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2015 (3) TMI 816 - BOMBAY HIGH COURT

2015 (3) TMI 816 - BOMBAY HIGH COURT - TMI - Application for scheme of amalgamation under Section 394 of the Companies Act,1956 - Regional Director observation regarding contradictory statement in affidavit in relation to beneficial owner of the shares - Evading capital gains tax - Evading income tax - Retrospective appointed date - Held that:- The Learned Senior Advocate appearing for the Petitioners has submitted that afore stated issues pertaining to fixing of the liability qua payment of inc .....

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te clear from the record that the Petitioners have been less than forthright in placing the facts on record. As I have already held, prima facie it is apparent that the Transferee was not the beneficial owner of the shares of the Transferor Company either on 1st or 7th April 2008. It is also clear that the Petitioners have taken inconsistent stands in this connection viz. in one place they say that the relevant date on which the Transferee was the beneficial owner of the shares was 1st April 200 .....

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t by the Regional Director, the Petitioners have falsely stated in the affidavits filed with me that there were no income tax liabilities. To my mind there is no doubt that the Petitioners have sought to mislead this Court. It is no answer to say that the Court cannot look into these matters in its supervisory jurisdiction. Suppression of material facts and making false and incorrect statements is a very serious matter with serious consequences and it is the duty of the Court to examine the alle .....

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ding to him a party should not be shown any latitude and indulgence in such matters. Ordinarily, I would have agreed with the Regional Director. However, in the facts of the present case and particularly in view of the final order I propose to make I am of the view that instead of dismissing the Petitions on this ground, imposition of costs on each of the Petitioners will meet the ends of justice. - The scheme of amalgamation conditionally approved. - Company Scheme Petition No. 137 of 2014, Con .....

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under Section 394 of the Companies Act, 1956 ( the Act ) in respect of a scheme of amalgamation between Casby CFS Private Limited ( Transferor ) and Casby Logistics Private Limited ( Transferee ) and their respective shareholders, whereunder the entire business and the whole of the undertaking of the Transferor shall stand transferred to and vest in the Transferee with effect from the appointed date in terms of the scheme proposed by the Petitioners. 2. The Transferor was incorporated on 7th Ma .....

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nd the proposed amalgamation is restructuring of the Casby group. The proposed amalgamation will reduce the shareholding tiers and rationalize investments in the Casby group. Further, the proposed amalgamation would result in improved organizational capability and leadership, strong financial structure to all creditors of the Transferor and the Transferee, lower cost of borrowing, increase operational efficiency, economies of scale, standardization and simplification of business processes, produ .....

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mmons for Directions in this Court. The same were dismissed for default by an order dated 3rd February, 2012, for nonremoval of office objections/want of prosecution. Thereafter the Transferor and the Transferee filed Company Applications bearing Nos. 247 and 248 of 2013 seeking setting aside of the order dated 3rd February, 2012, and for restoration of Company Summons for Directions. By an order dated 20th June 2013, passed in Company Application Nos. 247 and 248 of 2013, the order of dismissal .....

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. 138 of 2014 seeking sanction of this Court to the scheme of amalgamation. Both the Petitions were admitted by this Court by its order dated 21st March, 2014. 6. The concerned Income Tax Officer for the Transferor and the Transferee Companies called upon the Companies to furnish certain information and documents by a letter dated 2nd April, 2014. The Regional Director also issued a letter dated 9th May, 2014, requesting the Petitioners' Advocates to provide the information to the concerned .....

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ransferee filed an affidavit in reply dated 27th August 2014 ( first affidavit in reply ) to the issues raised in the first affidavit of the Regional Director. The Regional Director filed a further affidavit dated 25th September 2014 ( second affidavit ) raising further issues. The Transferee filed its affidavit in reply dated 7th November 2014 ( second affidavit in reply ) to the second affidavit filed by the Regional Director. The final hearing of the above Petitions commenced on November 2014 .....

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dings either in progress or completed and the retrospective appointed date is nothing but a device to defeat the provisions of the Income Tax Act, particularly Section 139 (5), and the scheme therefore needs to be rejected, this Court directed the Regional Director to contact the Income Tax Department and to seek their views on the objections of the Regional Director. The Income Tax Department by its letters dated 3rd December 2014 addressed to the Regional Director informed the Regional Directo .....

