Home Case Index All Cases Companies Law Companies Law + HC Companies Law - 2016 (3) TMI HC This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2016 (3) TMI 696 - HC - Companies LawSanction of scheme of de-merger - Held that:- The sanction to the scheme of de-merger as sought by the petitioner company cannot be granted. The company does not appear to have had any real pre-existing real estate division since its inception. It is evident that the petitioner company was all along engaged in the business of manufacturing, processing and sale of vegetable oil alone. As evident from the facts on record no income or profit and loss on account of real estate business has been reflected in books of accounts of the company. The land of the company also has not been shown in the inventory under the head of current assets of the petitioner company as it would have been and warranted by the General Accounting Principles, if the company indeed had a real estate business. A bare look at the explanation to Section 2(19AA) of the Income Tax Act, 1961 makes it manifest that for a demerger a pre-existing undertaking is a prerequisite. That pre-requisite is found absent in the facts of the instant case. To sanction the scheme of demerger of purported (not real) and nonfunctional real estate business of the company as sought would also be in the cross hair of a statutory provision i.e. explanation to Section 2(19AA) of the Act of 1961. Thus the scheme of demerger of which sanction is sought appears to be only a device for avoidance of obligation towards capital gains tax and stamp duty and also falls foul of Explanation to Section 2(19AA) of the Income Tax Act of 1961. The scheme of de-merger cannot therefore be sanctioned - Decided against petitioner company
|