This Tax Alert summarizes a
Mumbai Tribunal decision in the case of Ultratech Cement Ltd.[1] (Taxpayer) v. DCIT, wherein one of the issues
that arose was whether Taxpayer being amalgamated company is entitled to claim
tax holiday in respect of profits earned from eligible undertakings which
vested with the Taxpayer pursuant to the scheme of amalgamation for residual
tax holiday period. If yes, whether the eligibility of the amalgamated company
to claim tax holiday was dependent on the specific enabling provision[2] contained in the Income-tax Act, 1961 (ITL) and
consequently whether the withdrawal of such enabling provisions in respect of
amalgamation undertaken post 1 April 2007, would result in denial of tax
holiday to the amalgamated company.
The Tribunal held that the preponderant judicial view prior to the enabling
provision was that the tax holiday benefit was linked to the eligible
undertaking and not to the owner. Basis this, the tax holiday benefit was
available to the amalgamating company up to the date of amalgamation and to the
amalgamated company post the date of amalgamation. The Tribunal, therefore,
held that the enabling provision merely clarified what was otherwise implicit
in the statute albeit in an explicit manner. Further, the Tribunal held that
the enabling provision in fact restricted the eligibility of the amalgamating
company to claim tax holiday in the year of amalgamation, but it did not
restrict the right of the amalgamated company to claim tax holiday benefit.
Hence, the withdrawal of the enabling provision also did not result in denial
of tax holiday benefit to the amalgamated company, but it merely restored the
position that existed prior to inclusion of the enabling provisions. Hence, the
Tribunal held that the Taxpayer being amalgamated company is eligible to claim
tax holiday benefit on profits from eligible undertaking taken over under the
scheme of amalgamation for the residual period
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