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TMI Blog2010 (10) TMI 192X X X X Extracts X X X X X X X X Extracts X X X X ..... d scheme nugatory. Claim u/s 72A - the Tribunal was correct in law in holding that the sanctioned scheme shall be conclusive evidence of fulfilling of requirements regarding consent of the Central Government/Central Board of Direct Taxes Circular No. 683 dated June 8, 1994. - 277 (Cal) and 278/98 - - - Dated:- 5-10-2010 - KALYAN JYOTI SENGUPTA, KALIDAS MUKHERJEE, JJ. JUDGMENT K. J. Sengupta J.- The above matter arises out of the reference made by the learned Income-tax Appellate Tribunal, Calcutta basing on the statement of case which is as follows : The assessee/respondent J. K. Corporation is the company and was formerly known as Straw Products Ltd. (in short "SPL") and on change the present name is assumed with effect from June 17, 1994. 2. On or about January 25, 1994, one M/s. Orissa Synthetic Limited (in short "OSL") was declared a sick industrial undertaking and by an order of the company court this company was amalgamated with the then SPL being the present assessee with a new name. The assessee for the assessment year 1992-93 filed its returns of income on December 31, 1992, being the due date, declaring a total income of Rs. 23.58 crores. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 143(3) on March 31, 1995. 4. The Assessing Officer while passing assessment order disallowed the assessee's claim under section 72A for set off and carry forward of unabsorbed business loss, unabsorbed depreciation and unabsorbed investment allowance of M/s. OSL. 5. The reasons for disallowances are summarized as follows : (a) The first revised return filed on March 31, 1994, was beyond the stipulated time under section 139(1). In view of section 80 read with section 139 sub-section (3) of the said Act set off of loss cannot be allowed. (b) There was no declaration by the Central Government under section 72A(1). (c) The amalgamation cannot be made operative retrospectively with effect from February 1, 1992, when the order sanctioning the scheme itself was passed on January 25, 1994. (d) The business of the amalgamating company was not carried on by the amalgamated company during the relevant previous year i.e., during the period February 1, 1992 to March 31, 1992, hence the conditions under section 72A(2)(i) were not complied with. (e) Certificate under section 72A(2)(ii) was not filed along with the return. (f) Consent of the Central Govern ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the aforesaid disallowances. 11. In view of the aforesaid decisions of the first appellate authority partly in favour of the assessee/respondent and partly in favour of the Revenue both parties preferred appeal therefrom before the learned Tribunal. The learned Tribunal after having elaborate discussion granted all the reliefs to the assessee/respondent viz. the returns filed by the assessee claiming benefit of the said scheme for amalgamation framed by the BIFR was accepted and all the benefits in terms of the scheme of amalgamation have been held to be valid. The disallowance of the expenses as claimed by the assessee in its return were deleted meaning thereby the claim for deduction was allowed by the learned Tribunal. 12. On the aforesaid facts and circumstances of the case both the Revenue and the assessee-respondent filed two applications before the Tribunal. The said cases were registered as R. A. Nos. 277 and 278 (Cal) of 1998 in respect of two appeals being I. T. A. Nos. 1650 and 1755 (Cal) 1996 before the learned Tribunal respectively. 13. The learned Tribunal after hearing both the parties and considering the rival contention and taking note of the que ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claiming the loss was not beyond the time contemplated by the provision of section 139(3) and section 80 even when the Tribunal had found the revised return of loss to be valid in view of the assessee having been exempted from the application of the provision of sections 80 and 139 of the Income-tax Act, vide BIFR order dated March 17, 1994 ?" 14. Mr. Agarwal submits that the decision taken by the Assessing Officer is perfectly lawful and valid as the tax benefit of the scheme framed and sanctioned by the BIFR on January 25, 1994, cannot be given in relation to the assessment year 1992-93, meaning thereby retrospective operation in the matter of the exemption cannot be granted. According to him when the scheme is sanctioned the amalgamation and/or merger takes place on the date of passing of the order and the amalgamated company viz. the assessee herein can get the benefit in the matter of exemption on and from that date only when it is passed though the scheme provides for retrospective operation, but retrospective operation is meant for other purpose not for exemption. Factually, the assessee-company did not carry on business for the period of qualifying years as required ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also referred to a decision of the Supreme Court in case of Tayabbhai M. Bagasarwalla v. Hind Rubber Industries P. Ltd. reported in [1997] 3 SCC 443, on the question that once an order passed by the statutory authority cannot be indirectly or directly held to be void until and unless the appropriate authority in appropriate proceedings declares it so. 21. He further submits that by virtue of section 32 the provision of the SICA the schemes made thereunder has overriding effect on all laws except the Foreign Exchange Regulation Act, the Urban Land (Ceiling and Regulation) Act, 1973 or in the memorandum and articles of association of industrial company or in any other instrument having effect by virtue of any law other than this Act. Therefore, he contends that both the Assessing Officer and the first appellate authority formed an erroneous opinion about the applicability of the said scheme. 