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ain material facts from this Court, have made false and misleading statements and have also taken stands which are contradictory and inconsistent. It is inter alia submitted on behalf of the Regional Director that a false and misleading statement is made by the Petitioners in the Scheme to the effect that the Transferor was a wholly owned subsidiary of the Transferee with effect from 1st April, 2008, pursuant to the Share Purchase Agreements executed in the years 2008 and 2009. A contradictory s .....

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nd this is clear from the following: 9.1 On 1st April, 2008, the issued and paid up capital of the Transferor was ₹ 1,00,000/comprising of 10,000 equity shares of ₹ 10/each. These equity shares were held by the following persons: (a) Mr. R.K. Byramjee : 5000 shares (b) Mrs. M.K. Byramjee : 5000 shares 9.2 On 1st April, 2008, a Share Purchase Agreement ( 2008 SPA ) between the Transferor, Mr. R.K. Byramjee and Mrs. M.K. Byramjee was executed. Under this SPA, Mr. R.K. Byramjee and Mrs. .....

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al owner of the shares of Byramjees. In fact, recital H of the Share Purchase Agreement dated 1st April 2009 ( 2009 SPA ) expressly states that the transaction contemplated by the 2008 SPA had not been completed. It is therefore clear that even as on 1st April, 2009, the Transferor was not the beneficial owner of the shares of the Byramjees. 9.3 On 7th April, 2008, additional 9,22,460 equity shares of the face value of ₹ 10/each of the Transferor were issued and allotted to the following p .....

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therefore clear that the investment by M. Dinshaw and K.B. & Sons in the shares of the Petitioner was on their own account. 9.5 On 1st April 2009, another Share Purchase Agreement between the Transferor, Transferee, the Byramjees, M. Dinshaw & Co. and K.B. & Sons was executed. Under this SPA, K.B. & Sons and M. Dinshaw agreed to sell their respective shareholdings in the Transferor to the Transferee in the manner and on the terms and conditions stipulated therein. This SPA also .....

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the shares of the Petitioner on its own account and had paid for the same on its own behalf. There is no mention that this amount was paid on behalf of the Transferee nor is there any statement to the effect that the beneficial owner of the said shares was the Transferee. The balancesheets also do not reflect any kind of arrangement between M. Dinshaw and the Transferee in respect of the said shares which would suggest that the latter was the beneficial owner of the shares. 9.7 The balancesheet .....

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the shareholders of the Transferor as the Transferee, M. Dinshaw and K.B. & Sons and does not state that the Transferee was the beneficial owner of the said shares held by M. Dinshaw and K.B. & Sons. 9.9 On 11th August, 2008, a further 4,00,000 equity shares of the face value of ₹ 10/each of the Transferor were issued and allotted to K.B. & Sons. 9.10 On 7th October, 2011, the Board of Directors of the Transferor and the Transferee approved the scheme. As mentioned hereinabove, .....

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09 and 610 of 2013 were filed by the Transferor and the Transferee in July 2013, on 24th July 2013, the Transferor filed two Form 20Bs i.e. the annual returns for the years ending 31st March, 2011 and 31st March, 2012. Along with these forms, the Transferor filed annexures containing details of its shareholding pattern. In these annexures it was stated for the first time that M. Dinshaw & Co., K.B. & Sons, Mr. R.K. Byramjee and Mrs. M.K. Byramjee held the shares as nominees of the Transf .....

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Transferee on 1st April 2008. The same statement was made by the Byramjees in the declarations filed along with the form. As far as the other two Form 22Bs filed in respect of the shares of M. Dinshaw and K.B. & Sons and the declarations of M. Dinshaw and K.B. & Sons filed along with the same are concerned, the same stated that the beneficial ownership of the shares of M. Dinshaw and K.B. & Sons vested in the Transferee on 7th April 2008. The statements made in the above three Form 2 .....

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Transferee on 7th April 2008 and consequently the entire basis for fixing the appointed date on 1st April 2008 was fallacious. It is submitted that under Section 187C (4) of the Act (which was applicable at the relevant time), Form 22B was required to be filed by the Transferor with the Registrar of Companies within 30 days from the date of receipt of the declarations under subSections (1) and (2) of Section 187C of the Act. In the instant case, the said Form 22Bs in respect of the purported dec .....

