Telangana High Court
M/S. Optum Global Solutions India … vs Principal Commissioner Of Income Tax, on 19 June, 2025
Author: P.Sam Koshy
Bench: P.Sam Koshy
THE HON'BLE SRI JUSTICE P.SAM KOSHY
AND
THE HON'BLE SRI JUSTICE NARSING RAO NANDIKONDA
WRIT PETITION Nos.32633 and 32578 of 2024
COMMON ORDER:
(per the Hon’ble Sri Justice P.Sam Koshy)
Heard Mr. Kamal Sawhney, learned counsel, representing Mr. Mamilla
Ashwin Reddy, learned counsel for the petitioner, and Mr. K. Sudhakar Reddy,
learned Standing Counsel for the Income Tax Department for the respondents.
2. These are two matters dealing with the same issue in respect of the same
petitioner / assessee, except for the assessment years. Since the grounds of
challenge of the impugned orders being same, we proceed to decide the two writ
petitions by this common order. Writ Petition No.32633 of 2024 is in respect of
the assessment year 2018-19 and Writ Petition No.32578 of 2024 is in respect
of the assessment year 2017-18.
3. For convenience, the facts in Writ Petition No.32578 of 2024 are
discussed hereunder.
4. The instant writ petition has been filed by the petitioner seeking for
issuance of a writ of mandamus for quashment of the impugned notice dated
14.10.2024, issued by respondent No.1. It was also sought for by the petitioner
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for issuance of a writ of mandamus declaring that the petitioner is entitled for
Minimum Alternate Tax (MAT) Credit of the amalgamated entity.
5. The facts of the case are that the petitioner is a company incorporated
under the Companies Act and is engaged in the business of information
technology and information technology enabled services. The matter involved
in the present case is the notice issued by respondent No.1, dated 14.10.2024,
under Section 263 of the Income Tax Act, 1961 (briefly, ‘the Act’ hereinafter)
for the assessment year 2017-18. The petitioner enjoys an interim protection of
this Court granted on 22.11.2024 till date. The notice under challenge is one
seeking for explanation from the petitioner as to why the MAT Credit
amounting to Rs.21,28,50,670/- pertaining to another entity namely M/s. United
Health Group Information Services Pvt. Ltd., which is the amalgamating entity,
be not disallowed and the same amount be recovered with interest from the
petitioner.
6. It is pertinent to mention that the aforesaid MAT Credit was allowed to
the petitioner by way of a rectification order dated 03.09.2022, which was
passed after due verification. It is this rectified order which is now sought to be
revised and for which the impugned notice has been issued.
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7. Learned counsel for the petitioner has challenged the impugned notice
primarily on the following two grounds:-
1. That the impugned notice is without any jurisdiction, as the very
basis of the impugned notice i.e. the rectification order dated
03.09.2022 has become non-est in view of the newly inserted
provision under Section 92CD (3) of the Act as a result of the
Advance Pricing Agreement (APA) dated 28.03.2023; and
2. That the impugned notice even otherwise is in contravention of the
settled legal position so far as an amalgamated company being
entitled to MAT Credit pertaining to the transferee company after
the amalgamation having been taken place.
8. It was the contention of the learned counsel for the petitioner that in terms
of the provisions of Section 92CD (3) of the Act, if the assessee has entered into
an Advance Pricing Agreement with the Central Board of Direct Taxes after an
assessment proceedings has been completed, the requirement of law is that the
Assessing Officer is required to pass a fresh assessment order in accordance
with the Advance Pricing Agreement.
9. According to the learned counsel for the petitioner, the original
assessment order was passed on 26.03.2022, the rectification order was passed
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on 03.09.2022 and the Advance Pricing Agreement was entered upon on
28.03.2023. Thus, in view of the said developments, the Assessing Officer is
required to pass a fresh assessment order computing the total income in the light
of the Advance Pricing Agreement.
10. It was also contended by the learned counsel for the petitioner that
pursuant to the Advance Pricing Agreement, dated 28.03.2022, the petitioner
had filed modified return on 16.06.2023. According to him, since they have
filed the modified return in terms of the Advance Pricing Agreement, the
original assessment order dated 26.03.2022 and the rectification order dated
03.09.2022 stands completely sub-planted and the Assessing Officer is required
to pass a fresh assessment order in terms of the Advance Pricing Agreement as
well as the modified return.
