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TMI Blog2015 (12) TMI 511X X X X Extracts X X X X X X X X Extracts X X X X ..... he Petitioner : Sh. Trandeep Singh, CA For the Respondent : Sh.Balwan Chauhan, Sr. DR ORDER PER PRASHANT MAHARISHI, A. M. 01. The present appeal filed by the revenue is directed against the order of learned CIT(A)-IX, New Delhi dated 30.09.2009 passed for the assessment year 2003-04. The revenue raised the following grounds of appeal: 1. On the facts and in the circumstances of the case, the ld CIT(A) has erred in holding that there was valid demerger u/s 2(19AA) of the Act. 2. On the facts and in the circumstances of the case, the ld CIT(A) has erred in holding that the assessee is to be allowed carry forward of loss and unabsorbed deprecation of ₹ 46,57,12,585/- 02. This company was incorporated on 26.12.2002 I under the name and style of Siel Sugar sugars Limited and subsequently the name of this assessee was changed w.e.f 16.06.2004 to Mawana Sugars Limited. The facts in brief of the case are that the assessee was engaged in the business of manufacture and sale of sugar. The assessee filed return of income on 24.10.2003 declaring loss of ₹ 26,79,18,903/-. The case was selected for scrutiny and processed u/s 143(1) on 19.02.2004. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essing officer did not raise any issue regarding quantification of the amount. Therefore the learned Commissioner of Income-tax (Appeals) allowed the carry forward of depreciation and business loss amounting to ₹ 46,57,12,585/-. Aggrieved the revenue is before us. 05. Ld DR submitted that AO has given a finding for not considering the scheme of arrangement of demerged company and result ting company as falling within the definition of demerger u/s 2(19AA0 of the income tax act and therefore no benefit of section 72A (4) can be given to the assessee. He relied on the order of AO for this. 06. Ld AR of the assessee submitted that CIT (A) has considered all the issue and held that assessee is entitled to the benefit of 72A(4) of the Act. He further submitted that in case of demerged company revenue has accepted the demerger u/s 2 (19AA) of the act and in case of resulting company , assessee revenue is pleading that it is not demerger. For supporting this he placed before the bench copy of the assessment order u/s 143(3) for AY 2003-04 in case of demerged Company where in it is held that transfer of assets to resulting companies falls under the category of demerger only hol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is clause, undertaking shall include any part of an undertaking, or a unit or division of an undertaking or a business activity taken as a whole, but does not include individual assets or liabilities or any combination thereof not constituting a business activity. Explanation - 2. For the purposes of this clause, the liabilities referred to in sub-clause (ii), shall include-- (a) the liabilities which arise out of the activities or operations of the undertaking ; (b) the specific loans or borrowings (including debentures) raised, incurred and utilised solely for the activities or operations of the undertaking ; and (c) in cases, other than those referred to in clause (a) or clause (b), so much of the amounts of general or multipurpose borrowings, if any, of the demerged company as stand in the same proportion which the value of the assets transferred in a demerger bears to the total value of the assets of such demerged company immediately before the demerger. Explanation - 3. For determining the value of the property referred to in sub-clause (iii), any change in the value of assets consequent to their revaluation shall be ignored. Explanation - 4. For the purpos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isions of section 72 if the reorganisation of business or amalgamation or demerger had not taken place; (b) unabsorbed depreciation means so much of the allowance for depreciation of the predecessor firm or the proprietary concern or the amalgamating company or the demerged company, as the case may be, which remains to be allowed and which would have been allowed to the predecessor firm or the proprietary concern or amalgamating company or demerged company, as the case may be, under the provisions of this Act, if the reorganization of business or amalgamation or demerger had not taken place. 08. Ld CIT (A) has dealt with all the issues raised by AO and has held that :- 7.7 . Position with regard to compliance of conditions of section 2(19AA) of the Act is discussed in the following paras :- i) The first condition as prescribed in section 2(19AA) of the Act is that all the property of the undertaking transferred by the demerged company becomes property of the resulting company. As per the SOA approved by Hon'ble High Court running business of two sugar undertakings have been transferred to the appellant company. It has been provided in clause (c) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 24.02 Cash credit/overdrafts 59.28 Loan from Fin. Institutions 96.75 TOTAL 180.05 Unsecured Loans: Deposits - others 1.12 Short term loans 1.43 TOTAL 2.55 It has been submitted that above figures given in the Balance Sheet as on 30.9.2002 fully tally with the figures given in Annexure II of the SOA which has been duly approved by the High Court of Delhi. Further, the Id. counsel has invited my attention to the Sub-clause (a) of Clause (v) of Part III of the SOA wherein it has been specifically provided that working capital facilities obtained from working capital providers for sugar units namely Mawana Sugar Works and Titawai Sugars Complex shall be allocated to the appellant company. Loans from banks and cash credits/overdrafts mentioned above aggregating ₹ 83.30 crore (24.02+ 59.28) are for working capital requirement as also mentioned in Ann ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e appearing in the books of demerged company. Accordingly, in my view the AO has also not pointed out any variation in the figures of assets liabilities of sugar undertakings mentioned in the books of demerged company and taken in the books of the appellant company. iv) The fourth condition provided in section 2(19AA) of the Act is to the effect that the resulting company issues shares to shareholders of demerged company on a proportionate basis. Though the AO has made a statement that demerger does not meet the requirement but no reasons for arriving at this conclusion has been given. According to the appellant, it was explained to the AO during the assessment proceedings that as per SOA, the company had to issue 3 shares for 4 shares held by a shareholder in demerged company. Total share capital of Siel Ltd. was ₹ 41.26 crore against the same the appellant has allotted share capital of ₹ 30.95 crore. Accordingly, condition regarding allotment of share capital has been strictly complied with. It has stated that SOA has been sanctioned by the Hon'ble High Court vide its order dated 26.8.03. The appointed date for the purpose of SOA has been 1.10.02. According ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r sub-section (5) of section 72A by the Central Government. Sub-section (5) provides that the Central Govt. may for the purpose of this Act, by notification in the official gazette specify such conditions, as if consider necessary to ensure that demerger is for genuine business purposes. So far no condition has been notified by the Central Govt. under this sub-section. Therefore, there is no question of non-compliance here. In any case, since the SOA has been approved by the Hon'ble Delhi High Court, no question can be raised regarding its genuineness. 7.8 The AO in the order has also made observation to the effect that the ratio in which the reserves have been transferred by the demerged company are at absolute variance with the ratio in which capital has been transferred. Further, she has observed that vide SOA immovable properties and investments have also been transferred to other companies namely Shivaji Marg properties and Siel Holdings Ltd. It has also been observed that lenders were also part of SOA. On the basis of these observations, she has stated that object of SOA was quite different. The appellant in this regard has submitted that these observations have no ..... X X X X Extracts X X X X X X X X Extracts X X X X
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