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declarations dated 1st April 2008 filed by the Byramjees and the purported declarations dated 7th April, 2008 filed by the Transferee, M. Dinshaw and K.B. & Sons with the Transferor are false and do not reflect the correct position. 11. It has been argued by the Petitioners that Section 187C provides for the consequences of not filing Form 22B and/or of the delayed filing thereof and that those are the only consequences which will flow from the nonfiling and/or delayed filing of Form 22B. Co .....

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the Transferee, the Byramjees, M. Dinshaw and K.B. & Sons cannot be penalized for the default of the Transferor in filing Form 22Bs within the stipulated period as they had no control over the Transferor. It is further argued that in any event M. Dinshaw and K.B. & Sons have accepted and consented to the Scheme being sanctioned and have thereby affirmed the said transaction and consequently there is no question of going behind the same in these proceedings. It was also argued by placing .....

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of invalidating the transfer for the late filing of Form 22B. 12. In answer to the submissions of the Petitioners, the Regional Director submits that Form 22B is not and cannot be proof of the existence of an arrangement between the Transferee on the one hand and the Byramjees, M. Dinshaw and K.B. & Sons on the other, under which the Transferee became the beneficial owner of the shares. Form 22B is filed only for the purpose of notifying the world at large about the preexisting arrangement u .....

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wise, the same are contrary to the facts on record. It is further submitted by the Regional Director that it does not lie in the mouth of the Transferee to say that the Transferee cannot be penalised for the default of the Transferor in duly filing the Form 22Bs inasmuch as it is the case of the Transferee Company that the Transferor was its wholly owned subsidiary with effect from 1st/7th April 2008 and as such, the Transferee could very well have caused the said forms to be filed by the Transf .....

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t the beneficial ownership of the shares vested in the Transferee, as Form 22B is filed only for the purpose of notifying the world at large about the preexisting arrangement under which the legal ownership of the shares vests in one person and the beneficial ownership of the same shares vests in another. There must be a preexisting and underlying arrangement under which the beneficial ownership of the shares vest in the Transferee, which has not been shown to exist in the present case. In fact, .....

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e so when the record clearly suggests the contrary. To put it in other words, the said declarations prima facie appear to be ante dated. The argument that the Transferee, the Byramjees, M. Dinshaw and K.B. & Sons, cannot be penalized for the default of the Transferor in filing the Form 22Bs within the stipulated period as they had no control over the Transferor also cannot be accepted particularly in view of the fact that the Transferee claims to be the only shareholder of the Transferor wit .....

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todian and others (supra) will not be of assistance to the Petitioners. 14. However, this Court enquired from the Learned Senior Advocate appearing for the Regional Director regarding the benefit that the Petitioners would receive through the scheme by making an incorrect statement that the Transferee was the beneficial owner of the entire shareholding in the Transferor Company since 1st/7th April 2008. The Learned Senior Advocate for the Regional Director stated that it appears that the object .....

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such transfer. Under the scheme the said shares were being cancelled on the basis that the Transferee was the beneficial owner thereof. 15. It is further pointed out on behalf of the Regional Director that apart from evading capital gains tax, it appears that the scheme is devised to evade payment of income tax by the Transferee. In this regard attention is drawn to Section 56(2)(viia) of the Income Tax Act which inter alia provides that the receipt of shares of a Company by another Company with .....

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mputed in accordance with the aforesaid Section. 16. In response it was contended by the Petitioners that if at all capital gains tax was payable, it would be payable by the Byramjees, M. Dinshaw and K.B. & Sons, all of whom were not involved in the scheme of amalgamation and therefore the aforesaid submission of the Regional Director was irrelevant. The Regional Director has explained that the Byramjees, M. Dinshaw and K.B. & Sons cannot be said to be persons who are not involved in the .....

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cheme itself will not legitimize the scheme. 17. The Learned Senior Advocate appearing for the Petitioners has submitted that aforestated issues pertaining to fixing of the liability qua payment of income tax and capital gains may independently be decided by the tax authorities. In my view, the Learned Senior Advocate of the Petitioners is right and the aforesaid issues as regards the liability, if any, of the Petitioners and their shareholders, towards payment of capital gains tax as well as in .....

