GE INDIA INDUSTRIAL PVT LTD V. ASST COMMISSIONER OF INCOME TAX

WP/11566/2017

AI Insights

The case involves GE India Industrial Private Limited, which challenged a notice and order demanding advance tax for the assessment year 2017-18, issued by the Assistant Commissioner of Income-Tax. The petitioner argued that it ceased to exist as a legal entity from April 1, 2016, due to a scheme of amalgamation with GE India Technology Centre Private Limited and GE Indian Private Limited, which was effective from that date but only approved by the National Company Law Tribunal on March 20, 2017. The revenue contended that the petitioner was still a legal entity until the approval of the amalgamation and thus liable for advance tax for the intervening period. The court dismissed the petitions, agreeing with the revenue's position.

• Counselvise Citation: [2021] 140 COUNSELVISE.COM (IT) 754621 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 22-02-2021
• Assessment Year: misc
• Other Referred Cases: MARSHALL SONS AND CO. (INDIA) LIMITED v. INCOME TAX OFFICER, PRINCIPAL COMMISSIONER OF INCOME TAX, NEW DELHI v. MARUTI SUZUKI INDIA LIMITED
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: K V ARAVIND
• Assessee Lawyers: SACHIT JOLLY; KUMAR RAM; C K NANDAKUMAR
• Keywords: Advance tax; Amalgamation; Assessment Year 2017-18; Income Tax; Writ petition
• Section: 208; 207; 211; 210(3); 210(4)

Judgement Text

" 1 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 22ND DAY OF FEBRUARY, 2021 BEFORE THE HON'BLE MR. JUSTICE M. NAGAPRASANNA WRIT PETITION No.11566/2017 (T - IT) C/W WRIT PETITION No.11565/2017 (T - IT) BETWEEN GE INDIA INDUSTRIAL PRIVATE LIMITED, A/18, FIRST FLOOR, OKHLA INDUSTRIAL AREA, PHASE II, NEW DELHI - 110 020, REP. BY ITS AUTHORIZED SIGNATORY, MR. GIRISH GURNANI. ... COMMON PETITIONER (BY SRI SACHIT JOLLY, ADVOCATE FOR SRI KUMAR RAM C.M., AND SRI C.K.NANDAKUMAR, ADVOCATES) AND ASSISTANT COMMISSIONER OF INCOME-TAX CIRCLE - 3(1) (2), BMTC BUILDING, 80FT ROAD, 6TH BLOCK, KORAMANGALA - 560 095. ... COMMON RESPONDENT (BY SRI K.V.ARAVIND, ADVOCATE) 2 THESE WRIT PETITIONS ARE FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH THE IMPUGNED ORDER AND IMPUGNED NOTICE [ANNEXURE-A] DTD: 20.2.2017 PASSED BY THE ASSESSING OFFICER [RESPONDENT] OF THE ACT RESPECTIVELY. THESE WRIT PETITIONS HAVING BEEN HEARD AND RESERVED FOR ORDERS ON 24.11.2020, COMING ON FOR PRONOUNCEMENT THIS DAY, THE COURT MADE THE FOLLOWING :- ORDER The common petitioner in both these petitions has called in question a notice dated 20-02-2017 issued by the Assessing Officer under Section 210(3) of the Income Tax Act, 1961 (‘the Act’ for short). 2. Brief facts leading to the filing of the present petitions as borne out from the pleadings are as follows:- The petitioner is a private limited company engaged in the business of export under the name and 3 style of GE India Industrial Exports Private Limited. The petitioner entered into a scheme of amalgamation amalgamating the petitioner and GE India Technology Centre Private Limited (for short ‘the Company’) with GE Indian Private Limited under a scheme of amalgamation which was to become effective from 1-04-2016. Pursuant to the said amalgamation the claim of the petitioner/ company is that the Company was not in existence in law of the scheme of amalgamation to be effect with effect from 01.04.2016. 3. The scheme of amalgamation had to be placed before the National Company Law Tribunal for approval. The National Company Law Tribunal (‘the Tribunal’ for short) by its order dated 20th March 2017 approved the scheme of amalgamation dated 1-04-2016. It is the 4 period between 1-04-2016 and 20.03.2017 that is the issue in the present writ petitions. 4. On 16-06-2016 and 3-01-2017 notices were issued by the revenue to the petitioner seeking an explanation as to why advance tax should not be chargeable at the hands of the petitioner under the Act for the assessment year 2017-18. The notices were sent invoking Section 208 of the Act. The petitioner replied to the said notices dated 16-06-2016 and 3-01-2017 on two different dates on 21-06-2016 and 9-01-2017 explaining the reason as to why no advance tax was payable by the petitioner/company for the assessment year 2017-18. The claim of the petitioner was that under the scheme of amalgamation, the petitioner/company ceased to exist with effect from 1.04.2016 notwithstanding the fact that the Tribunal 5 allowed such amalgamation only on 20-03-2017 and further claiming that no advance tax for two quarters between 2016 and 2017, as claimed by the revenue, was payable by the petitioner. 5. Not accepting the reply given by the petitioner, an order dated 20th March 2017 under Section 210(3) and (4) of the Act was sent demanding advance tax to the tune of Rs.356,644,155 for the assessment year 2017-18. It is this order and the notice that is issued for payment of Rs.356,644,155 that is called in question in the writ petitions. 