Landmark Cases on Company and Corporate Restructuring

Once a resolution plan is approved under Section 31(1) of the IBC, claims not included in the plan are extinguished and cannot be pursued. This applies to statutory dues owed to the government and other authorities.

Genuine trade advances made by a company in the ordinary course of business to a shareholder do not fall within the definition of deemed dividend under Section 2(22)(e) of the Income-tax Act.

An assessment framed in the name of a company that has ceased to exist due to amalgamation is invalid, even if the amalgamated company participated in the proceedings. Such a defect cannot be cured under section 292B of the Income-tax Act.

For Section 2(22)(e) to apply, a payment by a company must be in the nature of a loan or advance, and the company must have accumulated profits. Such payments to a concern in which a shareholder, holding more than 10% voting power, has a substantial interest are deemed dividends if the shareholder ultimately benefits, even if routed through different modes or concerns.

An assessment framed by the Assessing Officer in the name of a defunct transferor company is valid if the assessee failed to intimate the AO about the merger or amalgamation.

Upon amalgamation, the amalgamating company ceases to exist in the eyes of the law. Therefore, any assessment or proceeding initiated against a non-existent amalgamating company is invalid as it is no longer considered a 'person' under the Income-tax Act.

For the purpose of deemed dividend under section 2(22)(e) of the Income-tax Act, the term 'shareholder' refers exclusively to a registered shareholder of the company, and not a beneficial owner or non-shareholder.

Arbitration proceedings cannot be initiated or continued after a moratorium under section 14(1)(a) of the Insolvency and Bankruptcy Code, 2016 (IBC) has come into effect.

A loan or advance from a closely held company to a 'concern' where a common shareholder has a substantial interest is not a deemed dividend under Section 2(22)(e) for the 'concern' if it is not a shareholder of the lending company. Deemed dividend under Section 2(22)(e) is taxable only in the hands of the registered or beneficial shareholder.

When an amalgamating company ceases to exist due to a scheme of arrangement or merger, any subsequent assessment or action under the Income-tax Act initiated against that non-existent entity is void ab initio, as it is not a 'person' under Section 2(31).

An assessment order passed against a transferor company that has ceased to exist due to amalgamation or demerger is non est in the eyes of law and void, as this constitutes a jurisdictional error not curable under Section 292B of the Income-tax Act.

A transfer of an industrial undertaking where the ownership changes hands in reality and effectively is not considered a reconstruction. Reconstruction implies the original business continues to function and its identity is preserved.

A shareholder has no interest in the property of a company. A shareholder's right is limited to participating in profits if and when the company decides to distribute them.

Convertible debentures (CCDs) continue to be classified as debt until they are converted into equity. During the pre-conversion period, interest paid on CCDs is treated as interest on debt, not as interest on equity.

In a scenario involving amalgamation, the accumulated losses and unabsorbed depreciation of an undertaking can be carried forward by the amalgamating company if it continues the business of the undertaking.

The Insolvency and Bankruptcy Code, 2016 overrides any other enactment, including the Income Tax Act, when an NCLT has declared a moratorium under Section 14 of the IBC. Proceedings against the assessee are barred during the moratorium.

All claims, including statutory dues, that predate the approval of a resolution plan under the IBC stand extinguished by operation of law. No proceedings can be initiated or continued for such claims if they are not part of the approved plan.

The Insolvency and Bankruptcy Code (IBC) overrides other laws, including the Income Tax Act, due to its non-obstante clause in Section 238. Proceedings initiated against a corporate debtor undergoing insolvency are prohibited under Section 14 of the IBC.

Recovery of bad debts written off by an amalgamating company is not taxable in the hands of the successor company under Section 41(4) if the identity of the assessee is not the same who originally claimed the deduction.

A scheme of amalgamation or demerger approved by the High Court, having considered public interest, cannot be disturbed by the revenue authorities solely on the ground that the assessee is not entitled to certain benefits like those under Section 72A of the Income Tax Act.

In cases of amalgamation, the computation of income should be done with reference to periods before and after the appointed day, not the date of court sanction. Amalgamating companies cease to exist in law upon amalgamation.

