Madras High Court
The Commissioner Of Income Tax vs M/S. Shaw Wallace Properties Limited on 6 August, 2024
Bench: R.Suresh Kumar, C.Saravanan
Tax Case (Appeal) Nos.60 and 61 of 2015
IN THE HIGH COURT OF JUDICATURE AT MADRAS
Date : 06-08-2024
CORAM:
THE HON'BLE MR. JUSTICE R.SURESH KUMAR
and
THE HON'BLE MR.JUSTICE C.SARAVANAN
Tax Case (Appeal) Nos.60 and 61 of 2015
The Commissioner of Income Tax
Chennai ........ Appellant / Respondent in
both the cases
-vs-
M/s. Shaw Wallace Properties Limited
(merged with Gordon Woodroffe Ltd.,
No.36. Rajaji Salai, Chennai - 600 001) ........ Respondent / Appellant in
both the cases
Common prayer : Appeals preferred under Section 260-A of the Income
Tax Act, 1961 against the order of the Income Tax Appellate Tribunal,
Bench 'C', Kolkatta, dated 17.01.2014 in I.T.A.Nos.896 & 897/Kol/2008
for the Assessment Year 2000-01 and Assessment Year 2002-03.
For Appellant : Mr.T.Ravikumar
Senior Standing Counsel
in both the appeals
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Tax Case (Appeal) Nos.60 and 61 of 2015
For Respondent : No Appearance
in both the appeals
COMMON JUDGMENT
(Judgment of the Court was delivered by R.SURESH KUMAR, J) These Tax Case (Appeal) were admitted on the following Substantial Questions of Law :-
(i) Whether on the facts and in the circumstances of the case, the Tribunal was right in quashing the assessment order as invalid and nullity holding that the assessee company had already got amalgamated with M/s.Gordon Woodroffe Ltd., which is still in existence and not been liquidated ?
(ii) Is not the finding of the Tribunal bad in quashing the assessment on the ground that the order passed was on non existence company which was in fact amalgamated with M/s.Gordon Woodroffe Ltd., and defects if any is curable as per the provisions of Section 292B of the Income Tax Act?
2. The facts of the case in nutshell :
2.1. That M/s.Shaw Wallace Properties Limited was an Assessee and the relevant Assessment Years is AY 2000-01 and AY 2002-03. Insofar as 2/16 https://www.mhc.tn.gov.in/judis Tax Case (Appeal) Nos.60 and 61 of 2015 AY 2000-01, Assessment order was issued on 31.03.2003, as against which, the matter has gone to CIT (Appeals), thereafter Income Tax Appellate Tribunal / ITAT, where the matter has been remitted back to the Assessing Authority for reassessment.
2.2. Insofar as AY 2000-01 is concerned, the Assessing Authority passed a fresh order, pursuant to the remand order which again went for appeal to CIT (Appeals) on 29.01.2007. By then, the Assessee company namely M/s.Shaw Wallace Properties Ltd., had already been amalgamated with GWL Properties Ltd. Vide order, dated 20.02.2002 of this Court and that of the High Court, Calcutta vide Order, dated 19.04.2002 w.e.f.
30.09.2001. Therefore, after the amalgamation w.e.f. 30.09.2001, the assessee company M/s. Shaw Wallace Properties Ltd., ceased to exist as if had merged with GWL Properties Ltd., 2.3. Despite the transfer has been effected w.e.f. 30.09.2001, the very first Assessment order itself was passed only on 31.03.2003.3/16
https://www.mhc.tn.gov.in/judis Tax Case (Appeal) Nos.60 and 61 of 2015 2.4. Insofar as the AY 2000-01 is concerned, the fresh assessment order after remand was made by the Assessing Authority. The said order was under challenge before the CIT (Appeals) filed by the GWL Properties Ltd., i.e., the transferee company. The said Appeal filed by the transferee company namely GWL Properties Ltd was disposed by the CIT (Appeals) on 15.01.2008.
2.5. Insofar as the AY 2002-03 is concerned, the return was filed on 30.10.2002. The Assessment Order was passed on 31.03.2005. As against the Assessment Order, an appeal was preferred on 25.05.2005 before CIT Appeals. The CIT Appeal passed an order on 30.01.2008.
2.6. Therefore both the orders of the CIT (Appeals), dated 15.01.2008 and 30.01.2008 for the Assessment Year 2000-2001 and AY 2002-03 respectively were under challenge before the Income Tax Appellate Tribunal in ITAT Nos.896 & 897/Kol/2008.
4/16 https://www.mhc.tn.gov.in/judis Tax Case (Appeal) Nos.60 and 61 of 2015 2.7. Both the Income Tax Appeals were decided vide Common Order, the ITAT dated 17.01.2014. The ITAT allowed both the Income Tax Appeals filed by the respondent Assessee.
2.8. It is interesting to be noted that the transferor company has taken a ground that after the merger or amalgamation which has taken effect from 30.09.2001, the transferor company was no more in existence, therefore no assessment could have been made and therefore the order passed by the Assessing Officer were a nullity.