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the Transferee. It will not be out of place to mention here that during the course of arguments, the Petitioners submitted that they were agreeable to have the appointed date as 1st April 2009. It is submitted on behalf of the Regional Director that upon merger of one Company with another, the balance sheet of the Transferee is usually revised and restated in order to reflect the transfer of assets and liabilities of the Transferor. The revision and restating of the balance sheet of the Transfe .....

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the provisions of Section 139 (5) of the Act. It is well settled that a revised Income Tax Return can be filed only if the conditions stipulated in Section 139 (5) are satisfied viz. (i) that the assessee discovers any omission or wrong statement in the Income Tax return already filed and (ii) the revised Income Tax return is filed before the expiry of one year from the end of the relevant assessment year or before the completion of the assessment whichever is earlier. It is only when both these .....

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ITR 602 (Mad) para 15. It is submitted that if the scheme is sanctioned as it stands, it will amount to this Court permitting the Petitioners to file revised Income Tax Returns for the period from and after 1st April 2008 since this is the corollary to the approval of a retrospective appointed date covering previous assessment years. It is submitted that this would be violative of Section 139 (5) of the Income Tax Act inasmuch as the revised Income Tax returns will clearly not be filed on the ba .....

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feat the provisions of the Income Tax Act, particularly Section 139(5) thereof. In support of the submission that if the scheme is found to be violative of any law, the Court will refuse to sanction the same and that the Court has no power to sanction something which parties could not do by agreement, the Learned Senior Advocate appearing for the Regional Director has relied on the decision of the Hon'ble Supreme Court in the case of Hindustan Lever vs. State of Maharashtra (2004) 9 SCC 438, .....

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lia to file revised Income Tax returns and that too notwithstanding the expiry of the statutory period for filing such returns. Clause 6.2.1 of the scheme is reproduced hereunder: 6.2.1 Upon this Scheme becoming effective, the Transferee is expressly permitted to revise and file its income tax returns and other statutory returns, including tax deducted at source returns, services tax returns, excise tax returns, sales tax and value added tax returns, as may be applicable and has expressly reserv .....

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ate such an illegality. 22. As set out hereinabove, during the course of the hearing this Court orally directed the Regional Director to enquire with the Income Tax Department as to whether the Department supported the objections of the Regional Director. In response to the enquiry of the Regional Director, the Income Tax Department issued two separate letters dated 3rd December 2014 in respect of the Transferor and Transferee Companies which have been placed on record by the Regional Director b .....

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, 2010-11, and 2011-12 is ₹ 2,94,81,414/and the total tax demanded from the Transferor in respect of the Assessment Years 200910 and 201011 is ₹ 1,11,95,826/. The Income Tax Department has confirmed the objections of the Regional Director and also stated that the Petitioners are not entitled to file revised Income Tax returns. 23. In response, the Petitioners have submitted that the only purpose of the appointed date is to identify the assets and liabilities of the Transferor that ar .....

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ate) and such date cannot be a prospective date but necessarily has to be an antecedent date. It is also contended that there can never be a prospective appointed date inasmuch as it is not possible to identify the assets and liabilities of a Company in future. 24. Relying on the decision of the Hon'ble Supreme Court in the case of Miheer H. Mafatlal vs. Mafatlal Industries Ltd. 1997 (1) SCC 579 at page 601 it is submitted that the role of the Company Court under Section 394 of the Act is li .....

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shareholders. The Regional Director has not relied on any provision of law or any decision of any Court which states that an appointed date in respect of a scheme of amalgamation cannot be an antecedent date. It is submitted that there is no legal bar to the appointed date being an antecedent date under the Act. In the absence of a bar under the Act, the shareholders of the Companies were free to choose any date as an appointed date in their commercial wisdom. 26. In support of their contention .....

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, on 15th January, 2014, to all the Regional Directors which circular was considered and interpreted by this Court in the case of Universal Mine Developers and Service Providers Pvt. Ltd. and others CSP No. 757 of 2013 & Ors. in its order dated 31st January, 2014. It is submitted that the circular makes it clear that if within 15 days of issuance of notice to the Income Tax Department no response as to their objections on the sanctioning of the scheme are received from them it is presumed th .....

