[Opinion] Section 170A | Effect of Order of Tribunal or Court in Respect of Business Reorganization

CA Amarbir Singh Walia – [2024] 162 taxmann.com 81 (Article)

I. Introductory Remarks

1. Section 170A of the Income Tax Act, 1961 (‘Act’) was inserted by Finance Act, 2022, w.e.f. 01.04.2022 and has been later substituted by Finance Act, 2023, w.e.f. 01.04.2023. The section, inter-alia, states that in cases of business reorganisation where prior to the date of order of the High Court or tribunal or an Adjudicating Authority (hereinafter referred to as order in respect of business reorganisation), as the case may be, any return of income has been furnished by an entity to which such order applies under the provisions of section 139 of the Act for any assessment year relevant to the previous year to which such order applies, the successor shall furnish, within a period of six months from the end of the month in which the order was issued, a modified return in such form and manner, as may be prescribed, in accordance with and limited to the said order.

2. For the purposes of this section: –

1. “business reorganisation” means the reorganisation of business involving the amalgamation or demerger or merger of business of one or more persons;
2. “successor” means all resulting companies in a business reorganisation, whether or not the company was in existence prior to such business reorganisation.
3. “Adjudicating Authority”, for the purposes of this section, means National Company Law Tribunal constituted under Section 408 of the Companies Act, 2013.

II. Emergence of section 170A of the Act (Legislative history)

3. The legislative intent behind introduction of this section is derived from the judgement of Hon’ble Supreme Court in the case of Dalmia Power Ltd. v. Asstt. CIT [2019] 112 taxmann.com 252/[2020] 269 Taxman 352/420 ITR 339, dated 18.12.2019. M/s Dalmia Power Limited and M/s Dalmia Cement (Bharat) Limited were public limited companies, incorporated under the Companies Act, 1956.

4. With a view to restructure and consolidate their businesses, and enable better realisation of the potential of their businesses, which would yield beneficial results, and enhanced value creation for their shareholders, better security to their creditors and employees, Dalmia Power and Dalmia Cement (also referred to as “Transferee Companies” or “Amalgamated Companies”) entered into 4 interconnected Schemes of Arrangement and Amalgamation with 9 companies viz. DCB Power Ventures Ltd., Adwetha Cement Holdings Ltd., Odisha Cement Ltd., OCL India Ltd., Dalmia Cement East Ltd., Dalmia Bharat Cements Holdings Ltd., Shri Rangam Securities & Holdings Ltd., Adhunik Cement Ltd., Adhunik MSP Cement (Assam) Ltd. (also referred to as “Transferor Companies” or “Amalgamating Companies”) and their respective shareholders and creditors.

5. The Schemes were duly approved and sanctioned by the NCLT Guwahati vide orders dated 18.05.2017 and 30.08.2017. Further, NCLT Chennai sanctioned the schemes vide orders dated 16.10.2017, 20.10.2017, 26.10.2017, 28.12.2017, 10.01.2018, 20.04.2018 and 01.05.2018. Therefore, the scheme was approved vide final order in May 2018.

Click Here To Read The Full Article