JUDGMENT
N.V. Balasubramanian, J.
1. This tax case revision petition has been filed by the dealer who is an assessee on the file of the Commercial Tax Officer, Mannadi (East), Assessment Circle, Chennai. The assessee-dealer during the course of the assessment year 1991-92 reported a total and taxable turnover of Rs. 2,75,63,222 and Rs. 2,70,69,402 by filing the return under the provisions of the Central Sales Tax Act, 1956. The assessing authority determined the total and taxable turnover at Rs. 41,76,77,025 and Rs. 7,80,11,468 respectively for the reasons stated in the assessment order.
2. The dispute in the tax case revision is only confined to a sum of Rs. 3,84,650 and the dispute arises in the following manner :
The assessee-company has a corporate office in Bombay. Another company by name, M/s. Indtech Speciality Chemicals Limited, Bangalore, has merged with the assessee-company with effect from January 1, 1992 as per the orders of the High Court of Judicature at Bombay dated January 27, 1993 in the Company Application No. 261 of 1992. The High Court of Karnataka at Bangalore also sanctioned the scheme of amalgamation in C.P. No. 135 of 1992 dated February 12, 1993. It is significant to notice that in both the orders, the High Courts have approved the scheme and under clause 2 of the scheme, the amalgamation shall take effect as and from the 1st day of January 1992 (hereinafter referred to as “the transfer date”). The assessee-dealer during the period from January 1, 1992 to March 31, 1992 despatched certain goods for a sum of Rs. 3,84,650 from Madras to Bangalore company and the Bangalore Company has also issued necessary “C” form and the assessing officer assessed the same at the rate of 4 per cent under section 8(2)(b) of the Central Sales Tax Act, 1956. The case of the assessee-dealer was that the buying company ceased to exist as a separate entity from January 1, 1992 consequent upon the order of the High Court of Judicature at Bombay and High Court of Karnataka by virtue of the approval granted by the said courts from January 1, 1992 and any transfer of the goods subsequent to that date should be taken as a transfer to the branch and there was no sale at all in favour of the Bangalore company. The assessing officer, however, did not agree with the contention raised on behalf of the assessee-dealer on the ground that the amalgamation would take effect only from the date the transferor-company merged with the amalgamated company, namely, the assessee-company and since that happened subsequent to March 31, 1992, the sale by the assessee-dealer should be taken as an inter-State sale and the turnover would attract the provisions of section 8(2)(b) of the Central Sales Tax Act, 1956 and accordingly levied the tax on the said turnover.
3. The assessee-dealer preferred an appeal before the Appellate Assistant Commissioner against the order of assessment made by the Commercial Tax Officer, Mannadi and the Appellate Assistant Commissioner also confirmed the order of the assessing officer on the ground that the “operative date” of the scheme of amalgamation is subsequent to the “transfer date”, i.e., January 1, 1992. According to the Appellate Assistant Commissioner, there are certain conditions that should be fulfilled both by the transferor as well as by the transferee-companies for the implementation of the scheme of amalgamation and since those things have been implemented subsequent to March 31, 1992, the transferor-company, i.e., M/s. Indtech Speciality Chemicals Limited continued to exist and the scheme of amalgamation would take effect only from the “operative date” and not from the “transfer date”. He therefore held that the assessing officer was justified in levying the tax on the said transaction and dismissed the appeal preferred by the assessee on that score.
4. The assessee carried the matter in appeal before the Tamil Nadu Sales Tax Appellate Tribunal, Chennai and the Appellate Tribunal, following the decision of this Court in the case of Marshall Sons and Co. (India) Ltd. v. Income-tax Officer [1992] 195 ITR 417, held that under the scheme of amalgamation, the tramferor-company ceased to exist only from the date when it is struck off from the register under the provisions of the Companies Act and before that date the transaction took place and hence there was a sale in the course of the inter-State trade. The Tribunal also held that the transaction cannot be converted into a branch transfer by the subsequent rum of event by applying the theory of retrospectivity. In this view of the matter, the Appellate Tribunal confirmed the order of the Appellate Assistant Commissioner and dismissed the appeal preferred by the assessee.
