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TMI Blog2019 (2) TMI 1780X X X X Extracts X X X X X X X X Extracts X X X X ..... ficer is allowed the claim of carried forward of losses under section 72A, based on an incorrect assumption of facts is valid?" 3. An order of assessment was initially passed under section 143(3) of the Act on 22.08.2006. The Assessing Authority examined several issues arising out of the return of income filed by the assessee. One of the issues taken up for scrutiny related to a claim for set-off of carried forward loss of an amount of Rs. 128,19,50,761/-. The claim arose in the light of an order passed by the Board for Industrial and Financial Re-construction (in short 'BIFR') dated 22.10.2003 in Case No.407 of 2002 filed by M/s.Textool Company Limited (in short 'Textool'). 4. Textool had approached the BIFR seeking a scheme of re-construction of its business in pursuance of section 17(3) of the Sick Industrial Companies (Special Provisions) Act, 1985 (in short 'SICA'). A rehabilitation proposal had been prepared and submitted, that involved amalgamation of Textool with the assessee before us. The details of the scheme are adverted to only in so far as they relate to the issue raised for our resolution. The proposal included the vesting of two spinning u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... satisfaction of the conditions set out in the statutory provision was called for in such cincumstances. Thus, according to the assessee, it was entitled to the claim for carry forward of loss made in the return of income, simply by virtue of the scheme sanctioned by BIFR that took into account the provisions of sections 72 A as well. The assessee also relied on the judgment of the Supreme Court in the case of Indian Shaving Products Ltd. V. BIFR ((1996) 218 ITR 140). 7. The Assessing Authority was in agreement with the view taken by the assessee and allowed the claim. Though the allowance of the claim is not supported by any reasons set out in the order of assessment, the Officer does refer to the provisions of section 32(2) of the SICA and the judgment of the Supreme Court in Indian Shaving Products Ltd (supra). 8. Thereafter, the CIT, being of the view that there had been no application of mind by the Assessing Authority while allowing the assessees' claim and no reasons in support thereof, proposed a revision of the order of assessment and the allowance of the claim under section 263 of the Act. Despite objections put forth by the assessee, the assessment came to be revi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Shaving Products Ltd (supra). The Bench was considering an appeal against an order of the Appellate Authority for Industrial and Financial Reconstruction upholding an order of the BIFR refusing to grant the benefit of the provisions of Section 71 (a) of the Income Tax Act to the appellant upon amalgamation and sanction of a scheme by the BIFR. 14. After noting that that BIFR had been enacted in public interest, with a view to secure timely detection of sick and potentially sick companies owning industrial undertakings and to determine preventive, ameliorative, remedial and other measures required to be taken with respect to such companies, the Bench considered the various provisions of the SICA, in specific Section 32(2). 15. Reference is made to the judgement of the Supreme Court in the case of Commissioner of Income Tax and others vs. Mahindra and Mahindra and Others (144 ITR 225) that considered a challenge to Section 72 A. The following paragraph from the judgement in Mahindra's case has been particularly noted and extracted: 'Before undertaking a scrutiny of these reasons for ultimately deciding whether the impugned conclusion of the Specified Authority and the Central Go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the 'sickness' of such undertaking and obviously in the context of its revival by a sound undertaking the sickness must be of a temporary character and not any basic or permanent sickness. An undertaking which is basically or potentially non-viable will ordinarily be incapable of revival and would face a closure; in other words, the financial non-viability spoken of by the section must refer to sickness brought about by temporary adverse financial circumstances that disables the unit to stand and work on its own. This is also made clear by the provision contained in cl. (a) of sub-s. (1) which states that the financial non-viability of the amalgamating company has to be judged by reference to "its liabilities, losses and other relevant facts' . 16. The above judgment was rendered prior to coming into force of SICA in terms of which the BIFR was constituted, in an era when sanction was specifically required to be given by the Central Government upon recommendation of the Specific Officer thereunder. Thus, financial viability or otherwise, of the amalgamating company had to be determined first, in order to attract the provisions of Section 72A. However, after the enact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been met and the BIFR must exercise the power conferred upon it by Section 32 (2} of the said Act and make the declaration contemplated by Section 72A of the Income Tax Act, The conditions for sanctioning a scheme un - der Section 18 of the said Act being the same as those required for a declaration under Section 72A of the Income Tax Act, the BIFR could not have sanctioned the scheme of amalgamation of Sharp Edge with the appellant but declined to make the declaration under Section 72A of the Income Tax Act with regard to that amalgamation' (underlining for emphasis, ours) 18. Nothing further remains to be said in the light of the categoric conclusion of the Supreme Court emphasised above. The view taken by the Assessing Authority to the effect that the claim of the assessee is liable to be allowed in the light of the provisions of section 32(2) of the SICA and its interpretation by the Supreme Court is thus, the correct one. 19. The jurisdiction exercised by the CIT to cor ..... X X X X Extracts X X X X X X X X Extracts X X X X
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