2012 (11) TMI 180 - AT - Income Tax

Amalgamation - carry forward and set off of business loss/unabsorbed depreciation relating to earlier assessment years alleged that sole idea of amalgamation was not the revival of the amalgamating company but was only to take the benefit of carry forward losses - returned income was shown Nil by the assessee company after setting off brought forward losses - A.O. held that such business loss was not eligible for carry forward and set off in subsequent years as the revised return i.e. return for merged entity was filed beyond the statutory limit, hence, violation of provisions of section 80 of the Act. Held that - Assessee cannot be expected to do an impossible thing i.e. filing of return of amalgamated entity before it is coming into legal existence and, therefore, such return should relate back to the original returns filed by these companies individually. It is not in dispute that original returns have been filed within the time specified u/s 139(1) - there is no default of provisions of section 80 as held by the Assessing Officer - Once the scheme of amalgamation had been sanctioned with effect from a particular date, it is binding on every one including the statutory authorities and the only course open to the Revenue would be to act as per the scheme sanctioned, the tax authorities are bound to take note of the state of affairs of the applicant as on the effective date i.e. Ist Jan 2004 and a revised return filed reflecting the same cannot be ignored on the strength of s. 139(5) - appeals of the Revenue are dismissed-

Summary

Issues:
Appeal by revenue against CIT(A)'s decision on carry forward of business loss/unabsorbed depreciation due to amalgamation.

Analysis:
The Appellate Tribunal ITAT, Indore heard the revenue's appeals against the CIT(A)'s orders allowing the assessee company to carry forward and set off business loss/unabsorbed depreciation from earlier assessment years post-amalgamation. The revenue contended that the amalgamation was not for the revival of the amalgamating company but solely for the benefit of carry forward losses. The Tribunal considered the submissions and referred to a previous order in the case of the assessee, where the issue was discussed. The Tribunal reproduced relevant portions of the previous order, highlighting the details of the assessment, amalgamation, and the eligibility for set off of losses. The CIT(A) had allowed the carry forward and set off of losses, emphasizing the confusion regarding the company's name and the eligibility for set off based on assessments up to a certain year.

The Revenue appealed, arguing that the amalgamation was approved after the filing of separate returns by the entities, and there was no violation of provisions. The Revenue also contended that the amended provisions of section 72 eliminated the requirement of the same business's existence for set off of carried forward losses. The Tribunal considered the submissions, records, and lower authorities' orders. It noted that the returns were filed within the specified time, and the consolidated return of the amalgamated entity was filed post the amalgamation's approval by the High Courts. The Tribunal held that there was no default in provisions, and section 72A did not apply to the brought forward losses of the amalgamated company. The Tribunal upheld the CIT(A)'s decision, dismissing the Revenue's appeal.

The Tribunal juxtaposed the observations, conclusions, and submissions, emphasizing the High Courts' approval of the amalgamation scheme. Referring to a decision by the Madras High Court, the Tribunal highlighted that once the amalgamation scheme is sanctioned, it binds all parties, including tax authorities. The Tribunal found no infirmity in the CIT(A)'s order, affirming it. Ultimately, both appeals by the Revenue were dismissed by the Tribunal. The judgment was pronounced in open court in the presence of representatives from both sides.