2.9. However as against the order of assessment passed in respect of AY 2000-01, the transferee company, namely GWL Properties Ltd., filed appeal before the CIT (Appeals), whereas insofar as AY 2002-03, the Appeal was filed by the transferor company, namely M/s.Shaw Wallace Properties Ltd., before the CIT (Appeals).
2.10. Insofar as the decision of the CIT (Appeals) is concerned, in the appeal pertaining to AY 2000-01, out of the five grounds urged, only ground 5/16 https://www.mhc.tn.gov.in/judis Tax Case (Appeal) Nos.60 and 61 of 2015 no.(4) was allowed and all other grounds were dismissed. Insofar as AY 2002-03 is concerned, the Appeal before the CIT (Appeals) was partly allowed.
2.11. When these orders of the CIT (Appeals) were under challenge before the ITAT, the Tribunal in para 8 has given the following reasons and conclusions :-
"8. We have considered the rival submissions. As it is notice that the assessee company has been amalgamated with M/s. WGLPL w.e.f 30.09.2001 in view of the Jurisdictional Calcutta High Court, the assessment order dated 31.03.2003 in the case of the assessee company, which has already got amalgamated and consequently, become a non existence company is invalid and nullity. In the circumstances, respectfully following the said order of the co-ordinate bench of this tribunal in the case of Pampassar Distillery Ltd., (refer to supra), the assessment orders stand quashed."
3. Assailing the said decision made by the ITAT, Mr.T.Ravikumar, learned Senior standing counsel appearing for the appellant / Revenue would contend that, even though the merger had been taken place w.e.f. 6/16 https://www.mhc.tn.gov.in/judis Tax Case (Appeal) Nos.60 and 61 of 2015 30.09.2001, that was not been brought to the notice of the Assessing Authority. Moreover the first assessment order, dated 31.03.2003 though had been taken on appeal up to the ITAT, it was set aside and the case was remitted back on the ground of violation of principles of natural justice.
4. He would also submit that, thereafter the Assessing Authority had issued notice to the transferee company at Chennai address, which was received. However, no one appeared before the Assessing Authority. Therefore, based on the available materials, the Assessing Authority, completed the assessment and passed the order.
5. He would also submit that, as per the return, dated 28.11.2000 for the AY 2000-01, the assessee had shown a loss of Rs.88,444/-, however, when scrutiny was made, ultimately the long term capital gain claimed by the assessee company namely the Transferor was rejected. Therefore a sum of Rs.1,18,48,680/- was assessed as income.
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6. It was submitted that when this was the claim of the Revenue, the ITAT had not considered these aspects, particularly the aspect of the liability which rest on the transferee company even after the amalgamation or merger, but has simply set aside the order of assessment and allowed both the ITAs filed by the Assessee.
7. In this context, the learned standing counsel would rely upon a decision of the Hon'ble Supreme Court in the matter of Principal Commissioner of Income Tax (Central) v. Mahagun Realtors (P) Ltd., reported in AIR 2022 SC 1672, where he has relied on para 17 and 18 of the Judgment. They read as under :-
"17. The amalgamation of two or more entities with an existing company or with a company created anew was provided for, statutorily, under the old Companies Act, 1956, under Section 394 (1) (a). Section 394 empowered the court to approve schemes proposing amalgamation, and oversee the various steps and procedures that had to be undertaken for that purpose, including the apportionment of and devolution of assets and liabilities, etc. Section 394 (2) provided as follows:-8/16
https://www.mhc.tn.gov.in/judis Tax Case (Appeal) Nos.60 and 61 of 2015 “(2) Where an order under this section provides for the transfer of any property or liabilities, then, by virtue of the order, that property shall be transferred to and vest in, and those liabilities shall be transferred to and become the liabilities of, the transferee company; and in the case of any property, if the order so directs, freed from any charge which is, by virtue of the compromise or arrangement, to cease to have effect.” Section 394 (4) (a)defined “property” for the purpose of devolution of assets and liabilities:
“394….(4) In this section-
(a) " property" includes property, rights and powers of every description and" liabilities" includes duties of every description; and..
18. Amalgamation, thus, is unlike the winding up of a corporate entity. In the case of amalgamation, the outer shell of the corporate entity is undoubtedly destroyed; it ceases to exist. Yet, in every other sense of the term, the corporate venture continues – enfolded within the new or the existing transferee entity. In other words, the business and the adventure lives on but within a new corporate residence, i.e., the transferee company. It is, therefore, essential to look beyond the mere concept of destruction of corporate 9/16 https://www.mhc.tn.gov.in/judis Tax Case (Appeal) Nos.60 and 61 of 2015 entity which brings to an end or terminates any assessment proceedings. There are analogies in civil law and procedure where upon amalgamation, the cause of action or the complaint does not per se cease – depending of course, upon the structure and objective of enactment. Broadly, the quest of legal systems and courts has been to locate if a successor or representative exists in relation to the particular cause or action, upon whom the assets might have devolved or upon whom the liability in the event it is adjudicated, would fall."