5. It is against this order, the assessee-dealer has filed the present tax case revision.
6. At the time of hearing of the tax case revision, Mr. B. Ravindran, learned counsel for the assessee, strongly placed reliance on the decision of the Supreme Court in the case of Marshall Sons and Co. (India) Ltd. v. Income-tax Officer [1997] 223 ITR 809 wherein the Supreme Court held that the transfer date will be the date as specified in the scheme of amalgamation and it cannot be otherwise and submitted the view of the Tribunal is erroneous in law.
7. Mr. T. Mathi, learned Government Advocate, on the other hand submitted that in this case if transfer date is taken as January 1, 1992, it would lead to tax evasion and applying the principle of the Supreme Court in the case of McDowell & Co. v. Commercial Tax Officer [1985] 59 STC 277; [1985] 154 ITR 148 it is submitted that if this Court holds that die amalgamation takes effect even from the transfer date, it will lead to tax evasion and the tax avoidance should not be encouraged.
8. We have carefully considered the submissions of the learned counsel for both sides. The fact remains that both the High Court of Karnataka at Bangalore as well as the High Court of Judicature at Bombay have approved the scheme of amalgamation of M/s. Indtech Speciality Chemicals Ltd., with the assessee-dealer and the courts in both the orders held that the amalgamation shall take effect as and from the 1st day of January 1992. The 1st day of January 1992 is deemed to be the “transfer date”. Once that date is taken as the transfer date, according to the decision of the Supreme Court, the amalgamation would take effect from the transfer date and not from the operative date. Though subsequently, the transferor-company continued to exist, the Supreme Court held that the existence of the transferor-company is only for the benefit of the transferee-company. The decision of this Court in the case of Marshall Sons and Co. (India) Ltd. v. Income-tax Officer [19921 195 ITR 417 which was relied upon by the Appellate Tribunal was reversed by the Supreme Court in Marshall Sons and Co. (India) Ltd. v. Income-tax Officer [1997] 223 ITR 809. The Supreme Court held as under :
“Every scheme of amalgamation of companies has necessarily to provide a date with effect from which the amalgamation/transfer shall take place. It is true that while sanctioning the scheme, it is open to the company court to modify the said date and prescribe such date of amalgamation/transfer as it thinks appropriate in the facts and circumstances of the case. If the court so specifies a date, such date would be the date of amalgamation/date of transfer. But where the court does not prescribe any specific date but merely sanctions the scheme presented to it, the date of amalgamation/date of transfer is the date specified in the scheme as ‘the transfer date’. It cannot be otherwise.”
9. Hence, after the decision of the Supreme Court, it is clear that when the courts specify a date as the transfer date, the amalgamation would take effect from that date and when the court has not specified any other date and merely sanctioned the scheme presented to it, the date of amalgamation/date of transfer would be the date specified in the scheme as the “transfer date”. Following the decision of the Supreme Court, it must be held that the amalgamation took effect from January 1, 1992 and from that date, the transferor-company, M/s. Indtech Speciality Chemicals Ltd., continued only for the benefit of the transferee-company, When it has no separate entity, the transfer by the assessee-dealer in favour of M/s. Indtech Speciality Chemicals Limited cannot be regarded as the sale which would attract the provisions of the Central Sales Tax Act. The view of the Appellate Tribunal that it would attract the provisions of the Central Sales Tax Act is not in conformity with the decision of the Supreme Court cited supra (Marshall Sons and Co. (India) Ltd. v. Income-tax Officer [1997] 233 ITR 809 (SC)). The order of the Appellate Tribunal is set aside.
10. As regards the forceful argument advanced by learned Government Advocate before us that it will lead to tax evasion and tax avoidance should not be encouraged we are of the opinion that the question raised was not the subject-matter for consideration either by the assessing officer or by the Appellate Assistant Commissioner. Similar argument was not advanced before the Appellate Tribunal that the amalgamation itself was a device, adopted and designed to evade the taxes. We are of the view that it is now not open to learned Government Advocate to raise such a contention before us in the present tax case revision. Therefore we are unable to entertain the points raised by learned Government Advocate (Taxes).
11. In this view of the matter, we allow the tax case revision. No costs.
12. Petition allowed.