“scheme of arrangement”
The decision most relied on for scheme of arrangement is Spice Infotainment Ltd. v. CIT (247 CTR 500), cited in 114 judgments on BharatTax.
Leading authorities on scheme of arrangement
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.
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.
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).
Depreciation is allowable on goodwill as an intangible asset under Section 32(1)(ii) when it arises from a scheme of amalgamation or similar corporate restructuring.
An amalgamation that has been brought to the notice of the Assessing Officer is void ab initio, meaning it is invalid from the beginning.
Depreciation is not allowed on goodwill if it arises from book entries and has no identifiable cost of acquisition. This applies even when goodwill is acquired as part of a scheme of arrangement or amalgamation.
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.
Transactions lacking commercial substance, such as circular share transactions designed to generate artificial capital losses, are not genuine and may be disregarded by tax authorities.
