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TMI Blog1990 (9) TMI 1X X X X Extracts X X X X X X X X Extracts X X X X ..... algamation but the corporate entity of the transferor-company ceases to exist with effect from the date the amalgamation is made effective. We agree with the Tribunal's view that the amalgamating company ceased to exist in the eye of law and therefore, the appellant was not liable to pay tax on the amount of ₹ 58,735. Thus set aside the order of the High Court and answer the question in favour of the assessee and against the Revenue. - C.A. 91 OF 1976 - - - Dated:- 4-9-1990 - K. N. SINGH., KULDIP SINGH. and DR. T. KOCHU THOMMEN. JUDGMENT The judgment of the court was delivered by KULDIP SINGH J. -This appeal is directed against the judgment and order of the Punjab and Haryana High Court dated April 15, 1975 [CIT v. Sara ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gamated company. The Income-tax Officer disallowed the appellant's claim for exemption. The assessee filed an appeal before the Appellate Assistant Commissioner who confirmed the order of the Income-tax Officer. The assessee, thereafter, preferred an appeal before the Income-tax Appellate Tribunal. The Tribunal allowed the appeal on the construction of section 41(1) of the Act. The Tribunal held that, after the amalgamation of the Indian Sugar Company with the assessee-company, the identity of the amalgamating company was lost and it was no longer in existence and therefore, the assessee-company was a different entity not liable to tax on the aforesaid amount of Rs. 58,735. On the Department's application, the Tribunal referred the followin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 136 of the Constitution. This court granted leave. Hence this appeal. Section 41 ( 1 ) of the Act reads as follows: "41(1). Where an allowance or deduction has been made in the assessment for any year in respect of loss, expenditure or trading liability incurred by the assessee, and subsequently during any previous year the assessee has obtained, whether in cash or in any other manner whatsoever, any amount in respect of such loss or expenditure or some benefit in respect of such trading liability by way of remission or cessation thereof, the amount obtained by him or the value of benefit accruing to him, shall be deemed to be profits and gains of business or profession and accordingly chargeable to income-tax as the income of that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... recovered certain amounts towards sales tax from the assessee's husband succeeded in an appeal against its sales tax assessment and thereupon the firm refunded that amount to the assessee which was received during the relevant accounting period. A question arose as to whether the amount so received by the assessee could be assessed in her hands as a deemed profit under section 41(1) of the Act. This court held that section 41 did not apply because the assessee sought to be taxed was not the assessee as contemplated by section 41(1), as the husband of the assessee had died ; therefore, the Revenue could not take advantage of the provisions of section 41(1) of the Act. The question is whether, on the amalgamation of the Indian Sugar Compan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... new company, or by the transfer of one or more undertakings to an existing company. Strictly, "amalgamation" does not cover the mere acquisition by a company of the share capital of the other company which remains in existence and continues its undertaking but the context in which the term is used may show that it is intended to include such an acquisition. See Halsbury's Laws of England, 4th Edition, Volume 7, para 1539. Two companies may join to form new company, but there may be absorption or blending of one by the other and both amount to amalgamation. When two companies are merged and are so joined as to form a third company or one is absorbed into the other or blended with another, the amalgamating company loses its entity. In Gene ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decreed the landlord's suit. This court, in appeal, held that under the order of amalgamation made on the basis of the High Court's order, the transferor-company ceased to be in existence in the eye of law and it effaced itself for all practical purposes. This decision lays down that, after the amalgamation of the two companies, the transferor-company ceased to have any identity and the amalgamated company acquired a new status and it was not possible to treat the two companies as partners or jointly liable in respect of their liabilities and assets. In the instant case, the Tribunal rightly held that the appellant-company was a separate entity and a different assessee and, therefore, the allowance made to Indian Sugar Company which was a d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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