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5 days and therefore they are deemed to have granted their no objection to the scheme. The documents once having been furnished to the Income Tax Officer and no response in the nature of an objection having been received, it is deemed that the Income Tax Department does not have any objection to the sanctioning of the scheme. The Regional Director is precluded from then raising the issues which he seeks to raise. It is only after the hearing commenced that the Income Tax Officers have sent lette .....

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n of paragraph 4 of the circular. It is also submitted that this Court has in the case of All India Bluestar Employees Federation and another vs. Bluestar Limited Appeal No. 554 of 1995 in C.A. No. 654 of 1998 held that if timelines are fixed in matters pertaining to issuance of notices to creditors, etc., then timely steps are required to be taken otherwise the entire scheme becomes unworkable. It is submitted that in any event it is for the Tax Authorities and not for the Regional Director to .....

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d. 151 Company cases 1 Bom. 28. It is next submitted on behalf of the Petitioners that in respect of the assessment proceedings pending sanction of scheme, the Hon ble Supreme Court has in the case of Marshall Sons & Co. (India) Ltd. vs. Income Tax Officer 88 Company cases 528 (SC) held thus: 15. Counsel for the Revenue contended that if the aforesaid view is adopted then several complications will ensue in case the Court refuses to sanction the scheme of amalgamation. We do not see any basi .....

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ely. There may be a certain practical difficulty in adopting this course inasmuch as separate balance sheets may not be available for the Transferor and Transferee Companies. But that may not be an insuperable problem inasmuch as assessment can always be made, on the available material, even without a balancesheet. In certain cases, best judgment assessment may also be resorted to. Be that as it may, we need not pursue this line of enquiry because it does not arise for consideration in these cas .....

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e taxes legitimately payable by the subsidiary company. If the Income Tax authorities think that they are entitled to raise this question in the proceedings under the Income Tax Act, it is open to them to do so by way of a separate proceeding according to law. 18. No costs. It is submitted that in the facts of the present case also, the Income Tax Department has in fact applied the principle of protective assessment and has passed an order on 8th December, 2011, for financial year 20082009 makin .....

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ments, the Income Tax Department had accepted the Scheme and was precluded from objecting to the same. It is further submitted that the said letters dated 3rd December 2014 appear to have been issued owing to the threat issued by the Regional Director to the concerned Income Tax Officers. The Regional Director has exceeded his jurisdiction in issuing such threats. 29. It is further submitted on behalf of the Petitioners that the Regional Director s apprehension in respect of any alleged misuse o .....

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e Regional Director, the Petitioners submit that they are willing to delete clause 6.2.1 of the Scheme. This statement was made on behalf of the Petitioners during the hearing. Dealing with the decisions relied upon by the Regional Director in support of his arguments relating to Section 139(5) of the Income Tax Act, it is submitted on behalf of the Petitioners that the said decisions do not support the contention of the Regional Director and the judgments have no application to the present case .....

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he scheme has been framed with the intention of contravening the provision of any law. It is also well settled that the Court can interfere with the decision/commercial wisdom of the shareholders if the Court is satisfied that the scheme as framed in fact contravenes the provisions of any law, albeit unintentionally. There can be again no disagreement on the issue that the shareholders of companies are free to choose any date as an appointed date in their commercial wisdom. However, if the Regio .....

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of sanction to the scheme and it is always open to the Court to consider the doubt/apprehension expressed by the Regional Director and pass necessary orders either rejecting the scheme or sanctioning the same with/or without necessary clarifications. I also do not agree with argument advanced by the Petitioners that the Regional Director cannot object to the scheme on the ground that the same violates the provisions of the Income Tax Act and it is only the Income Tax Authorities who may raise an .....

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ain sanction of a scheme and thereafter use the same as a shield to protect itself from the consequences arising out of the contravention of provisions of law. In the present case itself, the Petitioners have included clause 6.2.1 in the scheme which expressly permits the Transferee inter alia to file revised Income Tax returns and that too notwithstanding the expiry of the statutory period for filing such returns and without satisfying the conditions stipulated by Section 139(5) of the Income T .....

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ns stipulated in Section 139(5) are satisfied viz. (i) that the assessee discovers any omission or wrong statement in the Income Tax Return already filed and (ii) the revised Income Tax Return is filed before the expiry of one year from the end of the relevant Assessment Year or before the completion of the assessment whichever is earlier. In fact, it was only after the Regional Director made this submission that the Petitioners agreed to delete the said clause from the scheme. In the circumstan .....

