M/S DALMIA POWER LIMITED & ANR. v. THE ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE 1, TRICHY

1. The issue which arises for consideration in the present Civil Appeals is whether the Department ought to have permitted the assessee companies to file the revised Income Tax Returns for the Assessment Year 2016­2017 after the expiry of the due date prescribed under Section 139(5) of the Income Tax Act, 1961 on account of the pendency of proceedings for amalgamation of the assessee companies with other companies in the group under Sections 230­232 of the Companies Act, 2013.

2. The factual background of this case briefly stated, is that: 2.[1] The Appellant No.1 ­ M/s Dalmia Power Limited and Appellant No.2 ­ M/s Dalmia Cement (Bharat) Limited are public limited companies, incorporated under the Companies Act, 1956. The Appellants have their registered offices at Dalmiapuram Lalgudi Taluk, Dalmiapuram, District Tiruchirappalli, Tamil Nadu. 2.[2] The Appellant No.1 is engaged in the business of building, operating, maintaining, and investing in power and power related businesses, directly or through downstream companies. The Appellant No.2 is engaged in the business of manufacturing and selling of cement, generation of power, maintaining and operating rail systems and sold waste management system which provide services to the cement business. 2.[3] The Appellant No.1 filed its original Return of Income under Section 139 (1) of the Income Tax Act on 30.09.2016 for A.Y. 2016­2017 declaring a loss of Rs. 6,34,33,806/­. Similarly, Appellant No.2 filed its original Return of Income under Section 139 (1) of the Income Tax Act on 30.11.2016 for A.Y. 2016­2017 declaring NIL income (after setting off Brought Forward Loss amounting to Rs. 56,89,83,608/­ against Total income of Rs. 56,89,83,608/­). 2.[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, the Appellants (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. The Appointed Date of the Schemes was 01.01.2015, and would come into effect from 30.10.2018. 2.[5] The Transferor and Transferee Companies filed Company Petitions under Sections 391 to 394 of the Companies Act, 1956 before the Madras and Guwahati High Courts. On the coming into force of the Companies Act, 2013, the Company Petitions were transferred to NCLT, Chennai and NCLT, Guwahati. 2.[6] The Schemes were duly approved and sanctioned by the NCLT, Guwahati vide Orders dated 18.05.2017 and 30.08.2017. 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. 2.[7] The Appellants/ Transferee Companies manually filed revised Returns of Income on 27.11.2018 with the Department after the Schemes were sanctioned and approval was granted by the NCLT. The revised Returns were based on the revised and modified computation of total income and tax liability of the Transferor/Amalgamated Companies. In the revised Returns of Income, the Appellant No.1 claimed losses in the current year to be carried forward amounting to Rs.2,44,11,837/­; whereas Appellant No.2 claimed losses in the current year, to be carried forward, amounting to Rs.1105,93,91,494/­. 2.[8] The Appellants submit that the revised Returns were filed after the due date for filing revised Returns of Income u/S. 139(5) for the Assessment Year 2016­ 2017 since the NCLT passed the final Order on 01.05.2018. Consequentially, it was an impossibility to file the revised Returns before the prescribed date of 31.03.2018. 2.[9] A summary of the dates relevant to the case of Appellant No.1 are tabulated as under:

┌────────────────────────────────────────────────────────────────┐
│

┌─────────────────────────────────────────────────────────────────┐
│        Sl. No.            Particulars            A.Y. 2016-17   │
├─────────────────────────────────────────────────────────────────┤
│           1.     Appointed Date of the            01.01.2015    │
│                  Scheme                                         │
│           2.     Filing of original Return of     30.11.2016    │
│                  Income                                         │
│           3.     Due date for filing revised      31.03.2018    │
│                  Return of Income u/s 139(5)                    │
│           4.     Effective Date of the Scheme     30.10.2018    │
│           5.     Date of filing revised Return    27.11.2018    │
│                  of Income to give effect to                    │
│                  approval of the scheme                         │
└─────────────────────────────────────────────────────────────────┘

Due date for filing revised 31.03.2018

│
│                  Return of Income u/s 139(5)                   │
│           4.     Effective Date of the Scheme     30.10.2018   │
│           5.     Date of filing revised Return    27.11.2018   │
│                  of Income to give effect to                   │
│                  approval of the scheme                        │
└────────────────────────────────────────────────────────────────�

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6. Section 139(5) of the Income Tax Act, as it stood at the relevant time, makes it clear that where an assessee furnishes a return under sub­section (1) or sub­section (4) of Section 139, and later discovers an omission or mistake therein, he may furnish a revised Return at any time before the expiry of one year from the end of the relevant assessment year or before the completion of the assessment, whichever is earlier. Section 139(5) of the Income Tax Act is set out hereinunder for ready reference: “139(5). If any person, having furnished a return under sub­section (1) or sub­section (4) of Section 139, discovers an omission or wrong statement therein, he may furnish a revised return at any time before the expiry of one year from the end of the relevant assessment year or before the completion of the assessment, whichever is earlier”

7. In our view, this provision is not applicable to the facts and circumstances of the present case since the revised Returns were not filed on account of an omission or wrong statement or omission contained therein. The delay occurred on account of the time taken to obtain sanction of the Schemes of Arrangement and Amalgamation from the NCLT.

8. In the facts of the present case, it was an impossibility for the assessee companies to have filed the revised Returns of Income for the A.Y. 2016­2017 before the due date of 31.03.2018, since the NCLT had passed the last orders granting approval and sanction of the Schemes only on 22.04.2018 and 01.05.2018.

9. The counsel appearing for the Department submitted that the Appellants ought to have made a representation to the Board under Section 119(2)(b) of the Income Tax Act for condonation of delay while filing the revised Returns. A perusal of Section 119(2)(b) shows that it is applicable in cases of genuine hardship to admit an application, claim any exemption, deduction, refund or any other relief under this Act after the expiry of the stipulated period under the Income Tax Act. Section 119(2)(b) of the Income Tax Act is reproduced hereinunder for ready reference:

this provision would not be applicable where an assessee has restructured their business, and filed a revised Return of Income with the prior approval and sanction of the NCLT, without any objection from the Department. Rules of procedure have been construed to be the handmaiden of justice.[4] The purpose of assessment proceedings is to assess the tax liability of an assessee correctly in accordance with law.[5]