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Facts
Amsteel Castings Pvt. Ltd. filed its return of income for AY 2021-22. Following an amalgamation with another company, it filed a consolidated return. The Assessing Officer (AO) treated an intercompany dividend of Rs. 1,73,50,000 as income from other sources.
Held
The Tribunal held that since the amalgamation was effective prior to the declaration of the dividend, the dividend payment lost its character as a dividend and became a payment to self, thus not taxable as income. Relying on the Gujarat High Court's decision in Torrent (P.) Ltd. vs CIT, the Tribunal found merit in the assessee's argument.
Key Issues
Whether intercompany dividends paid between amalgamating companies, prior to the amalgamation's effective date but declared after it, should be treated as taxable income of the assessee post-amalgamation.
Sections Cited
250 of the Income Tax Act, 1961, 170A of the Act, 115-O of the Act, 237 of the Act
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, ‘A’ BENCH: CHENNAI
Before: SHRI GEORGE GEORGE KAND MS. PADMAVATHY.S
आदेश / O R D E R
PER PADMAVATHY.S, A.M: This appeal by the assessee is against the order of the Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre (NFAC), Delhi, (in short "CIT(A)") passed u/s. 250 of the Income Tax Act, 1961 (in short "the Act") dated 23.09.2025 for Assessment Year (AY) 2021-22. The assessee raised the following grounds of appeal – “1) The learned Commissioner of Income-tax (Appeals) erred in confirming the addition of Rs. 1,73,50,000 being intercompany dividend paid by the amalgamating companies to each other, on the ground that there was no specific finding of the Hon'ble NCLT on this issue.
Amsteel Castings Pvt. Ltd. :- 2 -:
2) The Learned CIT (Appeals) failed to appreciate that once the merger scheme was approved by the Hon ble NCLT, the separate identities ofthe companies cease to exist and so does the concept of intercorporate dividends between them. 3) The Appellant submits that the intercorporate dividends were legitimately eliminated in the consolidated return filed u/s 170A, since both the companies stood amalgamated with effect from April 01, 2020 and the concept of inter corporate dividends did not survive post the amalgamation. 4) The Appellant seeks to rely on Torrent (P.) Ltd. vs CIT, [2013] 35 taxmann.com 300 (Gujarat) for the proposition that by virtue of amalgamation, payment of dividend to each other by the companies to the scheme of amalgamation would no longer retain the character of dividend, since no company could pay dividend to itself. 5) Consequently, the Appellant submits that it is entitled to seek refund of the tax paid on the inter-corporate dividends.”
The assessee is a company and filed the return of income for A.Y 2021- 22 on 12.03.2022 declaring income of Rs. 23,95,83,930/-. Subsequent to the amalgamation of M/s. Electarolly Special Steel Castings Pvt. Ltd. with the assessee-company vide NCLT order dated 06.14.2022, the assessee filed the return of income u/s. 170A of the Act on 22.02.2023 admitting a total income of Rs. 25,66,12,430/-. The A.O passed an order giving effect u/s. 170A of the Act on 30.12.2023 determining the total income at Rs. 27,39,62,430/-. The A.O while passing the order has considered the inter company dividend to the tune of Rs.1,73,50,000/- as income from other sources in the hands of the assessee. The assessee filed an appeal before the CIT(A) contending that the intercompany dividend gets nullified post merger and therefore the treatment of the dividend by the AO as income from other sources is not correct. The CIT(A) however dismissed the said contention stating that, in the order of NCLT dated 06.04.2022 there is no specific finding on the treatment to be given for inter company dividend and that in the absence of specific findings, Amsteel Castings Pvt. Ltd. :- 3 -: the claim of the assessee cannot be accepted. Aggrieved, the assessee is in appeal before the Tribunal.
The Ld. Authorized Representative (AR) of the assessee submitted that as per the order of NCLT, the appointed date for the merger scheme is 01st April, 2020. The Ld. AR further submitted that since the order of NCLT was pronounced only on 06.04.2022, the assessee and M/s. Electarolly Special Steel Castings Pvt. Ltd. have filed their returns separately for AY 2021-22 on 12.03.2022 and 08.03.2022, respectively. The Ld. AR also submitted that both the assessee and M/s. Electarolly Special Steel Castings Pvt. Ltd. have declared interim dividend on 23.03.2021 to the tune of Rs. 1,73,50,000/-. The Ld. AR submitted that post amalgamation the assessee filed the consolidated return as per Section 170A of the Act. The ld AR drew our attention to the order giving effect passed by the AO to submit that the A.O has considered the dividend income of Rs.1,73,50,0000/- as income from other sources in the hands of the assessee. The ld AR argued that the dividend which is mutually declared between the assessee and the amalgamated entity would get squared off in the consolidated return since post merger both have become one entity by which the dividend would be payment to self. The Ld. AR in this regard relied on the decision of the Hon'ble Gujarat High Court in the case of Torrent (Pvt.) Ltd. vs. CIT [2013] 35 taxmann.com 300 (Guj.). The Ld. AR also submitted that the TDS on the dividend should be refunded to the assessee since, the income is not taxable on the principles of mutuality.