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ed by the Court. It is therefore clear that the legislature intended that the Regional Director will examine a scheme from all aspects and place his observations and views before the Court and the Court will consider the same before sanctioning the scheme. It is obvious that the Regional Director while making his observations and comments is entitled to consider the scheme from all aspects and is not restricted in any manner. He is entitled to consider the effect and implications of the scheme o .....

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also to be noted that giving the Regional Director the opportunity to place all his observations on record cannot be said to prejudice anyone including the parties before the Court. It is always in the public interest that all aspects of a scheme are duly considered and decided before the same is sanctioned. 32. In support of his contentions, the Regional Director cited an unreported decision of the Learned Single Judge of the Goa Bench of the Bombay High Court dated 6th November 2012 passed in .....

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before me the decision of the Division Bench of the Goa Bench of the Bombay High Court in the same case passed on 14th February 2013 whereby the Division Bench dismissed the Appeal of the Revenue and confirmed the decision of the Learned Single Judge. In this case I am not required to comment on whether the Income Tax Authorities have any independent locus or not. However, it is apparent that these decisions support the contention of the Regional Director that he has the necessary locus to appea .....

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o the statutory provisions and cannot be construed to override the statutory provisions. Even otherwise, as discussed below, the circular does not fetter or restrict the rights or duties of the Regional Director. 33. To appreciate the contentions of parties with regard to the Circular dated 15th January 2014, it is necessary to reproduce paragraphs 3 and 4 thereof and the same are accordingly reproduced below: 3. An instance has recently come to light wherein a Regional Director did not project .....

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tion to the action proposed under Section 391 or 394 as the case may be. The Regional Directors must also see if in a particular case feedback from any other sectoral Regulator is to be obtained and if it appears necessary for him to obtain such feedback, it will also be dealt with in a like manner. 4. It is also emphasized that it is not for the Regional Director to decide correctness or otherwise of the objections/views of the Income Tax Department or other Regulators. While ordinarily such vi .....

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epartment is deemed to have no objection to the scheme and cannot raise any objection after the expiry of this period. According to the Petitioners the word may used in the 3rd sentence of para 3 means shall . The Petitioners rely upon the order of this Court in Universal Mine Developers and Service Providers Private Limited & Ors. (Supra) in support of their aforesaid contention. It is further submitted by the Petitioners that by virtue of para 4 of the circular if the Regional Director did .....

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h the procedure prescribed in para 4 of the Circular. In this regard, the Petitioners rely upon the decision of this Court in the case of All India Bluestar Employees Federation and Anr. v/s. Bluestar Limited (Supra). 35. In my opinion, the above contentions of the Petitioners with regard to the Circular are not sustainable. As rightly pointed out by the Regional Director, this Circular does not place any restriction on the rights and powers of the Regional Director. The Circular merely provides .....

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deem fit including objections and observations pertaining to taxation laws. In view of the clear object of the Circular and what is stated above, there is no justification at all for considering the word may as shall as contended by the Petitioner. Para 4 spells out the procedure to be followed in the event of the Regional Director not agreeing with the objections and views of the Income Tax Department. In the present case, there was no occasion for the Regional Director to make any reference to .....

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his Court in the case of Universal Mine Developers and Service Providers Private Limited (Supra) it is apparent from the order that the same was passed only for the purpose of facilitating and streamlining the working of the Regional Director s office so far as scheme matters were concerned. A detailed schedule with timelines was prepared and finalised by the Court after inter alia taking into consideration the said Circular dated 15th January 2014. In this context, this Court in para 3 of the O .....

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smuch as the issue in that case was completely different and the said Circular dated 15th January 2014 was not being considered in that case. 37. When the arguments in the matter were in progress and the Regional Director was doing his duty of pointing out what in his view was wrong and illegal, the Petitioners criticized the role played by the Regional Director and submitted that he was exceeding his jurisdiction. This Court therefore orally directed the Regional Director to ask the Income Tax .....

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port the views of the Regional Director. Neither the Court nor the Regional Director have asked the Income Tax Department to submit their letters or views in a particular manner but have only asked the Income Tax Department to give their independent views qua the objections raised by the Regional Director. This is clear from the letter of the Regional Director and his Senior Advocate. Moreover, the Petitioners wholeheartedly consented to this Court seeking the views of the Income Tax Department. .....

