Case: M/S DALMIA POWER LTD Vs. THE ASSISTANT COMMISSIONER OF INCOME TAX

2.1 The Appellant No.1 - M/s Dalmia Power Limited and Appellant No.2 - M/s Dalmia Cement (Bharat) Limited are public limited companies, incorporated under the Companies Act, 1956. The Appellants have their registered offices at Dalmiapuram Lalgudi Taluk, Dalmiapuram, District Tiruchirappalli, Tamil Nadu2.2 The Appellant No.1 is engaged in the business of building, operating, maintaining, and investing in power and power related businesses, directly or through downstream companies. The Appellant No.2 is engaged in the business of manufacturing and selling of cement, generation of power, maintaining and operating rail systems and sold waste management system which provide services to the cement business2.3 The Appellant No.1 filed its original Return of Income under Section 139 (1) of the Income Tax Act on 30.09.2016 for A.Y. 2016-2017 declaring a loss of Rs. 6,34,33,806/-. Similarly, Appellant No.2 filed its original Return of Income under Section 139 (1) of the Income Tax Act on 30.11.2016 for A.Y. 2016-2017 declaring NIL income (after setting off Brought Forward Loss amounting to Rs. 56,89,83,608/- against Total income of Rs. 56,89,83,608/-)2.4 With a view to restructure and consolidate their businesses, and enable better realisation of the potential of their businesses, which would yield beneficial results, and enhanced value creation for their shareholders, better security to their creditors and employees, the Appellants (also referred to as Transferee Companies or Amalgamated Companies) entered into 4 interconnected Schemes of Arrangement and Amalgamation with 9 companies viz. DCB Power Ventures Ltd., Adwetha Cement Holdings Ltd., Odisha Cement Ltd., OCL India Ltd., Dalmia Cement East Ltd., Dalmia Bharat Cements Holdings Ltd., Shri Rangam Securities & Holdings Ltd., Adhunik Cement Ltd., Adhunik MSP Cement (Assam) Ltd. (also referred to as Transferor Companies or Amalgamating Companies) and their respective shareholders and creditorsThe Appointed Date of the Schemes was 01.01.2015, and would come into effect from 30.10.20182.5 The Transferor and Transferee Companies filed Company Petitions under Sections 391 to 394 of the Companies Act, 1956 before the Madras and Guwahati High CourtsOn the coming into force of the Companies Act, 2013, the Company Petitions were transferred to NCLT, Chennai and NCLT, Guwahati2.6 The Schemes were duly approved and sanctioned by the NCLT, Guwahati vide Orders dated 18.05.2017 and 30.08.2017. NCLT, Chennai sanctioned the Schemes vide Orders dated 16.10.2017, 20.10.2017, 26.10.2017, 28.12.2017, 10.01.2018, 20.04.2018 and 01.05.20182.7 The Appellants/ Transferee Companies manually filed revised Returns of Income on 27.11.2018 with the Department after the Schemes were sanctioned and approval was granted by the NCLT. The revised Returns were based on the revised and modified computation of total income and tax liability of the Transferor/Amalgamated Companies. In the revised Returns of Income, the Appellant No.1 claimed losses in the current year to be carried forward amounting to Rs.2,44,11,837/-; whereas Appellant No.2 claimed losses in the current year, to be carried forward, amounting to Rs.1105,93,91,494/-2.8 The Appellants submit that the revised Returns were filed after the due date for filing revised Returns of Income u/S. 139(5) for the Assessment Year 2016- 2017 since the NCLT passed the final Order on 01.05.2018. Consequentially, it was an impossibility to file the revised Returns before the prescribed date of 31.03.20182.11 On 04.12.2018, the Department issued a Notice under Section 143(2) of the Income Tax Act to give effect to the approval of the Scheme2.12 On 05.12.2018, the Department recalled the Notice dated 04.12.2018 on the ground that the Appellants had belatedly filed their revised Returns without obtaining permission from the Central Board of Direct Taxes ( CBDT) for condonation of delay under Section 119(2)(b) of the Income Tax Act, 1961 read with CBDT Circular No. 9/2015 dated 09.06.20152.13 On 28.12.2018, the Department passed an Assessment Order u/S. 143(3) of the Income Tax Act, stating that in view of the Scheme of Arrangement and Amalgamation, the notice issued under Section 143(2), and the assessment proceedings for A.Y. 2016-2017 had become infructuous with respect to Appellant No.22.14 The Appellants filed Writ Petitions before the Madras High Court praying for quashing of the Order dated 05.12.2018, and for a direction to the Department to complete the assessment for