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TMI Blog2010 (10) TMI 846X X X X Extracts X X X X X X X X Extracts X X X X ..... circumstances of the case, the Tribunal was right in law in holding that the applicant was not entitled to set off of the brought forward losses of the State Bank of Jaipur?" 2. Factual matrix of case is that prior to 1st January, 1963 assessee Bank was named as State Bank of Bikaner only. This Bank acquired assets and liabilities of State Bank of Jaipur under Section 38(2) of the State Bank of India (Subsidiary Banks) Act, 1959 vide order dated 18th December, 1962 passed by Government of India, Ministry of Finance, Department of Economic Affairs. Assessee claimed set off regarding carried forward losses in respect of business of State Bank of Jaipur which merged with it under Section 38 of the Act of 1959. It was claimed by assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Jaipur for assessment year 1963-64. It was argued that ITAT has erred in law in holding that law of inheritance is applicable only to living person and not to jurisdictional person and therefore, the claim has wrongly been rejected. Learned counsel referred to provisions contained in Section 2(31) of the Act of 1961 to argue that person for the purpose of Act of 1961 would be a legal person, which would include a Company, it being a juridical person, what is barred in Section 78(2) of the Act of 1961 to be carried forward and set off against income is the loss incurred by otherwise by any inheritance. In other words, loss derived by inheritance would be open to be carried forward and set off against income. Learned counsel further argued ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1. Mysore Minerals Ltd. v. CIT [1999] 239 ITR 775 (SC). 2. Bajaj Tempo Ltd. v. CIT [1992] 196 ITR 188 (SC). 3. K.P. Varghese v. ITO [1981] 131 ITR 597 (SC). 4. CIT v. J.H. Gotla [1985] 156 ITR 323 (SC). 5. Per contra, Ms. Parnitoo Jain, learned counsel appearing for revenue, has argued that ITAT as well as CIT (Appeals) and Assessing Officer were completely justified in disallowing benefit of carrying forward losses under Section 78(2) of the Act of 1961 because it was not at all the case of assessee that merger of two companies where losses of State Bank of Jaipur, which was merged with State Bank of Bikaner, could not be allowed to be carried forward because latter company with which former is merg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... siness or profession has been succeeded in such capacity by another person otherwise than by inheritance, nothing in this Chapter shall entitle any person other than the person incurring the loss to have it carried forward and set off against his income." 8. Reading of above provision would show that if a person has derived loss by way of inheritance, i.e., when a person carrying on any business or profession has been succeeded in such capacity by another person otherwise than by inheritance, he would then be entitled to have such losses carried forward and set off against his income, what is to be seen is whether losses of merged company with another can be said to have derived by latter by way of inheritance. In other words, the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar benefit was claimed by assessee under Section 78(2). It was held that successor company was not entitled to carry forward or set off loss or unabsorbed depreciation incurred by its predecessor, as it is not a case of succession by inheritance. The principle is that the successor in business must be treated as if it had commenced or set up a new business. Kamataka High Court in aforesaid case relied on judgment of Privy Council in case of Indian Iron and Steel Co. Ltd. v. CIT [1943] 11 ITR 328, wherein judicial committee of Privy Council observed that where there is amalgamation of two companies, the unabsorbed depreciation allowance of one company could not be carried forward by successor company and set off against such successor's prof ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rofit or loss from a business of wife or minor children, included in total income of assessee, should be treated as profit or loss from a business carried on by him for the purpose of carry forward and set off loss under Section 24(2). 13. In view of above discussion, it must be held that provisions under Section 78(2) of the Act do not entitle the assessee to carry forward and set off losses of State Bank of Jaipur because requisite precondition that succeeding company should have derived such losses by way of inheritance has not been fulfilled and for that limited purpose, two companies shall have to be treated two different persons and not same person. Even if in law a company is treated as jurisdictional person, nevertheless, fo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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