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sake of convenience, both these paras are reproduced below: 6 (e) That the Deponent further submits that the Tax issue if any arising out of this scheme shall be subject to final decision of Income Tax Authority and approval of the scheme by Hon'ble High Court may not deter the Income Tax Authority to scrutinize the tax returns filed by the Petitioner Company after giving effect to the amalgamation. The decision of the Income Tax Authority is binding on the Petitioner Company . 6. I say tha .....

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ubject to the final decision of the Income Tax Authority and the approval of the scheme will not deter the Income Tax Authority from scrutinizing the Income Tax Returns filed by the Petitioners and the decision of the Income Tax Authority is binding on the Petitioners and since the Petitioners have accepted this position in their Affidavits in Reply, nothing survives in the objections of the Regional Director. In other words, according to the Petitioners, the objections of the Regional Director .....

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to the amalgamation . This para therefore refers to the tax issues that may arise upon the scheme being sanctioned and the amalgamation of the two companies taking effect. This objection of the Regional Director proceeds on the basis that the scheme is sanctioned. It is therefore submitted that this objection is different from the objection of the Regional Director to the Scheme being sanctioned with a retrospective appointed date. In fact, the latter objection is an objection to the sanction of .....

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ection regarding the income tax implications that may arise upon the sanction of the scheme. In para 6 (c) the objection is to the appointed date itself whereas para 6(e) proceeds on the assumption that the appointed date has been approved by this Court. According to the Regional Director, once the scheme is sanctioned, it will mean that the appointed date has been accepted by this Court and that aspect will be concluded forever and it will not be permissible for the Income Tax Department to rev .....

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ccording to the Regional Director if the Court sanctioned the scheme then the tax issues that may arise from the amalgamation must be left open for the Income Tax Authorities to decide. In other words according to the Regional Director, the sanction of the scheme should not prevent the Income Tax Authorities from scrutinizing tax returns filed by the Petitioners after giving effect to the amalgamation. In other words the Petitioners should not escape the liability, if any, to taxation upon givin .....

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fidavit in Reply of the Petitioners is a complete answer to the objection of the Regional Director. 43. In support of their contentions, the Petitioners have relied upon the decision of this Court in the case of Trinity India Ltd. (supra). In that case, the Regional Director placed on record the letter of the Income Tax Department to the effect that tax issues, if any, arising out of the Scheme, would be subject to the final decision of the Income Tax Department and the approval of the scheme by .....

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arried on against the merged entity. It is therefore clear that in Trinity India's case the Regional Director as well as the Income Tax Department accepted the appointed date and only sought a protection with regard to tax issues arising out of the scheme i.e. upon the amalgamation being given effect to. The aforesaid case is therefore of no assistance to the Petitioners and does not take their case any further. 44. The next decision cited by the Petitioners was the decision of the Calcutta .....

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e next decision relied upon by the Petitioners was the decision of this Court in the case of Sequent Scientific Ltd. This decision was relied upon for the proposition that assuming that the scheme is in violation of the Income Tax Act, the same can be addressed at the appropriate stage by the Income Tax Authorities which was possible in view of para 6 (e) of the affidavit of the Regional Director read with para 6 of the affidavit in reply of the Petitioners. The facts of the aforesaid decision c .....

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in breach of the supply agreement, the matter would have to be addressed at the appropriate stage and the intervener was free to invoke the terms of the contract and terminate the same and also claim damages and other reliefs as permissible by law (para 18). In Sequent Scientific, this Court was considering an argument of breach of contract whereas in the present case this Court is considering an argument that the scheme is in violation of the provisions of law viz. the Income Tax Act. Moreover, .....

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tegorical finding that the provisions of Chapter XXC were not attracted and that a No Objection Certificate under Chapter XXC was not required prior to the sanction of the scheme. This Court did not hold that the objection of the Income Tax Department was liable to be ignored by this Court and that the Income Tax Department may raise the same in the course of assessment proceedings. This decision therefore also does not assist the Petitioners. 47. In my view therefore the Regional Director is ri .....