8. Though notice had been served on the respondent and the name and address have been shown in the cause list, there has been no representation for the respondent. Hence we proceed to dispose these appeals on the basis of the records and after hearing the arguments of the learned standing counsel appearing for the appellant / revenue.
9. It is the case of the assessee that, after the merger had taken place w.e.f. 30.09.2001, the transferor company viz., M/s.Shaw Wallace Properties Ltd., ceased to be in existence and therefore assessment could not 10/16 https://www.mhc.tn.gov.in/judis Tax Case (Appeal) Nos.60 and 61 of 2015 have been made in its name hence on that ground which was questioned before the CIT (Appeals) was allowed by the ITAT and on the said ground, ITAT ultimately quashed two assessment order for the AY 2000-01 and AY 2002-03.
10. In this context, it is to be noted that, for the AY 2000-01, the appeal was filed before the CIT (Appeals) on 29.01.2007 by the GWL Properties Ltd., i.e., Transferee company and for the AY 2002-03, the CIT (Appeals) was filed on 25.05.2005 by M/s. Shaw Wallace Properties Ltd., i.e., Transferor company, which according to the assessee was not in existence with effect from 30.09.2001.
11. Since very transferor company was not in existence after 30.09.2001, the transferor company viz M/s. Shaw Wallace Properties Ltd., could not have filed appeal before the CIT (Appeals) on 25.05.2005. It is after the two orders were passed by the Madras High Court and Calcutta High Court on 20.02.2002 and 19.04.2002 respectively sanctioning the amalgamation with the effective date i.e., on 30.09.2001. 11/16 https://www.mhc.tn.gov.in/judis Tax Case (Appeal) Nos.60 and 61 of 2015
12. Moreover, if we exercise at the decisions cited by the Revenue in Principal Commissioner of Income Tax (Central) v. Mahagun Realtors (P) Ltd., (cited supra), it is clear that in amalgamation unlike the case of winding up of a corporate entity, the entity still continues enfolded within the new or the existing transferee entity. The Supreme Court has held that, the business and the adventure lives on but within a new corporate residence, i.e., the transferee company. Therefore it become essential to look beyond the mere concept of destruction of corporate entity which brings to an end or terminates any assessment proceedings.
13. Therefore the corporate business continues or the corporate venture continues with the transferree company of the transferor company. Therefore the liability will continue to be shouldered by the transferee company which concept cannot be easily ignored.
14. Moreover, the very CIT (Appeals) order dated 30.01.2008 for the AY 2002-03 shows that the appeal was filed before the CIT (Appeals) in the name of M/s. Shaw Wallace Properties Ltd., i.e., transferor company. 12/16 https://www.mhc.tn.gov.in/judis Tax Case (Appeal) Nos.60 and 61 of 2015 Therefore, it was with the knowledge of the assessee that, even though the merger had been taken place w.e.f 30.09.2001 by virtue of the order passed by the High Courts owing to liability of the transferor company, appeal was filed and pursued.
15. A notice to the assessee was also issued at its Chennai address. Since it was not responded, the AO proceeded to conclude the assessment, as the ITAT has remitted the matter back to the AO to do the same.
16. That being the position, it cannot be held that the Assessment Order passed by the AO was a nullity. An assessee cannot wriggle out of the assessment proceeding. At the same time, since there has been no effective hearing to the transferee company whereby, the claim for long term capital has been rejected to the extent of Rs.1,18,48,680/- and was assessed to income, to that extent, the Assessment Order also can be said to be invalid.
17. Since all these aspects have not been considered by the ITAT through the order impugned herein, we are inclined to interfere with the same.
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18. Resultantly, the following orders are passed in these Tax Appeals:-
(i) That the Questions of Law framed in these cases are therefore answered in favour of the Revenue, i.e., the Appellant and against the Assessee.
(ii) Accordingly, the orders passed by the ITAT which are impugned herein as well as the orders of CIT (Appeals) and the Assessing Authority are all set aside.
(iii) Consequently, the case is remitted back to the Assessing Authority for redoing the same, but now by giving proper notice to the Assessee, i.e., the present transferee company and after giving full opportunity, the assessment can be decided and finalised.14/16
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19. With these observations, both these Tax Case (Appeal) are ordered accordingly. However, there is no order as to costs.
(R.S.K., J.) (C.S.N., J)
06.08.2024
Index : Yes / No
Speaking order / Non-speaking order
tsvn
To
The Income Tax Appellate Tribunal,
Bench 'C', Kolkatta
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Tax Case (Appeal) Nos.60 and 61 of 2015
R.SURESH KUMAR, J.
and
C.SARAVANAN, J
tsvn/kkd
Tax Case (Appeal) Nos.60
and 61 of 2015
06.08.2024
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