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2012 (11) TMI 543 - AT - Income TaxSet off of Losses in case of Amalgamation Following the decision of Supreme Court in the case of Marshall Sons & co. (India) Ltd. v. ITO 1996 (11) TMI 6 - SUPREME COURT Held that - Amalgamation takes effect on the date of transfer specified in the scheme and not on the date of court s order. The court further held that the income of the transferor company from the date of transfer would be the income of transferee company. Assessing Officer expressing doubts regarding the scheme of amalgamation being a device to avoid taxes are all without any basis and are in the realm of suspicion and surmises. With regard to the non-filing of revised return of income, provisions of section 72A are applicable, notwithstanding anything contained in other provisions of the Act and the set off of accumulated losses and unabsorbed depreciation of the amalgamating company is deemed to be the loss or unabsorbed depreciation of the amalgamated company for the previous year in which the amalgamation has taken effect. In the present case, amalgamation is deemed to have been effected on 31.03.2008 and consequently the claim of the assessee for set off had to be allowed. The objections of the revenue as projected in the grounds of appeal in this regard therefore are devoid of any merit. The fact that TAPL filed the return of income for A.Y. 2008-09 is also of no consequence - Order of the ld. CIT(A) does not call for any interference - appeal by the revenue is dismissed.
Issues:
- Allowance of set off of loss of amalgamating company against profits of appellant amalgamated company - Justification of amalgamation for optimum utilization and expansion of business operations - Disallowance of set off by Assessing Officer as a colorable device to avoid taxes - Validity of the claim for set off under section 72A of the Act - Questioning of scheme of amalgamation by Assessing Officer - Applicability of Supreme Court decision on amalgamation date Analysis: The case involved an appeal by the revenue against the order of the CIT(Appeals)-I, Bangalore regarding the allowance of set off of the loss of an amalgamating company against the profits of the appellant amalgamated company for the assessment year 2008-09. The amalgamation was proposed between the two companies to achieve optimal utilization of resources and expansion of business operations. The Assessing Officer disallowed the set off, alleging it was a colorable device to avoid taxes, questioning the validity of the amalgamation scheme, and the appointed date for amalgamation. The AO raised concerns about the amalgamation process and the timing of decisions related to it. The CIT(Appeals) upheld the claim for set off, citing the provisions of section 72A of the Act and highlighting the timeline and steps taken for amalgamation. The CIT(Appeals) emphasized that the scheme of amalgamation was duly sanctioned by the High Court and took effect from the appointed date as per the scheme. The Tribunal considered the Supreme Court decision on amalgamation dates and held that the amalgamation took effect from the appointed date specified in the scheme sanctioned by the High Court. The Tribunal found that the AO's doubts regarding the scheme being a tax avoidance device were baseless and upheld the CIT(Appeals) order, dismissing the revenue's appeal. The Tribunal concluded that the claim for set off was valid under section 72A, and the objections raised by the revenue lacked merit.
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