HC Sanctions Amalgamation Scheme as all Observations of RD, RoC and IT were Adequately Replied by Petitioner-Co.

Case Details: Yuflow Engineering (P.) Ltd., In re, - [2023] 150 taxmann.com 526 (NCLT-Bengaluru)

Judiciary and Counsel Details

• • T. Krishnavalli, Judicial Member & Manoj Kumar Dubey, Technical Member
  • A. Murali & Abhijit Atur, Advs. for the Petitioner.
  • Ganesh R. Ghale, Adv. for the Respondent.

Facts of the Case

In the instant case, both the transferor and transferee companies jointly filed a petition seeking sanction for the scheme of amalgamation. The Regional Director (RD) and RoC made observations that the appointed date of the scheme was 1-4-2021 and being an old date, the scheme if approved, would be allowed from 1-4-2022 as the appointed date.

Consequently, the object of transferee company needs to be altered to enable it to carry out the objects of the transferor company. Further, the transferor company was a loss-making company and there might be a negative outflow of tax liability once the scheme was approved.

Later, the petitioner companies submitted that the appointed date of the scheme was 1-4-2021, considering the business requirements and operations of the transferee company and the business interest of amalgamated companies. Changing the appointed date to 1-4-2022 would not be in the interest of the scheme and would adversely affect the business requirements and operations of both companies.

Further, the alteration of the object clause of the transferee company was not required as the objects of the transferee company already encompassed the business activities undertaken by the transferor company.

It was noted that the transferor company was a loss-making company and if losses were set off after the scheme was adopted, then such a set-off would only facilitate paying lesser taxes and would benefit the public shareholders of the transferee company.

The petitioner also submitted a reply to observations made by the Income-Tax (IT) Authority that the scheme was not for avoiding payment of taxes. Upon the scheme coming into effect, proceedings pending in respect of the transferor company would be continued against the transferee company.

NCLT Held

The NCLT held that the objections or observations to the scheme received from RD, RoC and IT Authority had been adequately replied to by the petitioner companies. Hence, there was no impediment to the approval of the scheme. Thus, the instant scheme of amalgamation deserved to be sanctioned.

List of Cases Referred to

• • Wiki Kids Ltd. v. Regional Director, South East Region [Company Appeal (AT) No. 285 of 2017, dated 21-12-2017] (para 22)
  • Vodafone Essar Gujarat Ltd. v. Department of Income-tax [2012] 24 taxmann.com 333 (Guj.) (para 24)
  • Panasonic India (P.) Ltd. v. Panasonic Life Solutions India (P.) Ltd. [2021] 138 taxmann.com 570 (NCLT – Chd.) (para 24)
  • Sterling Accuris Wellness (P.) Ltd., In re [CP (CAA) 57 (Ahm.) of 2021, dated 20-10-2022] (para 24).