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2019 (7) TMI 639

he joint petition it has been affirmed that no proceedings under sections 206 to 229 or Chapter XIV of the Companies Act, 2013 are pending against the petitioner-companies. The shareholders of the petitioner-companies are the best judges to protect their interest, fully conversant with market trends, and therefore, their decision should not be interfered with by the Tribunal for the reason that it is not a part of judicial function to examine entrepreneurial activities and their commercial decisions. It is well-settled that the Tribunal while evaluating the scheme of which sanction is sought under sections 230-232 of the Companies Act, 2013 will not ordinarily interfere with the corporate decisions of companies approved by shareholders and creditors. Right to apply for the sanction of the scheme has been statutorily provided under sections 230-234 of the Companies Act, 2013 and therefore, it is open to the applicant-companies to avail the benefits extended by statutory provisions and the Rules. Upon considering the approval accorded by the members and creditors of the petitioner-companies to the proposed scheme, and the affidavits filed by the Regional Director, Northern Region, Mi .....

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erved on to the Regional Director (Northern Region), Registrar of Companies, NCT of Delhi and Haryana, official liquidator, the Income-tax Department and to the other relevant sectoral regulators. 6. It is seen from the records that the petitioners have filed an affidavit dated June 4, 2018 affirming compliance with the order passed by the Tribunal dated April 20, 2018. A perusal of the affidavit discloses that the petitioners have affected the newspaper publication as directed in one issue of the Business Standard English edition on May 19, 2018 as well as in Business Standard Hindi edition again on May 19, 2018 in relation to the date of hearing of the petition. Further, the affidavit also discloses that copies of petition have been duly served to the Registrar of Companies, Regional Director, Northern Region, official liquidator and Income-tax Department in compliance with the order and in proof of the same acknowledgment made by the respective offices have also been placed on record. In addition both the petitioners have also filed affidavits dated June 4, 2018 to the effect that the petitioners and their representatives have not received any objection against the scheme. 7. Th .....

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n to pay the fee in respect of the total authorized share capital emerging after the approval of the scheme of amalgamation in accordance with law. 11. The official liquidator has filed its report dated June 8, 2018 and pointed out that the transferor company, has acquired land at Sonepat on July 31, 2007 at a consideration of ₹ 3,22,59,069 and the said land was reflected in the balance-sheet of the company till March 31, 2013. Later on from 2014 onwards the land does not appear in the balance-sheet of the transferor company. 12. It is contended in the report that on query raised about this matter it has been informed by the petitioners that the transferor company had entered into a contract for sale of property which consists of land and building under construction against which the company has received advance. Subsequently, the said contract was not executed as party was not paying the sale consideration and consequently, the company has forfeited the advance of ₹ 7.50 crores in accordance with the terms of contract. Accordingly it is contended that the said land value has been reduced to Nil and the land has not been shown in the balance-sheet on and after March 31, .....

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affect the tax treatments of the transactions under the Income-tax Act, 1961 or any other applicable taxing statute, nor would sanction of the scheme or the effect thereof serve as a defence for the companies concerned against tax treatment under the aforementioned statutes. 19. The transferee company has filed its response against the report filed by the Income-tax Department and submitted that : "(i) Reply to point No. 4(i).-The losses of the transferor company may be adjusted with the income of the transferee company as per the provisions of the Income-tax Act, 1961. In case of any liabilities arises on behalf of transferor and transferee company, the same shall be paid by transferee company as per the provisions of the Income- tax Act, 1961. (ii) Reply to point No. 4(ii).-The approval of the scheme shall not affect the tax treatments of the transactions under the Income-tax Act, 1961 or any other applicable taxing statute. Further, the sanction of the scheme or the effect thereof shall not serve as a defence for applicant-company No. 1." 20. Needless to say, that the scheme should not be a device to evade law and to promote tax evasion. The scheme will be against the .....

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lication as annexure A at page No. 40 and annexure I at page No. 143 respectively). It is further submitted that the accounting treatment for above mentioned forfeiture of advance was made as per case decided by the Delhi High Court in CIT v. Meera Goyal [2014] 360 ITR 346 (Delhi), I. T. A. No. 1263 of 2011 (copy is enclosed for your reference as annexure 2), the hon'ble Supreme Court in the case of Travancore Rubber and Tea Co. Ltd. v. CIT [2000] 243 ITR 158 (SC) and section 51 of the Income-tax Act which is going reproduced as under : If the owner of an asset has received advance money or other money by forfeiting the said amount relating to the asset, this amount will be deducted from : (a) The written down value in case of depreciable assets, or (b) The cost of acquisition of the asset, or (c) The fair market value of the asset that will be taken as cost of acquisition as on April 1, 1981 if the asset was purchased before April 1, 1981 as the case may be, in computing the cost of acquisition. The company has reduced the cost of land and WIP of Building Cost by such forfeited amount. In view of above, the value of land has been reduced to nil in balance-sheet as on March 31, .....

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gamation is in conformity with the Accounting Standard notified by the Central Government as specified under the provisions of section 133 of the Companies Act, 2013. 27. The share exchange ratio as provided in the scheme is as under : "(a) 48 equity shares of ₹ 10 each of transferee company, credited as fully paid-up, for every 100 equity shares of ₹ 10 each of transferor company, shall be allotted to the shareholders of transferor company." Copy of the valuation report/share exchange ratio report prepared by P. R. Kumar and Co., Chartered Accountant has been placed on record. 28. The shareholders of the petitioner-companies are the best judges to protect their interest, fully conversant with market trends, and therefore, their decision should not be interfered with by the Tribunal for the reason that it is not a part of judicial function to examine entrepreneurial activities and their commercial decisions. It is well-settled that the Tribunal while evaluating the scheme of which sanction is sought under sections 230-232 of the Companies Act, 2013 will not ordinarily interfere with the corporate decisions of companies approved by shareholders and creditors. 2 .....

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up ; and (ii) That all the property, rights and powers of the transferor company, be transferred without further act or deed, to the transferee company and accordingly the same shall pursuant to section 232 of the Companies Act, 2013, be transferred to and vest in the transferee company. (iii) That all the liabilities and duties of the transferor company, be transferred without further act or deed, to the transferee company and accordingly the same shall, pursuant to section 232 of the Act, be transferred to and become the liabilities and duties of the transferee company ; and (iv) That all proceedings now pending by or against the transferor company, be continued by or against the transferee company ; and (v) That all the employees of the transferor company in service, on the date immediately preceding the date on which the scheme takes effect, i. e., the effective date shall become the employees of the transferee company on such date without any break or interruption in service and upon terms and condition not less favourable than those subsisting in transferor company on the said date. (vi) That the petitioner-companies shall within thirty days of the date of the receipt of this .....

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