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The income-tax department will now have an opportunity to protect the interest of the revenue in reconstruction or amalgamation schemes filed for approval before various High Courts.
The Central Board of Direct Taxes (CBDT) has in a letter directed the Chief Commissioners of income tax to ensure that the comments/objections of the tax department on such schemes are sent to the regional director (MCA) for incorporating them in the response to the Court.
Till recently, there was no procedure for the income tax department to raise objections (for any loss of revenue) to any schemes of amalgamation or reconstruction filed before High Courts.
There had been a recent instance when an amalgamation scheme was sought to be implemented on a retrospective date and involved setting off of losses of loss making companies with profits of profit making companies within the same group, thereby impacting public revenues.
The CBDT now wants CCITs to abide by a corporate affairs ministry circular of January 2014 that requires the comments of income tax department to be invariably obtained by the regional directors (MCA) before furnishing any report on reconstruction or amalgamation.
The idea is to ensure that the proposed scheme of amalgamation or reconstruction has not been so designed to defraud the revenue and consequently be prejudicial to the interest of the revenue.
“While the CBDT letter is a welcome move as it brings a more holistic approach towards protecting the interest of all the stakeholders, it could also delay the process”, Amit Maheshwari, Partner, Ashok Maheshwary & Associates, a firm of chartered accountants told BusinessLine.
Indications are that the new CBDT directive would also apply for schemes of reconstruction or amalgamation filed under the new company law, which came into effect from April 1 this year.
srivats.kr@thehindu.co.in
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