M/S DALMIA POWER LTD. vs. THE ASSISTANT COMMISSIONER OF INCOME TAX

REPORTABLE IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURI ICTION Civil Appeal Nos.9496­99 Of  2019 (Arising out of SLP (C) Nos.19678­681 of 2019) M/S DALMIA POWER LIMITED & ANR.           …APPELLANTS Versus THE ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE 1, TRICHY …RESPONDENT J U D G M E N T INDU MALHOTRA, J. Leave granted.

proceedings   for   amalgamation  of  the   assessee  companies with other companies in the group under Sections 230­232 of the Companies Act, 2013. 2. The factual background of this case briefly stated, is that:

6,34,33,806/­.   Similarly,   Appellant   No.2   filed   its original Return of Income under Section 139 (1) of the Income   Tax   Act   on   30.11.2016   for   A.Y.   2016­2017 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/­).

Companies”)   and   their   respective   shareholders   and creditors. The   Appointed   Date   of   the   Schemes   was 01.01.2015,   and   would   come   into   effect   from 30.10.2018.

approval   was   granted   by   the   NCLT.   The   revised Returns   were   based   on   the   revised   and   modified computation  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.1105,93,91,494/­.

119(2)(b) of the Income Tax Act, 1961 read with CBDT Circular No. 9/2015 dated 09.06.2015. 2.13 On   28.12.2018,   the   Department   passed   an Assessment Order u/S. 143(3) of the Income Tax Act, stating that in view of the Scheme of Arrangement and Amalgamation, the notice issued under Section 143(2), and the assessment proceedings for A.Y. 2016­2017 had   become   infructuous   with   respect   to   Appellant No.2.

quashed the Order dated 05.12.2018 passed by the Department. The Single Judge held that Clause 64 (c) of   the   Scheme   enabled   the   Appellants   to   file   their revised   Returns   of   Income   beyond   the   prescribed period   under   the   Income   Tax   Act.   The   Department could   not   override   an   approved   Scheme   of Arrangement and Amalgamation, which has statutory force, by rejecting the revised Returns of Income filed by the Appellants as being invalid. The Department did not object to the Schemes notified under Section 230(5) of the Companies Act, 2013. Sections 139(5) and 119(2)(b) of the Income Tax Act as well as the Circular No. 9/2015 issued by the CBDT  are  not applicable  to  a case where a  revised Return of Income has been filed pursuant to a Scheme of  Arrangement and Amalgamation, which has been approved and sanctioned by the NCLT. The Department was not justified in rejecting the revised Return of Income on the ground that it had been   filed   manually,   instead   of   being   filed electronically.   Rule   12(3)   of   the   Income   Tax   Rules 8

requires   filing   of   revised   Returns   of   Income electronically, which is not  applicable  where  revised Returns of Income are filed by the assessee pursuant to   a   Scheme   of   Arrangement   and   Amalgamation approved and sanctioned by the NCLT. Accordingly,   the   Single   Judge   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. 2015­2016 and A.Y. 2016­2017 in accordance with law within a period of 12 weeks.

Scheme can only be construed as an enabling clause. It cannot be inferred that the Department agreed to consider the revised Returns of Income, irrespective of whether it complies with the procedural and statutory requirements   under   the   Income   Tax   Act,   merely because Clause 64 of the Scheme was not objected to the   Department.   The   NCLT,   while   sanctioning   the Schemes,   clarified   that   the   Appellants   would   be required to approach the relevant statutory authorities for obtaining necessary permissions and compliances. The   Department   did   not   consent   to   waive   the procedures or statutory requirements prescribed under S.139(5) and 119(2)(b) of the Income Tax Act in respect of filing of revised Returns of Income.

assessment for A.Y. 2016­2017 would be conducted on the basis of the original Returns filed by them.

The   Department   informed   the   Appellants   on 05.08.2019 that since the revised Returns were not in accordance with Sections 139(5), 139(3) of the Act r.w. Rule 12(3) of the Income Tax Rules, 1962, the revised Returns were invalid, and could not be considered in view   of   the  procedural   requirement  under   Section 119(2)(b) read with CBDT Circular No. 9 of 2015. 11

