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TMI Blog2018 (2) TMI 50X X X X Extracts X X X X X X X X Extracts X X X X ..... EME Court) is squarely applicable and as per this judgment, the expenses relatable to increase in Share Capital are not allowable as revenue expenditure because the same are capital expenditure. - Decided against assessee. Invoking the provisions of section 79 - Held that:- We find that the AO has invoked the provisions of section 79 of the IT Act for the purpose of disallowing the set off of brought forward business loss and depreciation. In the facts of the present case as noted above, we find that more than 51% of shares, in fact, to the extent of 55.90% of the total shares, only two persons were holding those shares as on 31.03.2008 being the year in which loss was incurred and as on 31.03.2009 being the year in which the set off of brought forward depreciation is being claimed and hence, the claim of the assessee cannot be disallowed by invoking the provisions of section 79 of the IT Act. Therefore, on this issue, we decide the issue in favour of the assessee. Denial of carry forward of unabsorbed depreciation loss u/s. 72A on the ground that the amalgamating company, M/s. Banashankari Medical Oncology Research Centre Limited (BMORCL) is not an industrial undertaking as per th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sly erred in denying carry forward of business losses of previous years of ₹ 2,00,60,988/- by invoking the provisions of section 79 of the Income Tax Act, 1961, on the ground that 51% voting power in the appellant company as at 31 March 2009 was not held by persons holding 51% of the voting power in the years in which the losses were incurred; and 3. For these and other grounds that may be adduced at the time of hearing, the order of the Joint Commissioner of Income Tax, to the extent upheld by the CIT(A), may be set aside and this appeal be allowed." Grounds raised for Assessment Year 2010-11 in ITA No. 1901/Bang/2016 "1. The learned AO and CIT(A) have grievously erred in denying carry forward of unabsorbed depreciation loss of ₹ 3,70,22,124/- under section 72A of the Income Tax Act, 1961, on the ground that the amalgamating company, M/s Banashankari Medical Oncology Research Centre Limited is not an "industrial undertaking" as per the provisions of the said section. 2. For these and other grounds that may be adduced at the time of hearing, the order of the Additional Commissioner of Income Tax, Range 5, Bangalore, to the extent upheld by the CIT(A), may be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he hotel business, the assessee has availed the services of Control Risk Group, Singapore in order to carry out the due diligence and risk analysis of the target hotels. Under these facts, it was held by CIT (A) in that case that these expenses are incurred in the normal course of business and accordingly, are revenue in nature. Under these facts the Tribunal confirmed the order of CIT (A) in that case. In the present case, the facts are totally different. In the present case, due diligence was not carried out in regular course of business but it was carried out for the purpose of inviting investments from prospective investors. Hence in the present case, this Tribunal order is not applicable. 5. Regarding various other judgments on which reliance has been placed before CIT (A) as noted by CIT (A) in Para no. 4 of its order, it is seen that in none of these cases, the expenditure was in respect of inviting investment from prospective investors and therefore, these judgments are not applicable in the present case. Hence respectfully following this judgment of Hon'ble Apex Court rendered in the case of Brooke Bond India Ltd. vs. CIT (Supra), we decline to interfere in the order of C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be disallowed by invoking the provisions of section 79 of the IT Act. Therefore, on this issue, we decide the issue in favour of the assessee. This ground of the assessee is allowed. 8. In the result the appeal of the assessee for Assessment Year 2009-10 is partly allowed. 9. Now we take up the appeal of the assessee for Assessment Year 2010-11. The only issue involved in this year is regarding denial of carry forward of unabsorbed depreciation loss of ₹ 3,70,22,124/- u/s. 72A of the IT Act on the ground that the amalgamating company, M/s. Banashankari Medical Oncology Research Centre Limited (BMORCL) is not an industrial undertaking as per the provisions of the said section. Regarding this issue, it was submitted by ld. AR of assessee that in respect of the provisions of section 72A of the IT Act, clause (aa) of sub section 7 of section 72A is relevant which says that the company owning an industrial undertaking or a ship or a hotel with another company, then, notwithstanding anything contained in any other provision of this Act, the accumulated loss and the unabsorbed depreciation of the amalgamating company shall be deemed to be the loss or, as the case may be, allowanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the accumulated loss and the unabsorbed depreciation of the amalgamating company shall be deemed to be the loss or, as the case may be, allowance for unabsorbed depreciation of the amalgamated company for the previous year in which the amalgamation was effected, and other provisions of this Act relating to set off and carry forward of loss and allowance for depreciation shall apply accordingly. (7) For the purposes of this section,- (a) "accumulated loss" means so much of the loss of the predecessor firm or the proprietary concern or the private company or unlisted public company before conversion into limited liability partnership or the amalgamating company or the demerged company, as the case may be, under the head "Profits and gains of business or profession" (not being a loss sustained in a speculation business) which such predecessor firm or the proprietary concern or the company or amalgamating company or demerged company, would have been entitled to carry forward and set off under the provisions of section 72 if the reorganisation of business or conversion or amalgamation or demerger had not taken place; (aa) "industrial undertaking" means any undertaking which is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ivity of the said undertaking should be that of manufacturing or processing of goods. As per the judgment of Hon'ble Karnataka High Court rendered in respect of merger of M/s. Banashankari Medical and Oncology Research Centre Pvt. Ltd. with the assessee company available on pages 72 to 86 of paper book, it is noted in Para no. 2 of the judgment that this company M/s. Banashankari Medical and Oncology Research Centre Pvt. Ltd. is having main object to carry on the business of establishing developing, leasing, managing, operating and running of medical service centers such as nursing care homes, hospitals, polyclinics, health resorts, health clubs, in-patient and out-patient wards, laboratories, therapy units, theaters and allied consultation centers etc. amongst others. Now in the light of these facts, we examine the applicability of various judgments cited before us by ld. AR of assessee. 13. The first judgment cited before us is judgment of Hon'ble Apex Court rendered in the case of ITO vs. Arihant Tiles and Marbles P. Ltd. (supra). In that case, the assessee company was engaged in the business of manufacture/ production of polished slabs and tiles which the assessee exported ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a judgment of Hon'ble Madras High Court rendered in the case of CIT Vs. Commercial Laws of India (P.) Ltd. (supra). In that case, the assessee company was publisher of fortnightly journal and actual printing was done by a different concern and assessee was engaged in folding and stitching of printed sheets so as to be used as parts of journal which were later on dispatched to subscribers. Under these facts, it was held that the assessee was engaged in processing of goods. We have already seen that the only activity of the amalgamating company which can be equated with processing of goods is regarding its activity of laboratory but this is not a primary activity of the amalgamating company. Therefore it cannot be said that the amalgamating company is an industrial undertaking. 16. The next judgment cited before us is judgment of Hon'ble Gujarat High Court rendered in the case of CIT Vs. Suresh Amin Family Trust (supra). In that case, the assessee was engaged in a profession of pathological laboratory and under these facts, it was held that the assessee was carrying on a business as an industrial undertaking, which produced an article or thing and was thus entitled to investment al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as to whether the hospital can be considered as an industrial undertaking under clause (aa) of sub section 7 of section 72A of the IT Act. In that case, a scheme was approved to amalgamate M/s. Deccan Hospital Corporation Limited (in short 'DHCL'), running a Hospital at Jubilee Hills, Hyderabad with the assessee company i.e. Apollo Hospitals Enterprises Ltd. of Chennai and the issue in dispute was regarding the set off of unabsorbed depreciation of ₹ 11.60 crores on account of amalgamation of DHCL with Apollo Hospitals Enterprises Ltd. and it was held by Hon'ble Madras High Court that neither Apollo Hospitals Enterprises Ltd. nor DHCL are industrial undertaking within the meaning of section 72A of the IT Act and therefore, the set off of unabsorbed depreciation is not allowable. Respectfully following this judgment of Hon'ble Madras High Court, we decline to interfere in the order of CIT (A). Accordingly this ground is rejected. 20. In the result, the appeal filed by the assessee for Assessment Year 2010-11 is dismissed. 21. In the combined result, the assessee's appeal for Assessment Year 2009-10 is partly allowed whereas the appeal for Assessment Year 2010-11 is dismissed ..... X X X X Extracts X X X X X X X X Extracts X X X X
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