Court :
IN THE ITAT KOLKATA BENCH ‘E’
Brief :
Section 170 of the Income-tax Act, 1961 – Succession to business other than on death - Assessment years 1999-2000 to 2001-02 – Whether amalgamating company is assessable in respect of income up to date of amalgamation- Held, yes - Whether when after amalgamation once amalgamating company is dissolved it does not remain in existence then income up to date amalgamation should be assessed in hands of amalgamated company, i.e., successor company in like manner and to same extent as it would have been assessed in hands of amalgamating company – Held, yes - Whether assessment made in hands of a non-existent company is a nullity and invalid - Held, yes
FACTS
The assessee-company had merged with a company ‘M’, with effect from 1-7-2000 and the petition for merger had been accepted by the Jurisdictional High Courts. Thereafter the name of the company ‘M’ was changed to ‘S’, with effect from 12-5-2003. For the relevant assessment years, the Assessing Officer made the assessments in the hands of the assessee-company between 29-3-2003 and 26-3-2004. In second appeal before the Tribunal, the assessee raised an additional ground contending that after merger of the assessee-company with the company ‘M’ with effect from 1-7-2000, the assessee-company did not remain in existence, and, therefore, the assessments made in the hands of a non-existent entity were void, ab initio and nullity, and that merely because the assessee-company had filed the returns in its name would not give jurisdiction to the Assessing Officer to make the assessments in the hands of a non-existent entity.
Citation :
Pampasar Distillery Ltd.
v.
Assistant Commissioner of Income-tax, Circle –5, Kolkata
G.D. Agrawal, Vice President
And D.K. Tyagi, Judicial Member
IT Appeal Nos.227,228,304,558 to 560 and 1672 to 1676 (Kol.) of 2005
[Assessment Year 1994-95 to 2001-2002]
HELD
The income till date of amalgamation is assessable in the hands of the amalgamating company. [Paras 11 and 12]
Then the question for consideration was as to whether the income prior to the date of amalgamation could be assessed in the hand of amalgamating company on the date when amalgamating company did not remain in existence or it was to be assessed in the hands of amalgamated company as a representative of amalgamating company. [Para 13]
As per sub-section(1) of section 170 when a business or profession carried on by one person is succeeded by another person who continues to carry on that business, the predecessor shall be assessed in respect of the income up to the date of succession and the successor shall be assessed in respect of income after the date of succession. As per sub-section(2)when the predecessor cannot be found, the assessment of income up to the date of succession shall be made on the successor in the like manner and to the same extent as it would have been made on the predecessor. Therefore, the provision of section 170 would be squarely applicable in respect of the case of amalgamation. By the process of amalgamation the business which was being carried on by the amalgamating company is succeeded by the amalgamated company who continues to carry on the said business. Therefore, the amalgamating company is assessable in respect of income up to the date of amalgamation. However, after the amalgamation once the amalgamating company is dissolved it does not remain in existence and, therefore, it cannot be found. Once it cannot be found the income up to the date amalgamation should be assessed in the hands of amalgamated company, i.e., the successor company in the like manner and to the same extent as it would have been assessed in the hands of amalgamating company [Para 16]
Then the question was as to whether the assessment in the hands of a non-existent company was a nullity and invalid or it was only an irregularity. [Para 17]
In view of the totality of facts and the legal position, it was to be held that the assessment made in the hands of non-existent company was nullity. Accordingly, the assessments made in the hands of the assessee-company for the relevant assessment years were to be quashed because assessments for these years were made on the dates, when the assessee-company was not in existence. [Para 18]
However, the Assessing Officer was at liberty to make the assessment of the income prior to the period of amalgamation of the assessee-company in the hands of successor company, that is, amalgamated company ‘S’ as per provision of section 170(2). [Para 19]
Editors note:
It was also held by the Tribunal that the order passed by the Assessing Officer under section 201/201(1A) on the date on which the assessee-company was not in existence was a nullity, however, the Assessing Officer was at liberty to take appropriate action in the case of amalgamated company ‘S’ in accordance with law. [Para 22]
CAclubindia