A.Y. 2015-2016 and A.Y. 2016-2017 after taking into account the revised Income Tax Returns filed on 27.11.2018, as well as the Orders dated 20.04.2018 and 01.05.2018 passed by the NCLT, Chennai approving the Schemes of Arrangement and Amalgamation2.15 The learned Single Judge of the Madras High Court vide common Judgment and Order dated 30.04.2019 allowed the Writ Petitions filed by the Appellants, and quashed the Order dated 05.12.2018 passed by the Department. The Single Judge held that Clause 64 (c) of the Scheme enabled the Appellants to file their revised Returns of Income beyond the prescribed period under the Income Tax Act. The Department could not override an approved Scheme of Arrangement and Amalgamation, which has statutory force, by rejecting the revised Returns of Income filed by the Appellants as being invalidThe Department did not object to the Schemes notified under Section 230(5) of the Companies Act, 2013. Sections 139(5) and 119(2)(b) of the Income Tax Act as well as the Circular No. 9/2015 issued by the CBDT are not applicable to a case where a revised Return of Income has been filed pursuant to a Scheme of Arrangement and Amalgamation, which has been approved and sanctioned by the NCLTThe Department was not justified in rejecting the revised Return of Income on the ground that it had been filed manually, instead of being filed electronically. Rule 12(3) of the Income Tax Rules requires filing of revised Returns of Income electronically, which is not applicable where revised Returns of Income are filed by the assessee pursuant to a Scheme of Arrangement and Amalgamation approved and sanctioned by the NCLTAccordingly, the Single Judge directed the Department to receive the revised Returns filed pursuant to the approval of the Schemes of Arrangement and Amalgamation by the NCLT, Chennai and complete the assessment for A.Y. 2015-2016 and A.Y. 2016-2017 in accordance with law within a period of 12 weeks2.16 The Department filed Writ Appeals under Clause 15 of the Letters Patent Act challenging the Judgment & Order dated 30.04.2019 passed by the Single JudgeA Division Bench of the Madras High Court vide the impugned Judgment dated 04.07.2019 allowed the Writ Appeals, and reversed the Judgment of the Single Judge. The Division Bench directed the Appellants to comply with the procedure for filing belated revised Returns of Income, and held that Clause 64 of the Scheme can only be construed as an enabling clause. It cannot be inferred that the Department agreed to consider the revised Returns of Income, irrespective of whether it complies with the procedural and statutory requirements under the Income Tax Act, merely because Clause 64 of the Scheme was not objected to the Department. The NCLT, while sanctioning the Schemes, clarified that the Appellants would be required to approach the relevant statutory authorities for obtaining necessary permissions and compliancesThe Department did not consent to waive the procedures or statutory requirements prescribed under S.139(5) and 119(2)(b) of the Income Tax Act in respect of filing of revised Returns of Income2.17 The Department vide letter dated 11.07.2019 informed the Appellants that in case they fail to file the revised Returns before the expiry of the limitation period prescribed for completion of assessment in accordance with Explanation 1 to Section 153 r.w. Proviso (1) i.e. 60 days from the date of the impugned Judgment, the assessment for A.Y. 2016-2017 would be conducted on the basis of the original Returns filed by them2.18 The Appellants made a representation on 22.07.2019 stating that subsequent to the approval and sanction of the Scheme of Arrangement and Amalgamation, the income of the Transferor companies merged in the hands of the Appellants w.e.f. 01.01.2015, being the Appointed Date as the date of succession under S. 170 of the Act. Accordingly, the Appellants requested the Department to give cognizance to the Scheme, and accept the revised Return of Income filed on 27.11.2018, while completing the assessment for the A.Y. 2016-20172.19 The Department informed the Appellants on 05.08.2019 that since the revised Returns were not in accordance with Sections 139(5), 139(3) of the Act r.w. Rule 12(3) of the Income Tax Rules, 1962, the revised Returns were invalid, and could not be considered in view of the procedural requirement under Section 119(2)(b) read with CBDT Circular No. 9 of 20152.20 Aggrieved by the Judgment of the Division Bench, the Appellants have filed the present common Civil Appeals on 09.08.2019 before this Court.

