1.
Universal Cables Ltd. vs. Commissioner
of Income Tax
Jabalpur (2020) 420 ITR 111 (SC)
Refund – Interest on refund of
TDS deducted erroneously – Deductor to be paid interest u/s 244A of the Act
The appellant, M/s Universal
Cables Ltd., erroneously deducted tax on interest payments made to IDBI with
regard to the provisions contained in section 194A(3)(iii)(b) of the Act. The
TDS was Rs. 7,06,022 on payment of interest to IDBI, Bombay. IDBI objected to
the deduction of income tax as no tax was required to be deducted in respect of
payments made to a financial corporation established by or under a Central /
State or provincial Act; as IDBI was covered under the same, no tax was
required to be deducted on the payment of interest made to it. In view of the
above, the appellant requested the Income-tax Officer (TDS) to refund the
amount of Rs. 7,06,022 which was erroneously deducted and credited to the
account of the Central Government. The Commissioner of Income-tax, Jabalpur, by
an order dated 2nd February, 1996 directed the Income-tax Officer (TDS) to
refund the said amount to the appellant.
After the
grant of refund, the appellant requested the Department to grant interest on
the refund u/s 244A of the Act. The Income-tax Officer (TDS) declined to grant
interest. On an appeal, the Commissioner of Income-tax (Appeals) directed the
Income-tax Officer (TDS) to grant interest u/s 244A of the Act on the refunded sum
from the date of payment to the Government treasury to the date of issue of
refund voucher. On an appeal by the Revenue, the Tribunal reversed the order of
the Commissioner of Income-tax (Appeals), holding that the appellant was not an
assessee under the Act but only a tax deductor and that the tax refunded by the
Department was not a refund as per section 237 of the Act and therefore was not
entitled to refund u/s 244A of the Act. The High Court dismissed the appeal of
the appellant.
On further appeal to the Supreme
Court, the appellant relied on the decision of the Supreme Court in Union
of India vs. Tata Chemicals Ltd. reported in (2014) 363 ITR 658,
in particular, paragraph 37 on page 675 of the said decision.
The Supreme Court held that from
the dictum in the said judgment, it was clear that there was no reason to deny
payment of interest to the deductor who had deducted tax at source and
deposited the same with the treasury. According to the Supreme Court, this
observation squarely applied to the appellant.
As a result, the Supreme Court
allowed the appeal of the appellant and directed the Department to pay interest
as prescribed u/s 244A of the Act as applicable at the relevant time at the
earliest.
2. Union of India (UOI) and Ors. vs. Gautam Khaitan
(2020) 420 ITR 140 (SC)
Undisclosed foreign income and
assets – In order to give benefit to the assessee(s) and to remove anomalies,
the date 1st July, 2015 has been substituted in sub-section (3) of
section 1 of the Black Money Act in place of 1st April, 2016 – By
doing so, the assessee(s), who desired to take the benefit of one-time
opportunity could have made declaration prior to 30th September,
2015 and paid the tax and penalty prior to 31st December, 2015
An appeal was filed before the
Supreme Court challenging the interim order passed by the Division Bench of the
Delhi High Court in Writ Petition (Crl.) No. 618 of 2019 dated 16th
May, 2019 thereby restraining the appellants from taking and / or continuing
any action against the respondent pursuant to the order dated 22nd
January, 2019 u/s 55 of the Black Money (Undisclosed Foreign Income and Assets)
and Imposition of Tax Act, 2015 (hereinafter referred to as the Black Money
Act).
According to the Supreme Court,
the short question that fell for its consideration was as to whether the High
Court was right in observing that in exercise of the powers under the
provisions of sections 85 and 86 of the Black Money Act, the Central Government
had made the said Act retrospectively applicable from 1st July, 2015
and passed a restraint order.
