Amalgamating Co. liable to pay advance tax on income declared till Tribunal approved scheme of amalgamation: HC

Case details: GE India Industrial (P.) Ltd. v. ACIT - [2021] 129 taxmann.com 122 (Karnataka)

Judiciary and Counsel Details

• • M. Nagaprasanna, J. 
  • Sachit Jolly, Adv., Kumar Ram C.M. and C.K. Nandakumar, Adv. for the Petitioner.
  • K.V. Aravind, Adv. for the Respondent.

Facts of the Case

Assessee was a private limited company engaged in the business of Export. Assessee entered into a scheme of amalgamation, which was to become effective from 01-04-2016. The National Company Law Tribunal (NCLT), by its order dated 20-03-2017, approved the scheme of amalgamation. Revenue issued notices seeking an explanation from assessee as to why advance tax should not be chargeable in his hands for the Assessment Year (AY) 2017-18. Assessee claimed that under the scheme of amalgamation, assessee ceased to exist with effect from 01-04-2016, notwithstanding the fact that the NCLT allowed such amalgamation only on 20-03-2017. Thus, no advance tax was payable by it. Not accepting the reply of assessee, an order demanding advance tax was sent to assessee.

High Court held

On writ, Karnataka High Court held that Section 211 depicts quarters of payment of advance tax. The first installment/quarter is on or before 15th June, the next installment is on or before 15th September, and the third installment is on or before 15th December. Assessee’s claim for amalgamation was accepted on 20-03-2017. Therefore, asssessee’s was obliged to pay advance tax for the said three quarters/three installments.

Assessee’s claim that it did not exist with effect from 01-04-2016 cannot escape the liability of payment of advance tax for the said three quarters. On and from the date of acceptance by the Tribunal, i.e., 20-03-2017, the last installment for the assessment year 2017-18 advance tax need not be paid. But, for the interregnum period, assessee cannot escape advance tax payment as, under Section 207, advance tax depends upon the current income. The income as declared by assessee was its current income as an individual company, not as an amalgamated company. Therefore, assessee was obliged to pay advance tax for the said period.

Case Review

• • Marshal Sons & Co. (India) Ltd. v. ITO [1996] 89 Taxman 619/[1997] 223 ITR 809 (SC) (para 12)
  • Pr. CIT v. Maruti Suzuki India Ltd . [2019] 107 taxmann.com 375/265 Taxman 515/416 ITR 613 (SC) (para 13) distinguished.

List of Cases Referred to

• • Marshal Sons & Co. (India) Ltd. v. ITO [1996] 89 Taxman 619/[1997] 223 ITR 809 (SC) (para 7)
  • Pr. CIT v. Maruti Suzuki India Ltd. [2019] 107 taxmann.com 375/265 Taxman 515/416 ITR 613 (SC) (para 7).