Minda Tg Rubber Private Limited And ... vs Deputy Commissioner Of Income Tax ...

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NATIONAL COMPANY LAW APPELLATE TRIBUNAL PRINCIPAL BENCH NEW DELHI COMPANY APPEAL (AT) No.26 of 2023 In the matter of: Minda TG Rubber Pvt Ltd & Anr Appellant Vs Deputy Commissioner of Income Tax, Central Circle-13, New Delhi Respondent For Appellant: Mr. Ramji Srinivasan, Sr. Advocate, Ms Namrata Saraogi, Ms Shruti Pandey, Advocates. For Respondent: Mr Sunil Agarwal, Sr. Standing Counsel, Mr Shivansh Pandya, Mr Utkarsh Tiwardi, Advocates.

ORDER

20.04.2023: Heard.

The present appeal under Section 421 of the Companies Act, 2013 has

been preferred by two appellants i.e. transferor and transferee company

against an order dated 23.12.2022 passed by National Company Law

Tribunal, New Delhi Bench, Court II, New Delhi in Company Petition

No.(CAA)-111(ND)/2021 connected with Company Application No.CA(CAA)-

118(ND)/2021. By the said order learned NCLT accepting the objections

raised by the Respondent/Income Tax Department has dismissed the

application.

The appellants had filed application under Section 230 to 232 of the

Companies Act, 2013 mainly for the purposes of approval of scheme of

amalgamation. The Appellant No.1 was transferor company whereas the

appellant No.2 was transferee company. Before the Learned NCLT the Income

Tax Department appeared and filed a report raising objections mainly that in 2

the scheme neither it was mentioned nor there was any undertaking that the

transferee company shall not dispose of all the assets and shall hold at least

three-fourths of the book value of fixed assets of the amalgamating/transferor

company for at least five years and it shall continue the business of the

transferor company for next five years. In absence of such undertaking,

agreeing with the objections raised by the Income Tax Department, learned

NCLT rejected the applications filed by the appellants before the NCLT. After

filing of the appeal before this Tribunal the Respondent/Income Tax

Department filed reply and again it was reiterated regarding the absence of

undertaking in the scheme. In para 3 of the reply following facts were

incorporated:-

"3. Provisions relating to carry forward and set off of accumulated loss and unabsorbed depreciation allowance in amalgamation or demerger, etc. are reproduced as below:

72.A. (1) Where there has been an amalgamation of -

(a) a company owning an industrial undertaking or a ship or a hotel with another company; or

(b) a banking company referred to in clause (c) of section-5 of the Banking Regulation Act. 1949 (10 of 1949) with a specified bank: or

(c) one or more public sector company or companies engaged in the business of operation of aircraft with one or more public sector company or companies engaged in similar business, then, notwithstanding anything contained in any other provision of this Act, the accumulated loss and the unabsorbed depreciation of the amalgamating company shall be deemed to be the loss or, as the case may be allowance for unabsorbed depreciation of the amalgamated company for the previous year in which the amalgamation was effected, and other provisions of 3

this Act relating to set off and carry forward of loss and allowance for depreciation shall apply accordingly.

(2) Notwithstanding anything contained in sub-section (1), the accumulated loss shall not be set off or carried forward and the unabsorbed depreciation shall not be allowed in the assessment of the amalgamated company unless-

(a) The amalgamating company-

(i) has been engaged in the business, in which the accumulated loss occurred or depreciation remains unabsorbed, for three or more years;

(ii) has held continuously as on the date of the amalgamation at least three-fourths of the book value of fixed assets held by it two years prior to the date of amalgamation:

(b) the amalgamated company-

(i) holds continuously for a minimum period of five years from the date of amalgamation at least three-fourths of the book value of fixed assets of the amalgamating company acquired in a scheme of amalgamation;

(ii) continues the business of the amalgamating company for a minimum period of five years from the date of amalgamation:

(iii) Fulfils such other conditions as may be prescribed to ensure the revival of the business of the amalgamating company or to ensure that the amalgamation is for genuine business purpose.

In view of the above the carry forward and set off of the accumulated losses and unabsorbed depreciation accruing and relating to the operation of the business from the appointed date onwards of the transferor company should be in compliance of the provisions of section 72A of the Income Tax Act, 1961 and shall be ensured by the Transferee Company as per provision laid down NOT and in 72A Sub Section 2 and 4 of the Income Tax Act, 1961.

The scheme of amalgamation of M/s Minda TG Rubber Pvt Ltd(Transferor Company) with M/s Toyoda Gosei Minda India Pvt Ltd(Transferee company) may be approved subject to Transferee company undertake and confirm to comply with the conditions of Section 72A of the Income Tax Act,1961 and OF have no plans to dispose of all the assets and shall hold at least three-fourths of the book value of fixed assets of the Transferor Company for at least 5 years and shall continue the business of the Transferor company for the next 5 years. In case the Transferee company in future decides otherwise, it will not claim benefit of Section 72A of the Income Tax Act, 1961."

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After filing of the reply a rejoinder was filed behalf of Appellant No.2

alongwith an affidavit of undertaking dated 12th April, 2023. In the rejoinder

enclosing therewith affidavit of undertaking on behalf of appellant No.2 it was

confirmed to comply with the conditions of Section 72

A of Income Tax Act, 1961. In the affidavit of undertaking on behalf of

appellant No.2 in para 2 following facts has been incorporated:

"2. Appellant No. 2 confirms and undertakes to comply with the conditions of Section 72A of the Income Tax Act, 1961 and have no plans to dispose of all the assets and shall hold at least three-fourths of the book value of fixed assets of the Appellant No.1/Transferor Company for at least five years and Appellant No. 2 shall continue the business of the Appellant No. 1/Transferor Company for the next five years. In case, the Appellant No.2/ Transferee Company in future decides otherwise, it will not claim benefit of Section 72A of the Income Tax Act, 1961."

Mr. Ramji Srinivasan, learned senior counsel for the appellant by way

of referring to rejoinder which was filed as response to the reply filed by

Respondent/Income Tax Department has argued that in view of change

circumstances this appeal can be disposed off asking the NCLT to pass order

afresh. Mr. Sunil Agarwal, learned Senior Standing Counsel of Income Tax

Department submits that if the appellants are ready to give undertaking

before the NCLT as given by the appellant No.2 in its rejoinder, the

Respondent No.1 may not raise any objection regarding amalgamation of the

aforesaid companies.

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We are of the opinion that since before the NCLT no undertaking in the

scheme was given by the appellant in compliance with provision of Section

72A of the Income Tax Act, 1961, the Learned Tribunal has committed no

error in dismissing the application. However, before this Appellate Tribunal

the said undertaking has been brought on record through its rejoinder. In

such view of the matter we feel appropriate to dispose off this appeal with an

observation that if fresh undertaking to amalgamation scheme in terms of

Section 72A of the Income Tax Act, 1961 is filed before the NCLT, the learned

NCLT may consider the same and pass appropriate orders expeditiously in

accordance with law.

With above observations and with consent of both the parties the appeal

stands disposed off.

(Justice Rakesh Kumar) Member (Judicial)

(Dr. Alok Srivastava) Member (Technical) Bm/gc