6. Heard Sri.Sachit Jolly, learned counsel appearing for petitioner and Sri.K.V.Aravind, learned counsel appearing for respondent. 6 7. Learned counsel appearing for the petitioner would contend that the petitioner is not liable to pay any advance tax for the period demanded by the revenue as the petitioner was no longer in existence. The scheme of amalgamation was already effective with effect from 1- 04-2016 and any demand made in the interregnum would be contrary to law and runs counter to judgments on the issue in the case of MARSHALL SONS AND CO. (INDIA) LIMITED v. INCOME TAX OFFICER reported in 1997 Income Tax Reports 809 and in the case of PRINCIPAL COMMISSIONER OF INCOME TAX, NEW DELHI v. MARUTI SUZUKI INDIA LIMITED reported in (2019) 107 Taxmann.com 375. 8. On the other hand, the learned counsel appearing for the revenue would submit that the petitioner cannot escape payment of advance tax for two 7 quarters under Sections 207, 208 and 211 of the Act. The amalgamation was approved by an order of the Tribunal only on 20-03-2017. Between the dates 1-04- 2016 and 20-03-2017 the petitioner was still an independent company though a scheme of amalgamation the petitioner had been amalgamated to the aforesaid companies. The learned counsel would submit that for three quarters from 15th June to 15th December, the petitioner cannot escape liability of payment of advance tax. Having not paid the same, no fault can be found with the Assessing Officer demanding advance tax in terms of the impugned order. 9. I have given my anxious consideration to the rival submissions of the learned counsel appearing for the parties, in terms of which the issue that arises for my consideration is whether the Company is obliged 8 under the Act to pay advance tax between 1-04-2016 and 20-03-2017 for the assessment year 2017-18. 10. It is not in dispute that the petitioner/company and two other companies were amalgamated under the scheme of amalgamation before High Court of Delhi. Government of India in the Ministry of Corporate Affairs issued a notification on 17.12.2016 that the scheme of amalgamation of the petitioner was transferred to the National Company Law Tribunal, New Delhi and at Bangalore. Therefore, the scheme of amalgamation was transferred to the Tribunal. The Tribunal on receipt of the scheme from the hands of the Government of India on 17.12.2016 approved the same on 20-03-2017. The stamp of approval of the scheme of amalgamation, which in terms of law happened on 20-03-2017, albeit with 9 retrospective effect i.e., from the date on which they had entered into such a scheme i.e., 1-04-2016. To consider whether the petitioner was liable to pay advance tax between the aforesaid dates, the provision concerning payment of advance will have to be noticed. The relevant provisions that concerns here is Sections 207, 208, 209 and 211 of the Act, which read as follows: “207. Liability for payment of advance tax.—[(1)] Tax shall be payable in advance during any financial year, in accordance with the provisions of Sections 208 to 219 (both inclusive), in respect of the total income of the assessee which would be chargeable to tax for the assessment year immediately following that financial year, such income being hereafter in this Chapter referred to as “current income”. 10 [(2) The provisions of sub-section (1) shall not apply to an individual resident in India, who— (a) does not have any income chargeable under the head “Profits and gains of business or profession”; and (b) is of the age of sixty years or more at any time during the previous year.] 208. Conditions of liability to pay advance tax.— Advance tax shall be payable during a financial year in every case where the amount of such tax payable by the assessee during that year, as computed in accordance with the provisions of this Chapter, is [ten thousand rupees] or more. 209. Computation of advance tax.— (1) The amount of advance tax payable by an assessee in the financial year shall, subject to the provisions of sub-sections (2) and (3), be computed as follows, namely:— 11 (a) where the calculation is made by the assessee for the purposes of payment of advance tax under sub-section (1) or sub- section (2) or sub-section (5) or sub-section (6) of Section 210, he shall first estimate his current income and income tax thereon shall be calculated at the rates in force in the financial year; (b) where the calculation is made by the Assessing Officer for the purpose of making an order under sub-section (3) of Section 210, the total income of the latest previous year in respect of which the assessee has been assessed by way of