2022 (3) TMI 40 - HC - Income Tax

Carry forward losses under Section 72A - scheme under this Act an amalgamation of a sick industrial company with another company - HELD THAT - Issue decided in favour of assessee as relying on own case 2020 (2) TMI 96 - MADRAS HIGH COURT as held that the claim of the assessee is liable to be allowed in the light of the provisions of section 32(2) of the SICA and its interpretation by the Supreme Court 2021 (11) TMI 1026 - SC ORDER is thus, the correct one. - Decided in favour of assessee.

Summary

Issues:
Challenge to order of Income Tax Appellate Tribunal regarding carry forward losses under Section 72A of the Income Tax Act for the assessment year 2004-05.

Analysis:
The High Court admitted the tax case appeal based on the substantial question of law regarding the allowance of carry forward losses under Section 72A of the Act. The appellant argued that a previous judgment in a related case favored the assessee, emphasizing the provisions of the Sick Industrial Companies (Special Provisions) Act and the Income Tax Act. The judgment highlighted the importance of financial viability and public interest in amalgamations, as well as the role of the Board for Industrial and Financial Reconstruction (BIFR) in determining sickness or health of entities. The Supreme Court's interpretation of Section 72A emphasized the conditions for amalgamation and financial non-viability, linking them to the public interest and the BIFR's role in assessing such cases.

The judgment discussed the Commissioner of Income Tax's authority under Section 263 to revise assessments if found erroneous and prejudicial to revenue interests. It was noted that the assessing officer had followed the Supreme Court's dictum in a previous case, making the action not erroneous. The Court concluded that the CIT's action was contrary to the statute as both conditions under Section 263 were not concurrently satisfied. The appeal filed by the Revenue was dismissed, and the substantial question of law was answered in favor of the assessee.

The Court also mentioned the dismissal of a Special Leave Petition by the Supreme Court in a similar case, further supporting the decision in favor of the assessee. Consequently, the tax case appeal filed by the Revenue was dismissed, and no costs were awarded.