NCLT Oks Asian Granito Demerger Amidst ₹104Cr Tax Dispute

Regulatory Approval Paves Way for AGIL Restructuring

The National Company Law Tribunal (NCLT), Ahmedabad Bench, has given the green light to a Composite Scheme of Arrangement for Asian Granito India Limited (AGIL). This court-sanctioned plan facilitates the demerger of the tiles manufacturing undertaking of its subsidiary, Adicon Ceramica Tiles Pvt. Ltd., into another entity, Adicon Ceramics Limited. The approval is a significant step towards AGIL's strategic goals, including integrating manufacturing processes, expanding production lines, and widening market access.

Tax Department's Objections & NCLT's Stance

A notable point of contention during the NCLT proceedings was the opposition from the Income Tax Department. The department flagged outstanding Income Tax demands of ₹104.73 Crores against AGIL and contested that the proposed scheme was not tax-neutral, citing non-compliance with certain sections of the Income Tax Act, 1961. The Income Tax Department argued that the demerger would not qualify for tax benefits.

However, the NCLT overruled these objections for the purpose of approving the scheme. The tribunal stated that the provisions of the Income Tax Act are specific to that legislation and do not prevent the sanctioning of the corporate restructuring scheme. Importantly, the NCLT clarified that the Income Tax Department remains free to pursue necessary actions concerning any tax liabilities the company may have.

Strategic Rationale and Future Outlook

AGIL's stated rationale for this demerger includes achieving risk diversification for stakeholders and building a more sustainable and competitive business in the long run. The integration aims to unlock operational efficiencies and leverage a broader marketing network.

Key Risks for Investors

While the NCLT approval clears a major regulatory hurdle for AGIL's restructuring, the ongoing dispute with the Income Tax Department over a substantial sum of ₹104.73 Crores represents a significant financial risk. Although the NCLT has allowed the scheme to proceed, the company will still need to address these disputed tax liabilities. Investors will need to closely monitor the resolution of this tax matter, as it could impact the company's financial health and future profitability.