The Supreme Court, from the
Statement of Objects and Reasons, observed that the Black Money Act had been
enacted for the following purposes:
(a) to unearth the black money stashed in foreign countries;
(b) to prevent unaccounted money going abroad;
(c) to punish the persons indulging in illegitimate means of
generating money causing loss to the Revenue; and
(d) To prevent illegitimate income and assets kept outside the country
from being utilised in ways which are detrimental to India’s social, economic
and strategic interests and its national security.
The Black Money Act was passed by
Parliament on 11th May, 2015 and received Presidential assent on 26th
May, 2015. Sub-section (3) of section 1 provides that save as otherwise
provided in the said Act, it shall come into force on the 1st day of
April, 2016. However, by the notification / order notified on 1st
July, 2015, which was impugned before the High Court, it had been provided that
the Black Money Act shall come into force on 1st July, 2015, i.e.,
the date on which the order was issued under the provisions of sub-section (1)
of section 86 of the Black Money Act.
The Supreme Court noted that the
scheme of the Black Money Act is to provide stringent measures for curbing the
menace of black money. Various offences have been defined and stringent
punishments have also been provided. However, the scheme of the Black Money Act
also provided a one-time opportunity to make a declaration in respect of any
undisclosed asset located outside India and acquired from income chargeable to
tax under the Income-tax Act. Section 59 of the Black Money Act provides that
such a declaration was to be made on or after the date of commencement of the
Black Money Act, but on or before a date notified by the Central Government in
the Official Gazette. The date so notified for making a declaration is 30th
September, 2015, whereas the date for payment of tax and penalty was notified
to be 31st December, 2015. As such, an anomalous situation was
arising; if the date under sub-section (3) of section 1 of the Black Money Act
was to be retained as 1st April, 2016, then the period for making a
declaration would have lapsed by 30th September, 2015 and the date
for payment of tax and penalty would have also lapsed by 31st
December, 2015.
However, in
view of the date originally prescribed by sub-section (3) of section 1 of the
Black Money Act, such a declaration could have been made only after 1st
April, 2016. Therefore, in order to give the benefit to the assessee(s) and to
remove the anomalies, the date 1st July, 2015 had been substituted
in sub-section (3) of section 1 of the Black Money Act in place of 1st
April, 2016. According to the Supreme Court, this was done to enable the
assessee(s) desiring to take benefit of section 59 of the Black Money Act. By
doing so, the assessee(s) who desired to take the benefit of the one-time
opportunity could have made a declaration prior to 30th September,
2015 and paid the tax and penalty prior to 31st December, 2015.
According to the Supreme Court,
the penal provisions under sections 50 and 51 of the Black Money Act would come
into play only when an assessee fails to take benefit of section 59 and neither
discloses assets covered by the Black Money Act, nor pays the tax and penalty
thereon. The Supreme Court therefore concluded that the High Court was not
right in holding that by the notification / order impugned before it, the penal
provisions were made retrospectively applicable.
The Supreme Court also noted that
in the factual scenario of the present case, the assessment year in
consideration was 2019-2020 and the previous year relevant to the assessment
year was the year ending on 31st March, 2019 and in that view of the
matter, the interim order passed by the High Court was not sustainable in law;
the same was quashed and set aside.
3. Dalmia Power Limited and
Ors. vs. ACIT
(2020) 420 ITR 339 (SC)
Amalgamation of companies –
Revised return of income filed after amalgamation beyond the due date of filing
revised return provided u/s 139(5) without seeking permission from Central
Board of Direct Taxes u/s 119(2)(b) is a valid return where the Scheme of
Arrangement and Amalgamation which is approved by NCLT so provides and is not
objected to by the Department.
The appellant No. 1, M/s Dalmia
Power Limited, was 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, M/s Dalmia Cement (Bharat) Limited,
was engaged in the business of manufacturing and selling of cement, generation
of power, maintaining and operating rail systems and solid waste management
systems which provide services to the cement business. The appellants had their
registered offices at Dalmiapuram Lalgudi Taluk, Dalmiapuram, District
Tiruchirappalli, Tamil Nadu.
The appellant No. 1 filed its
original return of income u/s 139(1) of the Act on 30th September,
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 u/s 139(1) of the Act on 30th
November, 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).