Clause   63   (c)   of   the   said   Scheme   is   set   out hereinbelow for ready reference: “(c) DCBL   [Appellant   No.2]   shall   be   entitled   to, amongst others, file/or revise its income tax returns, TDS/TCS returns, wealth tax returns, service tax, excise duty, sales tax, value added tax, entry tax, cess, professional tax or any other statutory returns, if required, credit for advance tax paid, tax deducted at source, claim for sum prescribed under Section 43B of the Income Tax Act on payment basis, claim for deduction of provisions written back by DCBL previously disallowed in the hands of (i) DCB Power pertaining   to   Power   Undertakings   and   (ii)   ACHL and/or pertaining to Amalgamating Undertaking 1, under   the   Income   Tax   Act,   credit   of   tax   under Section   115JB   read   with   Section   115JAA   of   the Income   Tax   Act,   credit   of   foreign   taxes paid/withheld   etc.   if   any,   as   may   be   required consequent to implementation of this Scheme and where necessary to give effect to this Scheme, even if the prescribed time limits for filing or revising such returns have lapsed without incurring any liability on account of interest, penalty or any other sum. DCBL   shall   have   the   right   to   claim   refunds,   tax credits, set­offs and/or adjustments relating to its income or transactions entered into by it by virtue of this Scheme with effect from Appointed Date I and Appointed Date II, as applicable. The taxes or duties paid by, for, or on behalf of the Power Undertakings and   Amalgamating   Undertaking   1   relating   to   the period on or after Appointed Date I and Appointed Date II respectively shall be deemed to be the taxes or duties paid by DCBL, and accordingly DCBL shall be entitled to claim credit or refund for such taxes or duties. DPL   [Appellant   No.1]   shall   be   entitled   to, amongst others, file/or revise its income tax returns, TDS/TCS returns, wealth tax returns, service tax, excise duty, sales tax, value added tax, entry tax, cess, professional tax or any other statutory returns, if required, credit for advance tax paid, tax deducted at source, claim for sum prescribed under Section 43B of the Income Tax Act on payment basis, claim 13

for   deduction   of   provisions   written   back   by   DPL previously disallowed in the hands of DCB Power pertaining   to   Amalgamating   Undertaking   2   under the   Income     Tax   Act,   credit   of   tax   under   Section 115JB read with Section 115JAA of the Income Tax Act, credit of tax under Section 115JB read with Section 115 JAA of the Income Tax Act, credit of foreign tax paid/withheld etc., if any, pertaining to Amalgamating Undertaking 2 as may be required consequent to implementation of this Scheme and where necessary to give effect to this Scheme, even if the prescribed time limits or revising such returns have   lapsed   without   incurring   any   liability   on account of interest, penalty or any other sum. DPL shall have the right to claim refunds, tax credits, set­ offs  and/or adjustments  relating to its  income or transactions   entered   into   by   it   by   virtue   of   this Scheme with effect from Appointed Date I. The taxes or   duties   paid   by,   for,   or   on   behalf   of   the Amalgamating Undertaking 2 relating to the period on or after Appointed Date I shall be deemed to be the taxes or duties paid by DPL, and accordingly DPL shall be entitled to claim credit or refund for such taxes or duties.” [emphasis supplied]

revised Returns even after the prescribed time limit for filing   or   revising   such   Returns   had   lapsed,   without incurring any liability on account of interest, penalty or any other sum. Clause   64   (c)   of   the   said   Scheme   is   extracted hereinbelow for ready reference: “(c) Amalgamated   Company   and   Transferee [Appellant Nos. 1 and 2 ] Company shall be entitled to,   amongst   others,   file/or   revise   its   income   tax returns,   TDS/TCS   returns,   wealth   tax   returns, service tax, excise duty, sales tax, value added tax, entry   tax,   cess,   professional   tax   or   any   other statutory returns, if required, credit for advance tax paid,   tax   deducted   at   source,   claim   for   sum prescribed under Section 43B of the Income Tax Act on payment basis, claim for deduction of provisions written   back   by   Amalgamated   Company   and Transferee Company previously disallowed in the hands of Amalgamating Company and Transferor Company (relating to the Transferred Undertaking) respectively under the Income Tax Act, credit of tax under section 115JB read with section 115JAA of the   Income   Tax   Act,   credit   of   foreign   tax paid/withheld, if any, pertaining to Amalgamating Company and Transferor Company (relating to the Transferred   Undertaking)   as   may   be   required consequent to implementation of this Scheme and where necessary to give effect to this Scheme, even if the prescribed time limited for filing or revising such   returns   have   lapsed   without   incurring   any liability on account of interest, penalty or any other sum.   Amalgamated   Company   and   Transferee Company shall have the right to claim refunds, tax credits, set­offs and/or adjustments relating to the income   or   transactions   entered   into   by   them   by virtue   of   this   Scheme   with   effect   from   Appointed Date. The taxes or duties paid by, for, or on behalf of,   Amalgamating   Company   and   Transferor Company   (pertaining   to   Transferred   Undertaking) 15

relating to the period on or after Appointed Date, shall be deemed to be the taxes or duties paid by the   Amalgamated   Company   and   Transferee Company respectively and Amalgamated Company and Transferee Company shall be entitled to claim credit or refund for such taxes or duties.” [emphasis supplied]