regular assessment or the total income returned by the assessee in any return of income furnished by him for any subsequent previous year, whichever is higher, shall be taken and income tax thereon shall be calculated at the rates in force in the financial year; 12 (c) where the calculation is made by the Assessing Officer for the purpose of making an amended order under sub-section (4) of Section 210, the total income declared in the return furnished by the assessee for the later previous year, or, as the case may be, the total income in respect of which the regular assessment, referred to in that sub-section has been made, shall be taken and income tax thereon shall be calculated at the rates in force in the financial year; (d) the income tax calculated under clause (a) or clause (b) or clause (c) shall, in each case, be reduced by the amount of income tax which would be deductible or collectible at source during the said financial year under any provision of this Act from any income (as computed before allowing any deductions admissible under this Act) which has been taken into account in computing the current income or, as the case may be, the total income 13 aforesaid; and the amount of income tax as so reduced shall be the advance tax payable: [Provided that for computing liability for advance tax, income tax calculated under clause (a) or clause (b) or clause (c) shall not, in each case, be reduced by the aforesaid amount of income tax which would be deductible or collectible at source during the said financial year under any provision of this Act from any income, if the person responsible for deducting tax has paid or credited such income without deduction of tax or it has been received or debited by the person responsible for collecting tax without collection of such tax.] (2) Where the Finance Act of the relevant year provided that, in the case of any class of assessees, net agricultural income (as defined in that Act) shall be taken into account for the purposes of computing advance tax, then, the net agricultural income to the taken into account 14 in the case of any assessee falling in that class, shall be— (a) in cases where the Assessing Officer makes an order under sub-section (3) or sub- section (4) of Section 210,— (i) if the total income of the latest previous year in respect of which the assessee has been assessed by way of regular assessment forms the basis of computation of advance tax payable by him, the net agricultural income which has been taken into account for the purposes of charging income tax for the assessment year relevant to that previous year; or (ii) if the total income declared by the assessee for the later previous year referred to in sub-section (4) of Section 210 forms the basis of computation of advance tax, the net agricultural income as returned by the assessee in the return 15 of income for the assessment year relevant to such later previous year; (b) in cases where the advance tax is paid by the assessee on the basis of his estimate of his current income under sub-section (1) or sub- section (2) or sub-section (5) or sub-section (6) of Section 210, the net agricultural income, as estimated by him, of the period which would be the previous year for the immediately following assessment year. (3) Where the Finance Act of the relevant year specifies any separate rate or rates for the purposes of computing advance tax in the case of every Hindu undivided family which has at least one member whose total income of the previous year exceeds the maximum amount not chargeable to income tax in his case, then, the Assessing Officer shall, for making an order under sub-section (3) or sub-section (4) of Section 210 in the case of any such Hindu undivided family, compute (subject to the 16 provisions of Section 164) the advance tax at such rate or rates— (a) in a case where the total income of the latest previous year in respect of which the Hindu undivided family has been assessed by way of regular assessment forms the basis of computation of advance tax, if the total income of any member of the family for the assessment year relevant to such latest previous year exceeds the maximum amount not chargeable to income tax in his case; (b) in a case where the total income of the previous year in respect of which a return of income is furnished by the Hindu undivided family under Section 139 or in response to a notice under sub-section (1) of Section 142 forms the basis of computation of advance tax, if the total income of any member of the family for the assessment year relevant to such 17 previous year exceeds the maximum amount not chargeable to income tax in his case. 211. Instalments of advance tax and due dates.