5 At the outset, we may deal with the objections raised with reference to the provisions of the Income-tax Act. It is firstly to be noted that there is no prohibition contained in the Income-tax Act to a scheme such as the one proposed here. It is merely that if a scheme of arrangement, which is otherwise permissible both under the Companies Act and the Income-tax Act, does not amount to 'demerger' within the meaning of the Income-tax Act, it may have certain tax implications for the companies in question. There is a provision in the present scheme that the part of the scheme, namely, the demerger, has been drawn up to comply with the conditions relating to demerger as specified under Section 2(19AA) of the Income-tax Act 1961. The scheme at the same time makes it clear that if any terms or provisions of the scheme are inconsistent with the provisions of Section 2(19AA) of the Income-tax Act 1961, the provisions of Section 2(19AA) of the Income-tax Act shall prevail and the scheme shall stand modified to the extent, if necessary, to comply with Section 2(19AA). It is thus very clear that the framing of the scheme and the corresponding sanction by this Court do not in any way prejudice the application of Section 2(19AA) of the Income-tax Act 1961. In any event, by sanctioning the present scheme, this Court is not in any way accepting the company's case that the scheme, as framed, complies with the provisions of 'demerger' within the meaning of 2(19AA). In fact, this Court is inclined to clarify that the sanction of the scheme, as proposed by this Court, does not in any way bind the Income-tax Department to take any particular view of the scheme of arrangement sanctioned by this Court insofar as the tax implications of the transaction are concerned. In the face of this clarification, learned Counsel for Regional Director and Income-tax Department have no further objections to the scheme on the ground of non-compliance with the provisions of the Income-tax Act referred to above.