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t the Income Tax Department had passed protective assessment orders for previous years in accordance with the decision of the Hon'ble Supreme Court in Marshall's case and particularly the observations in para 15 thereof. According to the Petitioners, having made such protective assessments, the Income Tax Department had accepted the scheme and was therefore precluded from objecting to the same. It is not possible to accept the aforesaid contentions of the Petitioners for more than one re .....

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ses an order approving or rejecting the scheme. Accordingly it cannot be said that by making protective assessments in the present case, the Income Tax Department has accepted the scheme. 49. The Regional Director further contends that the aforesaid contention of the Petitioners is really a plea of waiver and that the same has not been raised in their pleadings and consequently the Petitioners are not entitled to raise the same. Alternatively, he submits that in any event the scheme is violative .....

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to raise this contention during the course of arguments. In any case, as I already observed above, the mere making of protective assessments does not preclude the Income Tax Department from objecting to the scheme. Further, it is well settled that there is no estoppel against statute and consequently it is always open to the Income Tax Department to point out that the scheme is contrary to the provisions of the Income Tax Act. In any case it is always open to the Regional Director, who has not .....

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139(5) are satisfied viz. (i) that the Assesse discovers any omission or wrong statement in the income tax return already filed, and (ii) the revised income tax return is filed before the expiry of one year from the end of the relevant assessment year or before the completion of the assessment whichever is earlier. According to the Regional Director, once the scheme is sanctioned the Transferor and Transferee Companies will revise and restate their balance sheets for the period from 1st April 20 .....

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ax demanded from the Transferee Company is ₹ 2,94,81,414/and that demanded from the Transferor Company is ₹ 1,11,95,826/. According to the Regional Director it is clear that the Petitioners desire to escape income tax liability arising out of the aforesaid demands by filing revised returns retrospectively from 1st April 2008. Prima facie, I am satisfied that there is some substance in the contentions of the Regional Director. It is clear from the various decisions cited by the Region .....

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to the Income Tax Department to decide whether the revised income tax returns, if filed, would be valid or would be violative of Section 139(5) of the Income Tax Act. 51. As regards the appointed date, according to the Petitioners, the retrospective appointed date is relevant only for the purpose of identification and quantification of assets and liabilities of the Transferor which would be transferred to the Transferee, to notify the shareholders of the same and for fixing the share valuation/s .....

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eady filed or revised returns, if any, that may be filed or otherwise and shall carry out such assessments without being influenced by the observations made herein. 52. As regard the objection of the Regional Director pertaining to stamp duty, as it pertains to a post amalgamation stage, the same shall be decided by the Stamp Authorities at the appropriate stage. 53. Finally I come to the issue of suppression of material facts and false and misleading statements and contradictory and inconsisten .....

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ffectuated and the transaction contemplated therein had not been completed. The Petitioners have further suppressed the fact that Form 22Bs were filed only on 28th July 2013 and that Form 20Bs were filed on 24th July 2013 and that prior to July 2013 the socalled arrangement pertaining to the beneficial ownership of the shares of the Transferor Company by the Transferee Company was not reflected in the accounts of the Transferor and Transferee Companies or M. Dinshaw and K.B. & Sons and that, .....

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urse of arguments but did so in their Written Submissions. According to the Petitioners, the alleged suppression of facts is irrelevant to the sanction of the scheme. According to them there is no suppression at all since the transfer of beneficial interest is a matter concerning two individuals i.e. M. Dinshaw and K.B. & Sons, both of whom have admitted and affirmed the same by filing requisite declarations under Section 187C and have also expressly consented in writing to the scheme. It is .....

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al owner of the shares of the Transferor Company either on 1st or 7th April 2008. It is also clear that the Petitioners have taken inconsistent stands in this connection viz. in one place they say that the relevant date on which the Transferee was the beneficial owner of the shares was 1st April 2008 and in another place they say that this date was 7th April 2008. The Petitioners have also not come forth with the correct facts in respect of the two SPAs or the effect thereof. Further, the Petiti .....

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this Court. It is no answer to say that the Court cannot look into these matters in its supervisory jurisdiction. Suppression of material facts and making false and incorrect statements is a very serious matter with serious consequences and it is the duty of the Court to examine the allegations of suppression etc. carefully and if found to be correct to take appropriate action against the party concerned. It is also not an answer to say that M. Dinshaw and K.B. & Sons have affirmed the tran .....

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