11. Learned Standing Counsel for the Income Tax Department, however,
opposed the writ petition and contended that since the petitioner had wrongly
availed the MAT Credit, the authorities have decided to revise the said order
and it was for this reason the impugned notice was issued. According to the
learned Standing Counsel for the Income Tax Department, there is an apparent
error in the rectification order granting MAT Credit so far as the transferee
entity M/s. United Health Group Information Services Pvt. Ltd., there was a
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case of loss of revenue, and because it was a case of loss of revenue, the order
granting MAT Credit firstly is erroneous and secondly is prejudicial to the
interest of the Revenue. Hence, the impugned notice under Section 263 of the
Act issued by respondent No.1 cannot be found fault with.
12. It was also the contention of the learned Standing Counsel for the Income
Tax Department that it is only a case of notice which has been issued. The
petitioner can still submit his response and based on his response, appropriate
order shall be passed by the Revisional Authority i.e. respondent No.1.
13. Lastly, it was contended by the learned Standing Counsel for the Income
Tax Department that the authorities had issued the show-cause notice on the
basis of an audit report and the objections raised in the audit report in respect of
granting of MAT Credit to the petitioner. On this count also the impugned
notice does not warrant interference and thus prayed for dismissal of the writ
petition.
14. From the factual matrix narrated in the preceding paragraphs, admittedly
the petitioner is a transferee entity from amalgamation proceedings, wherein
M/s. United Health Group Information Services Pvt. Ltd. got amalgamated with
the petitioner company. The original assessment order for the assessment year
2017-18 was passed on 26.03.2022, which further stood rectified on 03.09.2022.
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Subsequently, under Section 92CD (3) of the Act, a bilateral Advance Pricing
Agreement was entered on 28.03.2023 and, based on the said Advance Pricing
Agreement, a revised return was filed on 16.06.2023.
15. It would be relevant at this juncture to take note of the provisions of
Section 92CD (3) of the Act, which for ready reference is reproduced
hereunder:
“Effect to advance pricing agreement.
92CD. (1) Notwithstanding anything to the contrary contained in section
139, where any person has entered into an agreement and prior to the date
of entering into the agreement, any return of income has been furnished
under the provisions of section 139 for any assessment year relevant to a
previous year to which such agreement applies, such person shall furnish,
within a period of three months from the end of the month in which the
said agreement was entered into, a modified return in accordance with
and limited to the agreement.
(2) Save as otherwise provided in this section, all other provisions of this
Act shall apply accordingly as if the modified return is a return furnished
under section 139.
(3) If the assessment or reassessment proceedings for an assessment year
relevant to a previous year to which the agreement applies have been
completed before the expiry of period allowed for furnishing of modified
return under sub-section (1), the Assessing Officer shall, in a case where
modified return is filed in accordance with the provisions of sub-section
(1), pass an order modifying the total income of the relevant assessment
year determined in such assessment or reassessment, as the case may be,
having regard to and in accordance with the agreement.”
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16. A plain reading of the aforesaid statutory provision clearly gives an
indication of the fact that once a modified return as per the Advance Pricing
Agreement is filed, the said modified return has to be treated as the return filed
under Section 139 of the Act. Sub-Section (3) of Section 92CD also provides
for the steps to be taken by the Assessing Officer in the event of a modified
return having been filed. The reading of the aforesaid provision of law also
gives a clear indication of the fact that once the modified return is filed, the
earlier return filed, the earlier assessment order passed if any, will not be of
much relevance any further and it would lose its efficacy for all practical
purposes and a fresh assessment order is what is required to be passed and the
Assessing Officer would be at liberty to scrutinize the modified return
submitted and pass appropriate orders, which thereafter would be, either
appealable or revisable.
17. Whether the amalgamation proceedings and the order passed thereon
would have a binding effect or not, stands already settled, and the fact that it has
binding effect has been recently dealt with by the Madras High Court in the case
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of Ponni Sugars (Erode) Ltd. vs. Assistant Commissioner of Income-tax1
wherein in paragraph Nos.12, 15, 17 and 18, it has been held as under:
“12. The core issue involved in the present writ petitions is as to whether
the statement under Section 393 of the Companies Act, 1956 would form a
part of the Scheme of Arrangement and if so, whether the proceedings for
sanctioning of the Scheme under Sections 391 to 394 would be a
proceeding in rem?
