PRINCIPAL COMMISSIONER OF INCOME TAX (CENTRAL) – 2 versus M/S. MAHAGUN REALTORS (P) LTD.

Citation: [2022] 4 S.C.R. 502 · Decided: 05-04-2022 · Supreme Court of India · Bench: UDAY UMESH LALIT · Disposal: Appeal(s) allowed

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Judgment (excerpt)

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SUPREME COURT REPORTS
[2022] 4 S.C.R.
[2022] 4 S.C.R. 502
502
PRINCIPAL COMMISSIONER OF INCOME TAX (CENTRAL) – 2
v.
M/S. MAHAGUN REALTORS (P) LTD.
(Civil Appeal No. 2716 of 2022)
APRIL 05, 2022
[UDAY UMESH LALIT AND S. RAVINDRA BHAT, JJ.]
Income Tax Act, 1961 – ss. 2(1A), 2(31) and 170(2) –
Amalgamation of companies – Effect of amalgamation in the context
of income tax – Held: The combined effect of s.394(2) of the
Companies Act, 1956, s.2(1A) and various other provisions of the
Income Tax Act, is that despite amalgamation, the business, enterprise
and undertaking of the transferee or amalgamated company- which
ceases to exist, after amalgamation, is treated as a continuing one,
and any benefits, by way of carry forward of losses (of the transferor
company), depreciation, etc., are allowed to the transferee –
Therefore, unlike a winding up, there is no end to the enterprise,
with the entity – The enterprise in the case of amalgamation,
continues – Whether corporate death of an entity upon amalgamation
per se invalidates an assessment order ordinarily cannot be
determined on a bare application of s.481 of the Companies Act,
1956 (and its equivalent in the 2013 Act), but would depend on the
terms of the amalgamation and the facts of each case – Companies
Act, 1956 – ss.394(2) and 481 – Companies Act, 2013.
Company Law – Amalgamation and winding up of a corporate
entity – Difference.
Allowing the appeal, the Court
HELD: 1. Amalgamation is unlike the winding up of a
corporate entity. In the case of amalgamation, the outer shell of
the corporate entity is undoubtedly destroyed; it ceases to exist.
Yet, in every other sense of the term, the corporate venture
continues – enfolded within the new or the existing transferee
entity. In other words, the business and the adventure lives on
but within a new corporate residence, i.e., the transferee company.
It is, therefore, essential to look beyond the mere concept of
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destruction of corporate entity which brings to an end or
terminates any assessment proceedings. There are analogies in
civil law and procedure where upon amalgamation, the cause of
action or the complaint does not per se cease – depending of
course, upon the structure and objective of enactment. Broadly,
the quest of legal systems and courts has been to locate if a
successor or representative exists in relation to the particular
cause or action, upon whom the assets might have devolved or
upon whom the liability in the event it is adjudicated, would fall.
[Para 18][511-C-F]
2. The combined effect of Section 394(2) of the Companies
Act, 1956, Section 2(1A) and various other provisions of the
Income Tax Act, is that despite amalgamation, the business,
enterprise and undertaking of the transferee or amalgamated
company- which ceases to exist, after amalgamation, is treated
as a continuing one, and any benefits, by way of carry forward of
losses (of the transferor company), depreciation, etc., are allowed
to the transferee. Therefore, unlike a winding up, there is no end
to the enterprise, with the entity. The enterprise in the case of
amalgamation, continues. [Para 30][521-E-F]
3. Whether corporate death of an entity upon amalgamation
per se invalidates an assessment order ordinarily cannot be
determined on a bare application of Section 481 of the Companies
Act, 1956 (and its equivalent in the 2013 Act), but would depend
on the terms of the amalgamation and the facts of each case. [Para
42][534-G]
Principal Commissioner of Income Tax v. Maruti Suzuki
India Limited 2019 SCC Online SC 928 and Spice
Infotainment Limited v. Commissioner of Income Tax,
[2012] 247 CTR 500 (Del) – distinguished.
Marshall Sons and Co. (India) Ltd. v. Income Tax Officer
[1996] Supp 9 SCR 216 – relied on.
Saraswati Industrial Syndicate v. Commissioner of
Income Tax Haryana, Himachal Pradesh [1990] Supp 1
SCR 332; Commissioner of Income Tax, v. Hukamchand
PRINCIPAL COMMISSIONER OF INCOME TAX (CENTRAL) – 2 v.
M/S. MAHAGUN REALTORS (P) LTD.
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SUPREME COURT REPORTS
[2022] 4 S.C.R.
Mohanlal [1972] 1 SCR 786; Commissioner of Income
Tax v. Amarchand Shroff [1963] Supp 1 SCR 699;
Commissioner of Income Tax v. James Anderson [1964]
6 SCR 590; Commissioner of Income Tax v. Spice
Enfotainment Ltd. (2020) 18 SCC 353; Dalmia Power
Limited & Ors v. The Assistant Commissioner of Income
Tax, Circle 1, Trichy (2020) 14 SCC 736; McDowell
and Company Ltd. v. Commissioner of Income Tax,
Karnataka Central (2

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