The Ld. Departmental Representative (DR) on the other hand relied on the orders of the lower authorities.
Amsteel Castings Pvt. Ltd. :- 4 -:
We have heard the parties, and perused the material available on record. From the perusal of the order of the NCLT, we notice that the appointed date of amalgamation is 01.04.2020 (page 12 of paper book). We further notice that the assessee has declared dividend of Rs. 23,50,000/- to M/s. Electarolly Special Steel Castings Pvt. Ltd. and has received a dividend of Rs. 1,50,00,000/- from the same party on 23.03.2021. The contention of the assessee is that the dividend paid and received post merger gets nullified since the assessee and the merged entity have become one and the same effective 01.04.2020 as per the order of the NCLT. Accordingly, the assessee is contending that the dividend declared cannot be treated as income as it is a payment to self. In this regard, we notice that an identical issue has been considered by the Hon'ble Gujarat High Court in the case of Torrent (Pvt.) Ltd (supra), where it has been held that: “15. Before us, the situation is very similar. Certain dividend was declared and paid by one of the companies which ultimately merged with the assessee company along with other companies. Before the date of declaration and payment of dividend, scheme for amalgamation was framed. By virtue of the decision of the High Court, such scheme was sanctioned with no variation in the effective date. Thus, the date of amalgamation which actually took effect was prior to the date on which dividend was declared and paid. In that view of the matter, we have no hesitation in holding that by virtue of such subsequent developments, the payment of dividend could no longer retain the character of dividend paid by Torrent Power Ltd since there cannot be payment of dividend by one company to its own self. 16. & 17. ******* 18. Counsel for the Revenue, we may recall, placed reliance on the provisions of section 115-O of the Act. It is undoubtedly true that subsection (1) of section 115-O starts with a non-obstante clause and provides that notwithstanding anything contained in any other provisions of the Act, in addition to the income chargeable to tax in case of a domestic company, there shall be tax on any amount declared, distributed or paid by such company by way of dividend or interim dividend. Sub-section (3) thereof further provides that the Amsteel Castings Pvt. Ltd. :- 5 -:
principal officer of the domestic company and the company shall be liable to pay tax on distributed profits to the credit of the Central Government within fourteen days from the date of declaration of any dividend or distribution or payment of any dividend whichever is earliest. Sub-section (1) of section 115-O of the Act thus is a charging section and pertains to collection of tax on declaration, distribution or payment of dividend by a domestic company. Sub-section (3) does nothing beyond prescribing the date within which such tax must be credited to the Central Government. Neither of these two provisions or anything else contained in section 115O of the Act, in our opinion, would change the position. In the present case, we are concerned with a situation under which after certain dividend was declared and tax thereon was actually paid, by virtue of the High Court sanctioning the amalgamation scheme, which took effect from a date anterior to the declaration of the dividend would change the very character of such payment and such payment ceased to enjoy the character of dividend. In that view of the matter, the petitioner was perfectly justified in seeking refund of the tax already paid. We may recall that in the return filed, the petitioner had filed a detailed note explaining such position. Claiming refund, a separate application was also filed which unfortunately came to be rejected by the Assessing Officer. The Assessing Officer contended that there was no provision under which such refund can be claimed. Section 237 of the Act, however, provides that if any person satisfies the Assessing Officer that the amount of tax paid by him or on his behalf or treated as paid by him or on his behalf for any assessment year exceeds the amount with which he is properly chargeable under the Act for that year, he shall be entitled to a refund of the excess amount. The case of the petitioner would, thus, be clearly covered under the said statutory provisions.” (emphasis supplied)
The ratio held by the Hon'ble High Court is that when the scheme of amalgamation is effective anterior to the date of declaration of dividend then the payment of dividend could no longer retain the character of dividend paid since there cannot be payment of dividend by one company to its own self. In the present case, as already stated the amalgamation is effective the appointed date of 01.04.2020 which prior to the date of declaration of dividend i.e., 23.03.2021. Therefore, we see merit in the arguments of the Ld. AR that the impugned issue is covered by the decision of the Hon'ble High Court.
Amsteel Castings Pvt. Ltd. :- 6 -:
Therefore we direct the A.O to delete the additional income in the hands of the assesse towards dividend to the tune of Rs.1,73,50,000/-. Considering that the dividend is no longer to be treated as the income, the tax deducted there from deserves to be refunded to the assessee and we direct the AO accordingly.
In the result, appeal of the assessee is allowed.
Order pronounced on 27th day of January, 2026 at Chennai.