Reasoning:
4.9 In the present case, Appellant Nos.1 and 2/Transferee Companies filed their original Returns of Income on 30.09.2016 and 30.11.2016 respectively. Thereafter, they entered into Schemes of Arrangement and Amalgamation with 9 Transferor Companies in 2017The Schemes were finally sanctioned and approved by the NCLT, Chennai vide final orders dated 20.04.2018 and 01.05.2018. The Appointed Date as per the Schemes was 01.01.2015. Consequently, the Transferor/ Amalgamating Companies ceased to exist with effect from the Appointed Date, and the assets, profits and losses etc. were transferred to the books of the Appellants/ Transferee Companies/Amalgamated Companies. The Schemes incorporated provisions for filing the revised Returns beyond the prescribed time limit since the Schemes would come into force retrospectively from the Appointed Date i.e. 01.01.2015Accordingly, the Appellants filed their Revised Returns on 27.11.2018. The re-computation would have a bearing on the total income of the Appellants with respect to the A.Y. 2016-2018, particularly on matters in relation to carrying forward losses, unabsorbed depreciation etc6. Section 139(5) of the Income Tax Act, as it stood at the relevant time, makes it clear that where an assessee furnishes a return under sub-section (1) or sub-section (4) of Section 139, and later discovers an omission or mistake therein, he may furnish a revised Return at any time before the expiry of one year from the end of the relevant assessment year or before the completion of the assessment, whichever is earlier7. In our view, this provision is not applicable to the facts and circumstances of the present case since the revised Returns were not filed on account of an omission or wrong statement or omission contained therein. The delay occurred on account of the time taken to obtain sanction of the Schemes of Arrangement and Amalgamation from the NCLT8. In the facts of the present case, it was an impossibility for the assessee companies to have filed the revised Returns of Income for the A.Y. 2016-2017 before the due date of 31.03.2018, since the NCLT had passed the last orders granting approval and sanction of the Schemes only on 22.04.2018 and 01.05.20189. The counsel appearing for the Department submitted that the Appellants ought to have made a representation to the Board under Section 119(2)(b) of the Income Tax Act for condonation of delay while filing the revised Returns. A perusal of Section 119(2)(b) shows that it is applicable in cases of genuine hardship to admit an application, claim any exemption, deduction, refund or any other relief under this Act after the expiry of the stipulated period under the Income Tax ActSub-section (1) of Section 170 makes it clear that it is incumbent upon the Department to assess the total income of the successor in respect of the previous assessment year after the date of successionIn the present case, the predecessor companies/transferor companies have been succeeded by the Appellants/transferee companies who have taken over their business along with all assets, liabilities, profits and losses etcIn view of the provisions of Section 170(1) of the Income Tax Act, the Department is required to assess the income of the Appellants after taking into account the revised Returns filed after amalgamation of the companies11. In light of the aforesaid discussion, we find that the learned Single Judge had rightly allowed the Writ Petitions4.5 The Department did not raise any objection within the stipulated period of 30 days despite service of notice4.6 Pursuant thereto, the Schemes were sanctioned by the NCLT, Chennai vide Orders 16.10.2017, 20.10.2017, 26.10.2017, 28.12.2017, 10.01.2018, 20.04.2018 and 01.05.2018; and, vide Orders dated 18.05.2017 and 30.08.2017 by the NCLT, Guwahati. Accordingly, the Schemes attained statutory force J.K. (Bombay) (P) Ltd. v. New Kaiser-I-Hind Spg. and Wvg. Co. Ltd., (1969) 2 SCR 866   : AIR 1970 SC 1041   : (1970) 40 Comp Cas 689; not only inter se the Transferor and Transferee Companies, but also in rem, since there was no objection raised either by the statutory authorities, the Department, or other regulators or authorities, likely to be affected by the Schemes4.7 As a consequence, when the companies merged and amalgamated into another, the amalgamating companies lost their separate identity and character, and ceased to exist upon the approval of the Schemes of Amalgamation. (Pr. Commissioner of Income Tax, New Delhi v. Maruti Suzuki India Limited, Civil Appeal No 5409 of 2019, decided on 25.07.2019)4.8 Every scheme of arrangement and amalgamation must provide for an Appointed Date. The Appointed Date is the date on which the assets and liabilities of the transferor company vest in, and stand transferred to the transferee company. The Schemes come into effect from the Appointed Date, unless modified by the Court. This Court in Marshall Sons & Co. (India) Ltd. v. ITO Marshall Sons & Co. (India) Ltd. v. ITO (1997) 2 SCC 302  held that where the Court does not prescribe any specific date but merely sanctions the scheme presented, it would follow that the date of amalgamation/date of transfer is the date specified in the scheme as the transfer dateOn a plain reading of Section 119(2)(b), we find that this provision would not be applicable where an assessee has restructured their business, and filed a revised Return of Income with the prior approval and sanction of the NCLT, without any objection from the DepartmentRules of procedure have been construed to be the handmaiden of justice. Kailash v Nankhu (2005) 4 SCC 480  ; State of Punjab v Shamlal Murari (1976) 1 SCC 719    The purpose of assessment proceedings is to assess the tax liability of an assessee correctly in accordance with law. National Thermal Power Co. Ltd. v. Commissioner of Income Tax, (1997) 7 SCC 489