15. The Calcutta High Court in Maan concast Pvt. Ltd. & anr. Vs West
Bengal Industrial Development Corporation Ltd. & Ors. Reported in
(2017) SCC Online Cal 19426 also took a similar view in the following
manner:-
“A transfer which takes place by operation of law, therefore,
need not meet the requirement of the provisions of the Transfer
of Property Act, 1882 or the Indian Registration Act, 1908.
J.K. (Bombay) Private Ltd. (supra) has held that, a scheme
under Sections 391 and 392 of the Companies Act, 1956
framed by the Court in respect of a company, to pay of its
creditors, would be binding upon the creditors and the
shareholders of such company. It has held that, a scheme
sanctioned by the Court does not operate as a mere agreement
between the parties. It becomes binding on the company,
creditors and the shareholders and has statutory force.”
…….
“A scheme of amalgamation or arrangement documents the
compromise arrived at between the parties to the scheme inter
vivos. A scheme may be between two or more companies. It1
(2020) 16 ITR-OL 546
Page 9 of 11may also be between a company and its shareholders or
creditors. A proceeding for sanction of a scheme relating to a
company under the Companies Act, 1956 is a proceeding in
rem.”
17. In Dalmia Power Ltd. Vs Assistant Commissioner of Income Tax,
Circle-1, Trichy reported in (2019) 418 ITR 221 (Mad), the Hon’ble
Supreme Court had referred to one of its own decisions and held that such
Schemes sanctioned under the Companies Act has a statutory force and
the order is a judgment in rem. The relevant portion of the observation
reads as hereunder:-
4.6 Pursuant thereto, the Schemes were sanctioned by the
NCLT, Chennai vide Orders 16.10.2017, 20.10.2017,
26.10.2017, 28.12.2017, 10.01.2018, 20.04.2018 and
01.05.2018; and, vide Orders dated 18.05.2017 and
30.08.2017 by the NCLT, Guwahati. Accordingly, the Schemes
attaines statutory force J.K. (Bom.) (P.) Ltd. v. New Kaiser-
IHind Spg. & Wvg. Co. Ltd. [1970] 40 Comp. Cas. 689 not
only inter se the Transferor and Transferee Companies, but
also in rem, since there was no objection raised either by the
statutory authorities, the Department, or other regulators or
authorities, likely to be affected by the Schemes.
18. On a comprehensive enumeration of the aforesaid judicial precedents,
it can be summarised and held that the order sanctioning a Scheme of
Arrangement pursuant to Sections 391 to 394 of the Companies Act will
have a statutory force, binding on all concerned and the sanction of the
Court would operate as a judgment in rem.”
18. The fact that the scheme of amalgamation having a binding effect and
upon reading the provisions of Section 92CD, we are of the considered opinion
that the impugned notice dated 14.10.2024, at this juncture was un-called for.
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19. It is also necessary to visualize at this juncture that if the impugned show-
cause notice is permitted to be proceeded and the rectified order dated
03.09.2022 is found to be erroneous, it would not be of much consequence for
the reason of the subsequent developments that have transpired i.e. the Advance
Pricing Agreement being entered on 28.03.2023 and the modified return
submitted on 16.06.2023. If we permit the show-cause notice to continue, as of
now, then the Advance Pricing Agreement and the subsequent submission of
modified return would become inconsequential. On the other hand, now that the
Advance Pricing Agreement has been entered into and the modified return
having been submitted, nothing prevents the Assessing Officer from re-
scrutinizing the modified return treating it to be the return filed under Section
139 of the Act and pass appropriate fresh assessment order which may also be
inclusive of the contents of the show-cause notice which is now under challenge
in the instant writ petition.
20. For the given facts and circumstances of the case, we are of the
considered opinion that the impugned show-cause notice is not sustainable and
the same deserves to be and is accordingly set aside / quashed. The instant Writ
Petition accordingly stands allowed. Consequently, Writ Petition No.32633 of
2024 also stands allowed.
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21. As a sequel, miscellaneous petitions pending if any, shall stand closed.
However, there shall be no order as to costs.
________________
P.SAM KOSHY, J
_______________________________
NARSING RAO NANDIKONDA, J
Date: 19.06.2025
GSD