When instructions are given that self-acquired property is to be treated as joint family property, the property assumes the character of joint family property at that moment. A mere instruction or recital in a subsequent partition is sufficient to show this.

The Supreme Court case CIT v. General Insurance Corporation (286 ITR 232) is cited for the proposition that it dealt with the issue of bonus shares, and therefore may not be applicable to cases involving the increase of authorized share capital.

Section 2(22)(e) cannot be applied where the assessee is not a shareholder of the lending company, as its purpose is to prevent tax avoidance by distributing company profits as loans to shareholders.

A scheme of amalgamation, once sanctioned by a court, has statutory operation and is distinct from a mere agreement, being final and binding on all parties, including statutory authorities.

The eligibility for deductions under sections 80-IB and 80-IA, and related issues like the initial assessment year, demerger, and resulting company status, are significant considerations in the context of company restructuring and tax benefits.

Deemed dividend under section 2(22)(e) can only be taxed in the hands of a substantial or beneficial shareholder. If the assessee is not a registered shareholder, the ratio of this case applies.

A tribunal can distinguish a High Court judgment, like Hutchison Telecom East v CIT (2015) 375 ITR 566, if commercial arrangements have changed and follow decisions from other High Courts that favour the assessee based on the new terms.

An amalgamation that has been brought to the notice of the Assessing Officer is void ab initio, meaning it is invalid from the beginning.

An 'undertaking' is distinct from the 'legal entity' that owns it, meaning tax benefits related to an undertaking must be assessed on a per-undertaking basis, not for the company in general, especially when a company operates multiple undertakings.

A payment made to a Hindu Undivided Family (HUF) by a company in which the HUF holds substantial shares is considered a deemed dividend under Section 2(22)(e) if the HUF is considered a 'concern' and its member has a significant entitlement to its income.

Deemed dividends under Section 2(22)(e) apply when a loan or advance is given by a closely held company to a partner or a person for the substantial benefit of a shareholder, even if the firm is not directly a shareholder. The existence of accumulated profits is a necessary pre-condition for the application of Section 2(22)(e).

Income tax proceedings initiated against a corporate debtor under section 148 for assessment years prior to the approval of a resolution plan under the Insolvency and Bankruptcy Code (IBC) are invalid, as the IBC aims to provide certainty by extinguishing all claims not part of the resolution plan.

Distribution, division, or allotment of assets to partners upon dissolution of a firm is a mutual adjustment of rights and not a transfer of assets by the firm, as the firm does not hold separate rights in partnership assets.

Once a scheme of arrangement or amalgamation has been sanctioned by a competent court and due notice has been issued to the income tax department, the binding nature of the scheme cannot be challenged during its implementation, as it attains statutory force.

An assessment order passed in the name of an amalgamated company that no longer exists is void ab initio and cannot be treated as a procedural irregularity curable under section 292B.

When lending money is not the business of a company, loans or advances given to an assessee-shareholder are treated as deemed dividends under section 2(22)(e) of the Income-tax Act. The provisions of section 2(22)(e) apply to a company that has taken a loan from its subsidiary.

Courts can disregard the corporate entity if it's used for tax evasion or to circumvent tax obligations. Transactions lacking financial or economic propriety and those amounting to colourable devices cannot be considered legitimate tax planning.

This case is cited to explain the position of a shareholder in a company.

Beneficial ownership does not necessarily confirm a right to vote. This applies even when considering Sections 89 of the Companies Act, 2013 and 187C of the Companies Act, 1956, which are considered pari materia.

Beneficial ownership does not necessarily confer a right to vote, particularly when considering provisions similar to Section 89 of the Companies Act, 2013, and Section 187C of the Companies Act, 1956.

A shareholder's rights in a company are explained, referencing established legal principles regarding the powers of directors.

Proceedings under the Income Tax Act cannot continue once proceedings under the Insolvency and Bankruptcy Code, 2016 (IBC) have been initiated against the assessee, as the IBC has an overriding effect.

A new undertaking is not a reconstruction of an old business, even if it manufactures some items also manufactured by the old unit, provided it is a separate and identifiable undertaking established with new plant and machinery.

A statutory notice issued in the name of a non-existent entity, such as an amalgamating company after the amalgamation has become effective, renders the entire assessment void ab initio.