Marico group Investment Companies to merge with Marico Industries Limited.

4th November, 2003 Marico group Investment Companies to merge with Marico Industries Limited. In an innovative scheme of merger of Group Investment Companies a Promoters with Marico Industry Limited, the Promoter Group has tried to reduce its dividend tax liability. The Board of Directors of Marico Industries Limited approved a scheme of merger of Four companies belonging to the Promoter Group into the listed Marico Industries Limited Company. This is rather uncommon and normally not done as Promoter Group Companies are merging into one listed company. As is well known that dividend are exempted however at every distribution of dividend the dividend tax is payable by the Company distributing the dividend. So whenever Promoter Group Companies have a layer of investment Companies like company ‘A’ investing in company ‘B’ and company ‘B’ investing in company ‘C’ at every level on distribution of dividend additional tax is payable. Thus by merging these companies perhaps promoters direct or ultimate Promoter Group Companies will hold shares directly in the Marico Industries Limited which will reduce the dividend distribution tax burden of the entire group. However how much the more is beneficial to the publicly listed Marico Industries Limited remains to be seen.

Tricom India Limited demerges its Finance and Investment Division.

5th October, 2003, Mumbai. The Mumbai based Tricom India Limited(TIL) has demerged its Finance and Investment Division into a new Company known as Trio Mercantile and Trading Limited(TMTL).TIL has retained with itself the other business division of Business Process Outsourcing/IT enabled Services Division. The Mumbai High-Court has approved the Demerger and for every 100 Equity Shares held by a Shareholder in TIL, his shareholding has been reduced to 45 new Equity Shares of TIL(now containing onlt IT Division) and 55 new Equity Shares of TMTL will be issued to him. TIL's new Equity shares (45 for every 100) are expected to be listed on Bombay Stock Exchange anytime as Notice for Listing has already been issued by the Exchange about a fortnight back. TIL' total capital now will be around Rs. 4.5 Crores. The Company's customers are mainly from the US and some from Europe and other parts of the world. TIL's is expected to clock a Turnover of Rs. 12 to 14 Crores in the current year 2003-04 and corresponding profits.The Company's Executive Director is Mr. Chetan Kothari, a Chatered Accountant. Another wholetime-Director Mr. Jayant Tanksale is a veteran IT technologist, ex-TCS. TIL's additional facilities at andheri(East), Mumbai were recently inaugurated by Mr. F. C. Kohli of Tata Consultancy Services. TIL handles property Registration services of US Registrars, litigation and documentation support services,medical transcription, etc.

The Maharashtra Value Added Sales Tax Act, 2002 has introduced a unique Section relating to Amalgamation of Companies. The Section 47 relating to Amalgamation of Companies has been reproduced below: - Section 47 - Amalgamation of Companies:

(1) When two or more companies are to be amalgamated by the order of Court or of the Central Government and the order is to take effect from a date earlier to the date of the order and any two or more of such companies have sold or purchased any goods to or from each other in the period commencing on the date from which the order is to take effect and ending on the date of the order, then such transactions of sale and purchase shall be included in the turnovers of sale or purchase of the respective companies and shall be assessed to tax accordingly. (2) Notwithstanding anything contained in the said order, for all of the purposes of this Act, the said two or more companies shall be treated as distinct companies for all the periods up to the date of the said order and the registration certificates of the said companies shall be cancelled, where necessary, with effect from the date of the said order. (3) Words and expressions used in this section but not defined shall have the respective meanings assigned to them in the Companies Act, 1956 (1 of 1956). Readers will be aware that the Honorable Supreme Court in (Marshall Son’s & Co. (India) Limited v. Income tax Officer) [1997] 223 ITR 0809 has delivered a judgment on November 27, 1996.This amendment has the effect of overruling the ratio of the judgment in Marshall Son’s & Co. (India) Limited for the State of Maharashtra.In the said Judgement, the Honorable Supreme Court said that "the date of Amalgamation / date of transfer was the date specified in the scheme as the transfer date. In such a situation, it would not be reasonable to say that the Scheme of Amalgamation took effect on and from the date of the Order sanctioning the Scheme. The business carried on by the subsidiary Companies should continue to have been carried on for and on behalf of the Appellant Company. This was the necessary and the logical consequence of the Court sanctioning the Scheme of Amalgamation as presented to it. The Order of the Court sanctioning the scheme, the filing of the certified copies of the order of the Court before the Registrar of Companies, the allotment of Shares etc. might have all taken place subsequent to the date of Amalgamation /Transfer, yet the date of amalgamation in the circumstances of this case would be January, 1 1982." Thus, the transactions entered into after the effective date of Amalgamation but before the date of Court’s Order would have been treated as transactions of the Transferee Company pursuant to the above mentioned Supreme Court decision. However, now the proposed Section 47 as mentioned above provides that transactions of Sale and Purchase between two or more Companies which are being amalgamated, between the period commencing on the date from which the order is to take effect and ending on the date of Order shall be included in the turnovers of Sale or purchase of the respective Companies and shall be assessed to tax accordingly. Further section 47 sub section (2) provides that notwithstanding anything contained in the said Order, for all of the purposes of this Act, the said two or more Companies shall be treated as distinct Companies for all the periods up to the date of the said Order. Since the proposed section 47 refers to “Sale or Purchase of goods to or from each other" only such transactions will be treated as transactions of the respective Companies. However, for other Sales or purchase to or from outside parties will not be covered by Section 47 (1). However, section 47 sub section (2) is wide enough to cover even such transactions. Thus we will have a unique situation as follows:- 1) For Sales and Purchases made by the transferor Companies,in the ntervening period,within Maharashtra or from Maharashtra, the transactions of Sales and Purchases up to the date of the Order will be treated as transactions of respective companies. 2) Sales and Purchases made by the Transferor Companies, in the intervening period, in States other than Maharashtra, in the absence of any similar provision in the respective State Tax Act, will be treated as that of the Transferee Company. 3) For the purpose of Income Tax, TDS, and all other laws except Maharashtra Sales Tax Act, the ratio in Marshall Sons and Co. Ltd. will apply for Companies within Maharashtra as well as Companies outside Maharashtra. Author:- Shailesh Bathiya.