The Income-Tax department will have a say in mergers, demergers and amalgamations in 2006-07, with the Registrar of Companies (RoC) referring the first set of cases for clearance to the department.
The move follows a June 2006 Bombay High Court ruling, according to which, the Company Law Board can direct the RoC to get an I-T clearance before such deals are approved by the court.
Some of the cases referred include mergers, demergers and amalgamations of companies like Hindustan Lever (HLL), Indian Hotels Ltd, Hinduja Technology Media Telecom (HTMT) and Thomas Cook.
HTMT has demerged its IT/ITES undertaking into HTMT Technologies Ltd (HTMT Tech) and merged its media content subsidiary into HTMT.
Similarly, Indian Hotels Ltd has worked out a scheme of amalgamation between Indian Resort Hotels Ltd, Gateway Hotels, Gateway Resorts, Kuteeram Resorts and Taj Lands End, with Indian Hotels. Thomas Cook acquired Travel Corporation of India and forged an amalgamation with LKP Forex Ltd.
On the other hand, HLL demerged certain units to Hindustan Kwality Food and amalgamated Modern Food Industries and Modern Food and Nutrition Industries.
The need for Income-Tax clearance dates back to the controversial arrangements and amalgamation between Jindal Iron and Steel and Jindal Vijayanagar steel in 2004-05.
The income-tax department had objected to the merger and said Jindal Iron and Steel needed to pay Rs 62 crore as tax before the merger, prior to closure of the deal.
While the income-tax department lost the case in court, it made a strong pitch for the government to consider a move to make tax clearance mandatory for any mergers and amalgamation before a final approval from the concerned court.