— [(1) Advance tax on the current income calculated in the manner laid down in Section 209 shall be payable by— (a) all the assessees, other than the assessee referred to in clause (b), who are liable to pay the same, in four instalments during each financial year and the due date of each instalment and the amount of such instalment shall be as specified in the Table below: TABLE Due date of instalment Amount payable On or before the 15th June Not less than fifteen per cent of such advance tax. 18 On or before the 15th September Not less than forty-five per cent of such advance tax, as reduced by the amount, if any, paid in the earlier instalment. On or before the 15th December Not less than seventy-five per cent of such advance tax, as reduced by the amount or amounts, if any, paid in the earlier instalment or instalments. On or before the 15th March The whole amount of such advance tax, as reduced by the amount or amounts, if any, paid in the earlier instalment or instalments; (b) [an assessee who declares profits and gains in accordance with the provisions of sub-section (1) of Section 44-AD or sub- section (1) of Section 44-ADA, as the case may be], to the extent of the whole amount of such advance tax during each financial year on or before the 15th March: Provided that any amount paid by way of advance tax on or before the 31st day of March shall also be treated as advance tax 19 paid during the financial year ending on that day for all the purposes of this Act.] (2) If the notice of demand issued under Section 156 in pursuance of an order of the Assessing Officer under sub-section (3) or sub- section (4) of Section 210 is served after any of the due dates specified in sub-section (1), the appropriate part or, as the case may be, the whole of the amount of the advance tax specified in such notice shall be payable on or before each of such of those dates as fall after the date of service of the notice of demand.” 11. Section 211 depicts quarters of payment of advance tax. The first installment/quarter is on or before 15th June, the next installment is on or before 15th September and the third installment is on or before 15th December. Therefore, the petitioner’s claim of amalgamation having been accepted by the Tribunal on 20-03-2017 was obliged to pay advance tax for the said 20 three quarters/three installments. The petitioner/company on the ground that it did not exist with effect from 1-04-2016 cannot escape the liability of payment of advance tax for the said three quarters. On and from the date of acceptance by the Tribunal i.e., 20- 03-2017, the last installment for the assessment year 2017-18 advance tax need not be paid. But, for the interregnum period, as held by the revenue, the petitioner cannot escape payment of advance tax as under Section 207 of the Act advance tax depends upon the current income. The income as declared is current income not as an amalgamated company but as an individual company. Therefore, the petitioner was obliged to pay advance tax for the said period. 12. In so far as judgments relied on by the learned counsel appearing for the assessee in the case of 21 MARSHALL SONS AND CO. (INDIA) LIMITED v. INCOME TAX OFFICER reported in 1997 Income Tax Reports 809 the Apex Court was considering the scheme of amalgamation held to be reasonable to say that the scheme of amalgamation took effect on and from the date of sanctioning the scheme The order of the Tribunal in the case on hand sanctioning the same was on 20-03-2017. Therefore, the scheme would take effect from that date and advance tax to be paid from 1-04- 2016 to 20-03-2017 i.e., three installments cannot be contended that the petitioner was not liable to pay any advance tax. 13. In so far as the judgment in the case of PRINCIPAL COMMISSIONER OF INCOME TAX, NEW DELHI v. MARUTI SUZUKI INDIA LIMITED reported in (2019) 107 Taxmann.com 375 of the Apex Court, the 22 said judgment is also not applicable to the facts of the case at hand, as the scheme of amalgamation came into effect by an order being passed by the Tribunal on 20- 03-2017. The Apex Court in the aforesaid judgment has held that two companies may join to form a new company. When two company are merged and so joined as to form a third company or one is absorbed into one or blended with another, the amalgamating company losses its entity. The crux of the issue is when did the petitioner/company in the case at hand lose its entity. It cannot but be said that the petitioner company lost its entity only on 20.03.2017, upto this date the obligation to pay advance tax did not vanish. Therefore, I find no good ground to interfere with the impugned assessment order passed by the respondent/Assistant Commissioner of Income Tax and the notice demanding an amount of Rs.356,644,155/- . 23 Accordingly, the writ petitions lack merit and are dismissed. Sd/- JUDGE bkp CT:MJ 24 "