How to claim TDS in case of merger

In a merger or amalgamation, the resulting (transferee) company is legally entitled to claim the Tax Deducted at Source (TDS) credit that pertains to the amalgamating (transferor) company. While the TDS may appear in the Form 26AS of the transferor company due to technical reasons, the law allows the transferee company to claim this credit.

Recommended Steps to Claim TDS Credit

To successfully claim the TDS credit in the books of the resulting company (Company Y), follow these steps:

1. Maintain Proper Documentation:

   • NCLT Order: Keep a certified copy of the National Company Law Tribunal (NCLT) order sanctioning the scheme of merger.

   • Board Resolutions: Maintain copies of board resolutions from both companies approving the merger.

   • ROC Filing: Keep acknowledgment of filings made with the Registrar of Companies (ROC).

   • Affidavit/CA Certificate: Prepare a certificate from a Chartered Accountant or an affidavit confirming that the income corresponding to the TDS has been included in the return of income of the successor company (Company Y) and that no duplicate claim has been made for the same.

2. Request Correction from Deductor:

   • Ideally, approach the deductors (e.g., your banks, vendors, or clients) and request them to file TDS correction statements to update the PAN from Company X (transferor) to Company Y (transferee).

3. Application to the Assessing Officer (AO):

   • If the deductor is unable or unwilling to revise their return, you may file a manual application to the Jurisdictional Assessing Officer of Company Y.

   • Submit a detailed letter accompanied by the merger documents, the TDS certificates (Form 16A) in the name of Company X, and proof that the corresponding income is reflected in the tax return of Company Y.

   • Request the AO to grant credit for the TDS paid under Company X's PAN based on the judicial principle that substance should prevail over form.

4. Online Grievance:

   • If the AO remains unresponsive, you can file an online grievance via the e-Nivaran section on the official Income Tax portal, attaching all supporting documentation to request an intervention or direction.

5. Legal Recourse:

   • In cases involving significant amounts where the AO refuses to grant credit despite sufficient evidence, courts have historically ruled in favor of the taxpayer, emphasizing that the successor company inherits the tax benefits and liabilities of the predecessor. You may file a writ petition in the High Court if necessary.

Summary

To claim TDS credit in the successor company (Company Y) after a merger, you must establish the legal succession through the NCLT order and provide evidence (via a CA certificate) that the corresponding income has been declared in your return. If the TDS does not reflect in your Form 26AS, request the deductor to file a correction or apply to your Assessing Officer with the supporting documentation to allow the credit manually.