).
19. The date of filing of revised returns is not in dispute. However, the revenue sought to reject the plea on the ground that the orders of
assessment had already been passed and the revised return was filed on 12-1-2007, the revised returns not being filed within the time given u/s
139(5) is non est in the eye of law.
20. As far as the amalgamation order is concerned, the Petitioner reserved the right to revise the IT returns relating to TDS certificates. Learned
Counsel for the Petitioner pointed out that the Petitioner had already placed before the concerned authority as to the filing of the revised returns
and the order passed by this Court, .particularly last of the order in modifying the scheme dated 29-11-2007, received on 17-12-2007.
21. Learned standing counsel appearing for the revenue, however, submitted that the original assessment order was passed even much before this
date and the revised returns filed must satisfy the provisions of Section 139(5) of the Income Tax Act- As regards the order granting sanction of
the scheme is concerned, there is no dispute that the scheme is effective from 1-1-2004. That being so,- the contention of the Respondent based
on Section 139(5) of the Income Tax Act as regards the non-filing of revised return before the expiry of one year from the end of the relevant
period on or before the expiry of the year, whichever is earlier, needs to be considered. In this connection, the principle laid down by the Supreme
Court in the decision reported in Marshall-Sons Si, Co. (India) Ltd. v. ITO (supra) needs reference. Dealing with the question of relevancy of
effective date in a scheme sanctioned by the Court, the apex court held that once the scheme had been sanctioned with effect Yrom a particular
date, it is binding on everyone including the statutory authorities. Having regard to the law declared by the apex court as to the effect of the scheme
sanctioned by the Court, the only course open to the revenue would be to act as per the scheme sanctioned effective from 1-1-2004, which means
that the tax authorities are bound to take, note of the state of affairs of the applicant as on 1st Jan., 2004 and a return filed reflecting the same
cannot be ignored on the strength of Section 139(5) of the Income Tax Act. The merits or otherwise on the returns filed, however, is a matter of
assessment for the authorities to consider and pass order in accordance with law.
22. As rightly pointed out by the learned Counsel for the Petitioner, when the claim of the Assessee in the appeal had already been granted, on a
mere circumstance that the department had not accepted the same and gone before the appellate forum does not mean that the scheme sanctioned
would be of no consequence to the Respondent. The Respondent cannot Ignore the order of this Court approving the scheme giving the effective
date as 1-1-2004.
23. In the circumstances, accepting the case of the applicant, this Court directs the revenue to consider the returns filed in terms of the scheme
sanctioned by this Court effective from 1-1-2004. The applications are ordered.
