Facts of the case:-
1. Transferor Company is a wholly owned subsidiary (WoS) company of Transferee Company.
2. The Transferee Company is a profit-making company whereas the Transferor Company has been a loss-making company for the last two financial years.
3. The Income Tax Department filed its report for the Transferee Company stating that there is no objection for Merger subject to compliance of section 79 of Income Tax Act and continuation of proceedings against Transferee Company.
4. Transferee Company gave an undertaking that the company undertakes to comply with provisions of Section 79 of Income Tax Act and continuation of proceedings in the name of the Transferee Company.
Coming to the Transferor Company, The Income Tax Department Filed its report for the Yuflow Engineering Private Limited (Transferor Company) citing certain observations and raising objections to the scheme as follows:
Points from report by the Income Tax Department
lt is observed by the Income Tax Department that from the Financials submitted along with scheme documents that Transferor Company is loss making company and Transferee Company is a profit-making company.
It is also observed from the Income Tax return filed by the Transferor Company for AY: 2021-22 that it is having total loss to be carried forward to future years to the tune of Rs.8,09,04,600/(Business Loss Rs.6,69,94,054/-.. and unabsorbed depreciation of Rs.1,39,10,546/-).
Therefore, it is evident that the scheme is for avoiding payment of tax by merging loss making and profit-making companies.
This story is from the April 2023 edition of M & A Critique.
Start your 7-day Magzter GOLD free trial to access thousands of curated premium stories, and 8,500+ magazines and newspapers.
Already a subscriber ? Sign In
This story is from the April 2023 edition of M & A Critique.
Start your 7-day Magzter GOLD free trial to access thousands of curated premium stories, and 8,500+ magazines and newspapers.
Already a subscriber? Sign In
Advent International to combine its listed & private entity business
Recently, Advent International announced the merger of its privately held pharma company into recently acquired listed pharma company.
Eris Lifesciences on Acquisition Spree to expand its branded formulations portfolio
Recently, Eris Lifesciences Limited announced acquisition of 'branded Formulation Business' of Biocon Biologics Limited pertaining to the India territory through slump sale. In addition, ELL also announced a foreign acquisition.
Vuenow Merges All Entities Will It Create Value?
Recently, Vuenow Infratech Limited, a BSE listed company, announced the merger of two private companies itself.
Dalmia Group continues its journey of segregation of businesses by way of demerger
Recently Dalmia Group announced yet another restructuring of one of its group companies Dalmia Bharat Refractories Limited.
Rane Group to consolidate its listed operational entities
After keeping different operational listed entities for years, Rane Group, one of the key players in Auto Ancillary space has decided to consolidate its listed operational companies under Rane (Madras) Limited.
Zuari Group's attempts to create the biggest private producer of Fertilisers
“Transfer of Identified shares from ZACL to ZMPPL is a precondition for approval of the merger transaction”
Shankara Building Products separates its trading & marketplace business for independent growth
Recently, Shankara Building Products Limited announced the demerger of its trading/building material marketplace business from its manufacturing business.
CASE LAW: Reduction of Share Capital by way of cancellation of Shares amounts to "Transfer" and Losses available for set-off
Recently, the Mumbai bench of the Income Tax Appellate Tribunal in the case of Tata Sons Limited held that the reduction of share capital of the company by way of cancellation of shares is an extinguishment of rights in shares and be treated as \"transfer\".
Allcargo Logistics creating a more simplified structure
“The transaction will separate the international supply chain business into a separate entity”
TVS Group's Restructuring A Benchmark for Family Arrangements
\"Part I of the scheme, although complex with multiple transactions, executed to achieve separation of ownership between various family branches\"