1983 (5) TMI 49 - AT - Income Tax

Summary

Issues:
1. Validity of additional tax levy under section 104 of the Income-tax Act, 1961 on a company post-amalgamation.
2. Applicability of the amended provisions of section 104 to the amalgamated company for the assessment year in question.

Detailed Analysis:

Issue 1:
The judgment involves the appeal against the levy of additional tax under section 104 of the Income-tax Act, 1961 on a company post-amalgamation. The Tribunal considered the case where two companies, Orkay Silk Mills (P.) Ltd. and Orkay Knitting Industries (P.) Ltd., amalgamated with the latter going out of existence. The Income Tax Officer (ITO) levied additional tax on the amalgamating company for not distributing the distributable surplus as required under section 104. The Commissioner (Appeals) initially ruled in favor of the amalgamating company, which was upheld by the Tribunal. However, the ITO initiated proceedings against the amalgamated company, leading to an appeal before the Tribunal. The main argument raised was that the liability under section 104 did not exist at the time of amalgamation and that the amended provisions did not apply. The Tribunal rejected this argument, stating that the liability arose out of a statute and if legally sustainable for the amalgamating company, the amalgamated company was fully liable, irrespective of the timing of the amalgamation.

Issue 2:
The second issue revolved around the applicability of the amended provisions of section 104 to the amalgamated company for the assessment year in question. The Tribunal considered the timing of the amalgamation and the effective date of the amendment to section 104. The assessee argued that since the accounting period of both companies ended before the amendment came into force, the amended provisions should not apply. Citing the Calcutta High Court decision in the case of Bombay Photo Stores (P.) Ltd., the Tribunal agreed with the assessee, stating that the amended provisions did not apply to the case at hand. The Tribunal emphasized the importance of following established legal precedents, especially in the absence of contrary decisions from other High Courts. Consequently, the Tribunal allowed the appeal filed by the assessee based on the non-applicability of the amended provisions of section 104 to the assessment year in question.

In conclusion, the Tribunal allowed the appeal, ruling in favor of the assessee based on the non-applicability of the amended provisions of section 104 and the liability of the amalgamated company post-amalgamation.