With a view to restructure and
consolidate their businesses and enable better realisation of the potential of
their businesses, which would yield beneficial results, 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 four inter-connected Schemes of Arrangement and
Amalgamation with nine 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. and Adhunik MSP Cement (Assam) Ltd. (also referred to
as ‘Transferor Companies’ or ‘Amalgamating Companies’) and their respective
shareholders and creditors.
The appointed date of the Schemes
was 1st January, 2015 and these would come into effect from 30th
October, 2018.
The Transferor and Transferee
Companies filed company petitions under sections 391 to 394 of the Companies
Act, 1956 before the Madras and Guwahati High Courts.
On the coming into force of the
Companies Act, 2013, the company petitions were transferred to NCLT, Chennai
and NCLT, Guwahati.
The Schemes were duly approved
and sanctioned by the NCLT, Guwahati vide orders dated 18th May,
2017 and 30th August, 2017. NCLT, Chennai sanctioned the Schemes
vide orders dated 16th October, 2017, 20th October, 2017,
26th October, 2017, 28th December, 2017, 10th
January, 2018, 20th April, 2018 and 1st May, 2018.
The appellants / Transferee
Companies manually filed revised returns of income on 27th November,
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
computations 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. 11,05,93,91,494.
The revised
returns were filed after the due date for filing revised returns of income u/s
139(5) for the A.Y. 2016-2017 since the NCLT passed the final order on 1st
May, 2018. Consequentially, it was an impossibility to file the revised returns
before the prescribed date of 31st March,
2018.
On 4th December, 2018,
the Department issued a notice u/s 143(2) of the Income-tax Act to give effect
to the approval of the Scheme.
On 5th December, 2018,
the Department recalled the notice dated 4th December, 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 u/s 119(2)(b) of the Act read with CBDT Circular No.
9/2015 dated 9th June, 2015.
Next, on 28th
December, 2018, the Department passed an assessment order u/s 143(3) of the
Act, stating that in view of the Scheme of Arrangement and Amalgamation, the
notice issued u/s 143(2), and the assessment proceedings for A.Y. 2016-2017 had
become infructuous with respect to appellant No. 2.
The appellants filed writ
petitions before the Madras High Court praying for quashing of the order dated
5th December, 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 27th November, 2018, as well
as the orders dated 20th April, 2018 and 1st May, 2018
passed by the NCLT, Chennai approving the Schemes of Arrangement and
Amalgamation.
The learned Single Judge of the
Madras High Court, vide common judgment and order dated 30th April,
2019 allowed the writ petitions filed by the appellants and quashed the order
dated 5th December, 2018 passed by the Department and 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 weeks.
The Department filed writ appeals
under clause 15 of the Letters Patent Act challenging the judgment and order
dated 30th April, 2019 passed by the Single Judge.
A Division Bench of the Madras
High Court, vide the impugned judgment dated 4th July, 2019 allowed
the writ appeals and reversed the judgment of the Single Judge.
Aggrieved by the judgment of the
Division Bench, the appellants filed appeals before the Supreme Court on 9th
August, 2019.
According to the Supreme Court,
the issue arising for consideration in the appeals was whether the Department
ought to have permitted the assessee companies (the appellants) to file the
revised income tax returns for the A.Y. 2016-2017 after the expiry of the due
date prescribed u/s 139(5) of the Act on account of the pendency of proceedings
for amalgamation of the assessee companies with other companies in the group
under sections 230-232 of the Companies Act, 2013.
The Supreme Court observed that a
perusal of the Scheme of Arrangement and Amalgamation showed that the
appellants were entitled to file revised returns of income after the prescribed
time limit for filing or revising the returns had lapsed without incurring any
liability on account of interest, penalty or any other sum.
The Court noted that in
compliance with section 230(5) of the Companies Act, 2013, notices under Form
No. CAA 3 under sub-rule (1) of Rule 8 of the Companies (Compromises,
Arrangements and Amalgamations) Rules, 2016 were sent to the Department.
