1995 (5) TMI 61 - AT - Income Tax

Summary

Issues Involved:
1. Assessment of income of M/s. Indofil Chemicals Ltd. with the income of the assessee on a protective basis.
2. Adjustment of taxes paid by M/s. Indofil Chemicals Ltd. in the hands of the assessee-company.

Issue-wise Detailed Analysis:

1. Assessment of Income of M/s. Indofil Chemicals Ltd. with the Income of the Assessee on a Protective Basis:
The first ground of appeal concerns the action of the Assessing Officer in assessing the income of M/s. Indofil Chemicals Ltd. (IFCL) together with the income of the assessee on a protective basis. The assessee claimed that IFCL had been amalgamated with it from 1-7-1982. However, the Assessing Officer held that the necessary formalities had not been completed during the year under appeal, and thus, the income of the amalgamated company was to be assessed separately. The CIT(A) confirmed this view, leading to the appeal.

The relevant facts are that the Board of Directors of the appellant company passed a resolution for the merger of IFCL into the appellant company on 16th September 1982, subject to various approvals. The Ministry of Industry and Company Affairs approved the amalgamation on 17-1-1985, followed by the Bombay High Court on 16-9-1985 and the Allahabad High Court on 9-7-1985. The Controller of Capital Issues gave consent on 19-11-1985. However, the last of the required approvals was received from the RBI on 1-2-1986, which was beyond the previous year ending 30th June 1985, relevant to the assessment year 1986-87.

The Tribunal noted that once all formalities are completed, the effective date of amalgamation is the appointed date, which was 1-7-1982. This view was supported by the decision of the Bombay High Court in CIT v. Swastik Rubber Products Ltd [1983] 140 ITR 304, which held that the date of amalgamation for income-tax purposes is the date mentioned in the Court's order. Thus, the Tribunal concluded that the income of IFCL for the previous year relevant to the assessment year 1986-87 is assessable in the hands of the assessee on a substantive basis.

2. Adjustment of Taxes Paid by M/s. Indofil Chemicals Ltd. in the Hands of the Assessee-Company:
The next related issue is whether the tax recovered/paid by IFCL should be adjusted in the hands of the assessee-company. A sum of Rs. 65,10,495 had been paid as advance-tax and TDS by erstwhile IFCL. The Assessing Officer did not adjust this amount in the assessment of the assessee since the income of IFCL had been assessed on a protective basis.

The Tribunal held that since the income of IFCL is assessable in the hands of the assessee on a substantive basis, the taxes paid in the name of IFCL should be adjusted against the demand in the name of the assessee. This view is supported by the decision of the Supreme Court in ITO v. Bachu Lal Kapoor [1966] 60 ITR 74 and the Delhi High Court in CIT v. Ramanand Sachdeva [1982] 136 ITR 440. Accordingly, the Tribunal directed the Assessing Officer to adjust the sum of Rs. 65,10,494, subject to verification of payments.

Conclusion:
The Tribunal concluded that the income of IFCL for the previous year relevant to the assessment year 1986-87 is assessable in the hands of the assessee on a substantive basis. Consequently, the taxes paid by IFCL should be adjusted against the demand in the name of the assessee.