Gujarat HC sets aside Reassessment Notice issued to Amalgamated Company which ceased to exist after Approval of Composite Scheme of Arrangement [Read Judgment]

Probability - Realization - Gujarat High Court - Taxscan

The Gujarat High Court set aside Reassessment Notice issued to the amalgamated company which ceased to exist after approval of the composite scheme of arrangement.

The petitioner filed before this court by the petitioner company as well as by three companies viz. Gayatri Mine-Chem Private Limited, Gayatri Integrated Services Private Limited and Gayatri Fillers Private Limited inter alia praying for sanction of the composite scheme of arrangement in the nature of amalgamation with the petitioner company under the provisions of the Companies Act. During the said proceedings before this court, the Regional Director, North-Western Region, Ministry of Corporate Affairs, had filed his affidavit dated 13th May 2015. In response whereof, the additional affidavit was filed inter alia providing the explanation to the issues raised by the Regional Director, Ministry of Corporate Affairs. As per one of the explanations, an objection was invited from the Income Tax Department; however, within the statutory period of 15 days, no objection was raised by the Income Tax Department and it was presumed that the Income Tax Department had no objection to the proposed scheme of arrangement. Thus the court upon being satisfied that the amalgamation under the scheme resulted in three companies. Thereafter Income Tax Department issued a notice indicating that the department has reason to believe that income chargeable to tax.

The division bench comprising of Justice Harsha Devani and Justice Sangeeta K. Vishen on a writ petition filed by Gayatri Microns  Ltd.

While relying the decisions in the cases of Dharamnath Shares and Services (P) Ltd. and Khurana Engineering Limited held that once the assessee company gets amalgamated with the transferee company, its independent existence does not survive and therefore it would no longer be amenable to the assessment proceedings court came into a conclusion that it is well-settled proposition of law that upon its amalgamation the transferor company ceases to exist and becomes extinct, and it would no longer be amenable to the assessment proceedings considering the fact that the extinct entity would not be covered within the ambit of the provisions of the Act.

The Court also observed that the notice dated 25th March 2019 issued by the respondent under the provisions of section 148 of the Act for the assessment year 2012-13, being without jurisdiction, is not sustainable.

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