Rule 8(3) of the Companies
(Compromises, Arrangements and Amalgamations) Rules, 2016 provides that any
representation made to the statutory authorities notified u/s 230(5) shall be
sent to the NCLT within a period of 30 days from the date of receipt of such
notice. In case no representation is received within 30 days, it shall be
presumed that the statutory authorities have no representation to make on the
proposed scheme of compromise or arrangement.
The Supreme Court noted that the
Department did not raise any objection within the stipulated period of 30 days
despite service of notice.
Pursuant thereto, the Schemes
were sanctioned by the NCLT. Accordingly, the Schemes attained statutory force
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 Schemes.
As a consequence, when the
companies merged and amalgamated with one another, the amalgamating companies
lost their separate identity and character and ceased to exist upon the
approval of the Schemes of Amalgamation.
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.
The Supreme Court observed that
in Marshall Sons & Co. (India) Ltd. vs. ITO it had 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 date’. It was
further held that pursuant to the Scheme of Arrangement and Amalgamation, the
assessment of the Transferee Company must take into account the income of both
the Transferor and the Transferee Companies.
The Court noted that in the
present case, appellant Nos. 1 and 2 / Transferee Companies filed their
original returns of income on 30th September, 2016 and 30th
November, 2016, respectively. Thereafter, they entered into Schemes of
Arrangement and Amalgamation with nine Transferor Companies in 2017. The
Schemes were finally sanctioned and approved by the NCLT, Chennai vide final
orders dated 20th April, 2018 and 1st May, 2018. The
appointed date as per the Schemes was 1st January, 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., 1st January, 2015.
Accordingly, the appellants filed
their revised returns on 27th November, 2018. The re-computation
would have a bearing on the total income of the appellants with respect to the
A.Y. 2016-2017, particularly on matters in relation to carrying forward losses,
unabsorbed depreciation, etc.
The counsel appearing for the
Department relied on sections 139(5) and 119(2)(b) of the Act read with
Circular No. 9 of 2015 issued by the Central Board of Direct Taxes to contend
that the appellant ought to have made an application for condonation of delay
and sought permission from the Central Board of Direct Taxes before filing the
revised returns beyond the statutory period of 31st March, 2018. The
appellants having belatedly filed their revised returns on 27th
November, 2018, which was beyond the due date of 31st March, 2018
for the A.Y. 2016-17, the assessment could be done on the basis of the original
returns filed by the appellants.
According to the Supreme Court,
the provisions of section 139(5) were 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 NCLT. 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 31st
March, 2018 since the NCLT had passed the last orders granting approval
and sanction of the Schemes only on 22nd April, 2018 and 1st
May, 2018.
The Supreme Court further held
that a perusal of section 119(2)(b) showed that it was 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 Act. This provision would not be applicable where an assessee
has restructured his business and filed a revised return of income with the
prior approval and sanction of the NCLT, without any objection from the
Department.
The Court observed that the rules
of procedure have been construed to be the handmaiden of justice. The purpose
of assessment proceedings is to assess the tax liability of an assessee
correctly in accordance with law.
According to the Supreme Court,
sub-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 succession. In 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, etc. In 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 the amalgamation of the companies.
According to the Court, the
learned Single Judge had rightly allowed the writ petitions. The Court set
aside the impugned judgment and order dated 4th July, 2019 passed by
the learned Division Bench and restored the judgment dated 30th
April, 2019 passed by the learned Single Judge, allowing the civil appeals.
The Supreme Court directed the
Department to receive the revised returns of income for A.Y. 2016-2017 filed by
the appellants and complete the assessment for A.Y. 2016-2017 after taking into
account the Schemes of Arrangement and Amalgamation as sanctioned by the NCLT.
Note: The
judgment of the Apex Court in the case of Marshall Sons & Co.
(India) Ltd. vs. ITO (223 ITR 809) was analysed by us in the column
‘Closements’ in the February, 1997 issue of this Journal.