22. He also submits that in view of the provisions under sections 18, 32(2) the BIFR cannot sanction any scheme without declaring carry forward of loss and unabsorbed depreciation. So, in this context, he has drawn our attention to a Supreme Court judgment in the case of Indian Shavin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gamation of- (i) the sick industrial company with any other company, or (ii) any other company with the sick industrial company ; (hereafter in this section, in the case of sub-clause (i), the other company, and in case of sub-clause (ii), the sick industrial company, referred to as `transferee company')." 29. In case of amalgamation, the Board is to take step as follows : 30. Under sub-section (3)(a) the scheme prepared by the operating agency shall be examined by the Board and a copy of the scheme with modification, if any, made by the Board shall be sent, in draft, to the sick industrial company and the operating agency, and in the case of amalgamation, also to any other company concerned, and the Board shall publish or cause to be published the draft scheme in brief in such daily newspapers as the Board may consider necessary, for suggestions and objections, if any, within such period as the Board may specify. 31. Under section 18, sub-section (3)(b) it provides that the Board may make such modifications, if any, in the draft scheme as it may consider necessary in the light of the suggestions and objections received from the sick industrial company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... schemes made thereunder shall have effect notwithstanding anything inconsistent therewith contained in any other law except the provisions of the Foreign Exchange Regulation Act, 1973 (46 of 1973) and the Urban Land (Ceiling and Regulation) Act, 1976 (33 of 1976) for the time being in force or in the memorandum or articles of association of an industrial company or in any other instrument having effect by virtue of any law other than this Act." 37. Section 32, sub-section (2), specifically provides as follows : "(2) Where there has been under any scheme under this Act an amalgamation of a sick industrial company with another company, the provisions of section 72A of the Income-tax Act, 1961 (43 of 1961), shall, subject to the modifications that the power of the Central Government under that section may be exercised by the Board without any recommendation by the specified authority referred to in that section, apply in relation to such amalgamation as they apply in relation to the amalgamation of a company owning an industrial undertaking with another company." 38. Section 18 sub-section (7) and also sub-section (8) provide as follows : "(7) The sanction accorded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been empowered to give consent as is required to be done under the provisions of section 72A of the Income-tax Act, 1961. Under the aforesaid sub-section all the powers of the Central Government can be exercised by the Board without any interference or intervention of the authority referred to therein. Therefore, in this case, the Board really acts on behalf of the Central Government and when the Board is satisfied that all the conditions are fulfilled for giving consent for taking rehabilitation measures by way of amalgamation separate consent by notification by the Central Board of Direct Taxes is not required. 42. We could find this legal position from the decision of the Supreme Court in case of Indian Shaving Products Ltd. v. Board for Industrial and Financial Reconstruction reported in [1996] 218 ITR 140. In paragraph 28 of page 148 of the report Justice Bharucha for the Bench spoke legal position in this context as follows (headnote) : "By reason of section 32(2) of the said Act, where there has been under any scheme there under an amalgamation of a sick industrial company with another company, the provisions of section 72A of the Income-tax Act shall apply in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . It is appropriate to quote the relevant portion of the judgment as follows (headnote) : "Every scheme of amalgamation of companies has necessarily to provide a date with effect from which the amalgamation/transfer shall take place. It is true that while sanctioning the scheme, it is open to the company court to modify the said date and prescribe such date of amalgamation/transfer as it thinks appropriate in the facts and circum-stances of the case. If the court so specifies a date, such date would be the date of amalgamation/date of transfer. But where the court does not prescribe any specific date but merely sanctions the scheme presented to it, the date of amalgamation/date of transfer is the date specified in the scheme as `the transfer date'. It cannot be otherwise." 49. Hence, the income-tax authority has no competence to read the scheme differently as far as date of effect is concerned for any purpose. 50. Under those circumstances, we, therefore, are of the view that while answering question (A), that the Tribunal was correct in law in holding that the sanctioned scheme shall be conclusive evidence of fulfilling of requirements regarding consent of the Cen ..... X X X X Extracts X X X X X X X X Extracts X X X X
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