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TMI Blog2019 (1) TMI 1599X X X X Extracts X X X X X X X X Extracts X X X X ..... umstances of the case, the Ld. CIT(A) has erred in law and on facts in deleting the addition of Rs. 22,95,000/- made on account of disallowance of sales promotion." 3. The fact in brief is that the assessee is engaged in the business of manufacturing and trading of pharmaceutical product. There was a search action carried out u/s. 132 of the act in the case of the assessee on 5.5.2008. Thereafter, the assessment u/s. 153A of the act was finalized on 30th December, 2009 and the assessing officer has allowed the assessee to set off of business losses of M/s Dolphin Laboratory Ltd. (the company which was amalgamated with the assessee company) to the extent of Rs. 43,49,59,470/-). The assessing officer has also allowed the set off of unabsorbed depreciation of Rs. 4,67,16,865/-. Subsequently, the CIT, Central Circle-2 Ahmedabad passed order u/s. 263 of the act on 26th March, 2012 and set aside the assessment to the file of assessing officer to verify the following points:- "While refraining the assessment order, the Assessing Officer will also consider the following points:- (i) On verification of the scheme of rehabilitation, it was noticed that the 'cut of date', the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ring dated 26.4.2007 as well as in Para 11.4 page 17 of the Scheme. Therefore it appears that there was a big gap in the figure of actual losses of Rs. 10.89 crores and estimated set off of carry forward losses and depreciation claimed to have been available to IPL. It appears from the records available with this office, that this aspect has not been verified by the then A.O. while passing, the order u/s 153A r.w.s. 143(3) of the Act. The A.O. should verify this point in re-assessment proceedings. (iv) Further, it was noticed that the important aspect of the scheme (before BIFR) pertains to income-tax is sub-para 5 ofPara!4page 26 on Relief and Concessions. It is noted that in 'other sub-paras of these section, specific directions have been given to Banks and other Govt. agencies for, compliance. Whereas in Para 5, the BIFR has issued directions 'to consider' applicability of provisions ofSec.41(l), carry forward and set off of unabsorbed losses and depreciation; condonation of delay in filling of audited accounts. The BIFR has not directed as to what is to be done except regarding waiver of interest on penalty of delayed payment of income-tax dues. It has only direc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ught forward loss of M/s. Dolphin Laboratory Ltd in return of assessment year 2006-07. The claim of such business loss amounting to Rs. 43,49,59,470/- was allowed by the assessing officer vide order u/s. 143(3)/153A dated 30th December, 2009. During the assessment, the assessee has explained that the benefits of set off of brought forward business loss and unabsorbed depreciation of M/s. Dolphin Pharmaceutical Ltd. was available to the assessee company as per the provisions of section 72A of the income tax act and as per the rehabilitation scheme of BIFR the Dolphin Laboratory Ltd. would be merged with the assessee company with its appointed date being 1st Jan, 2006 of assessment year 2006-07. The assessee claimed that the set off of losses and depreciation claimed by the assessee was as per the provision of section 72A of the act and it was also stated that the amalgamation was as per section 2(1B) of the income tax act. It was further stated that by the assessee that the accumulated losses and 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 ye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... heme from Central Government is from DIT(Recovery), Department of Income-tax, New Delhi and that DIT (Recovery) was part of the concessions and reliefs. The A.O. was of the view that therefore, the cut off date is the date for consideration of the reliefs and concessions as envisaged in section 72A. Accordingly, it is held by him that the assessee is not eligible for set off of brought forward losses of Dolphin Laboratories Ltd. in assessment year 2006-07. He has held that the unabsorbed, depreciation and losses of Dolphin Laboratories Ltd. is allowed to be carried forward in A.Y. 2007-08. Accordingly he has disallowed the claim of set off of unabsorbed depreciation and losses in A.Y. 2006-07. 