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Corporate Tax Planning

Notes The department held the view that the amalgamation was just an exercise to avoid capital
gains tax and, therefore, any scheme that is opposed to the public interest cannot receive
legal recognition. Further, the I-T department had told the AAR that the latter should not
make any decision until the high court decides on the application for amalgamation fi led
by the group. The I-T department had proposed to intervene in this application and present
its case of adverse revenue implications in the event of the approval of the scheme.
The AAR, however, observed that since the amalgamation includes taking over all assets
and liabilities, which also included tax recoverable, tax avoidance cannot be seen as the
objective of the Star Group. Besides, the department is proposing to intervene in the
matter in the high court, it is free to request for appropriate direction for recovery of the
IT arrears.
Questions:
1. Study and analyse the case.

2. Write down the case facts.
3. What do you infer from it about taxation amalgamation?
Source: http://articles.economictimes.indiatimes.com/2010-01-28/news/28434312_1_aar-capital-gains-tax-tax-authorities

13.4 Summary

Corporate restructuring is the process of rearrangement of business activities and has
become the buzzword to cope with the fierce competitive environment prevailing all

throughout the globe in the era of globalisation and liberalisation.
Corporate restructuring is the process of redesigning one or more aspects of a company.
The process of reorganising a company may be implemented due to a number of different
factors, such as positioning the company to be more competitive, survive a currently
adverse economic climate, or poise the corporation to move in an entirely new direction.
Here are some examples of why corporate restructuring may take place and what it can
mean for the company.
Corporate restructuring may take place as a result of the acquisition of the company by
new owners. The acquisition may be in the form of a leveraged buyout, a hostile takeover,
or a merger of some type that keeps the company intact as a subsidiary of the controlling
corporation. When the restructuring is due to a hostile takeover, corporate raiders often
implement a dismantling of the company, selling off properties and other assets in order
to make a profit from the buyout. What remains after this restructuring may be a smaller

entity that can continue to function, albeit not at the level possible before the takeover took
place.

Amalgamation is a restructuring phenomenon in which two or more companies are
liquidated and a new company is formed to acquire business. In simpler terms, it means
that a new company is formed that buys the business of minimum two companies. The new
company or the acquiring company is known as the amalgamated company. It acquires
the assets and liabilities of the other companies known as amalgamating companies.
Commonly, such companies are also referred as target companies or merging companies.

The conditions to be fulfilled in merger includes: all the properties of the amalgamating
company or companies immediately before the amalgamation, become the properties
of the amalgamated company by virtue of the amalgamation; All the liabilities of the
amalgamating company or companies immediately before the amalgamation, become the
liabilities of the amalgamated company by virtue of the amalgamation; and Shareholders
holding not less than 75% in value of the shares in the amalgamating company or companies

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