10. As against this, the appellant has submitted that as per scheme of amalgamation, the appointed date which is 1-1-2006 is the date of amalgamation and that the amalgamation has to be considered as effective from that date. It is submitted that the cut off date as envisaged in the scheme is for the concerned agencies to consider the relief and concessions before such cut off date i.e. 30-9-2006 and to raised objections, if any, before such date. However, since date of amalgamation i.e., ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s incorrectly taken cut off of date of 30th Sep, 2006 which was pertaining to consideration of relief and concession of the scheme. He has further submitted that as per BIFR scheme of amalgamation the Dolphin Laboratory Ltd. was a sick company which was amalgamated with the assessee company and the date of merger was 01-01-2006 and it fall in assessment year 2006-07. He has also mentioned that as per the appointed date 01-01-2006, the ld. CIT(A) has correctly allowed the carry forward and set off loss as per provision of section 72A of the act on fulfillment of stipulated conditions of Rule 9C of the IT rule. 5. We have heard the rival contentions and perused the material on record carefully. In the assessment order u/s. 143(3) r.ws. 153A of the act, the assessing officer has allowed the claim of asssesse to set off of business losses of M/s. Dolphin Laboratory ( the company which was merged with the assessee company) to the extent of Rs. 43,49,59,470/-. Subsequently, vide order u/s. 143(3)/153A r.w.s. 263 passed on 28-01-2013 the assessing officer has disallowed the claim of the set off of business losses of Dolphin Laboratories Ltd. on the ground that cut off date for amalgamat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. However in the assessment order on 28-01-2013 u/s. 143(3)/153A/263 of the act the assessing officer has held that the cut off date was 30-09-2006 for considering various reliefs and concessions as mentioned in the order of DIT (Recovery) 28-04-2010 and the assessee was not eligible for the set off of the brought forward losses of Dolphin laboratories Ltd. in assessment year 2006- 07. The assessing officer has further held that total amount of Rs. 6,21,69,232/- as unabsorbed depreciation of Dolphin Laboratories Ltd and business loss of Rs. 40,07,36,522/- of Dolphin Laboratories is allowed to be carried forward in assessment year 2007-08. At the outset, we will discuss the nature of cut off date 30-09-2006. It is undisputed fact that it is the cut off date for consideration of following relief and concessions envisaged in the scheme:- "A) Secured creditors B) Unsecured creditors C) The company (Dolphin Laboratories Ltd.) D) New promoters workers & staff members of DLL. E) Central Govt. 1) Central Excise., Ahmedabad 2) D.G.F.T. Mumbai, Calcutta, Ahmedabad 3) Drug price equdiration cell, New Delhi 4) DGIT, New Delhi 5) DIT (Recovery), Department of Inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecured Loans 429.00 320.00 (OTS) Unsecured creditors 710.00 71.00 (OTS) Total Liabilities 1139.00 390.00 (OTS) "12. Rehablitation proposal through Merger The rehabilitation proposal submitted by DLL contemplates merger of DLL with IPL. DLL's performance over the years was not been satisfactory. DLL has been inclining operating losses and cash losses since 1997 mainly on account of gross under utilisation of installed manufacturing capacities. Since DLL is enviable on a stand-alone basis, it has been proposed to merge DLL with IPL. Any permanent employee of DLL, if found technically competent and suitable for the work culture of IPL and willing to join the employment of the IPL, shall become its employee' from the effective date of the merger without interruption in the services of such employees in any manner. As per the scheme of the merger, the DLL would be transferred to IPL (the Transferee company) and IPL would allot to the shareholders of DLL, preference shares in the ratio of one 5% redeemable preference share efface of value of Rs. 10/-each of the Transferee company (redeemable within 60 months from the date of the sanction of the scheme) for every 20 e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ditions mentioned in Rule 9C of the I.T. Rule. The assessee has also submitted complete information in Form No. 62. The assessing officer has not disputed the non-fulfillment of any conditions after verification of the Form No. 62 filed by the assesse. In the light of the above facts, we observe that the appointed date 01- 01-2006 is the date on which the assets and liabilities of the transferer company vest in transferee company. The assessee has made compliance to the conditions stipulated in Rule 9C of the I.T. Rule which is the requirement of section 72A of the act. After considering the above facts and circumstances, we are inclined with the decision of the ld. CIT(A) that the date of amalgamation is 01-01- 2006, therefore, the brought forward losses and the unabsorbed depreciation have been rightly set off in assessment year 2006-07. Accordingly this ground of appeal of the Revenue is dismissed. 6. The other ground of appeal of the revenue is pertained to deleting addition of Rs. 22,95.000/- on account of disallowance of sale promotion expenses by the ld. CIT(A). On this issue, we have heard both the sides and perused the material on record. It is noticed the aforesaid addi ..... 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