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TMI Blog2020 (11) TMI 229X X X X Extracts X X X X X X X X Extracts X X X X ..... , which travelled up to the Hon'ble Division Bench of this Court [ 2019 (2) TMI 1780 - MADRAS HIGH COURT ] and the appeal filed by the Revenue was dismissed. This judgment was followed by the Hon'ble Division Bench of this Court in the assessee's own case for the Assessment Year 2005-06 [ 2020 (2) TMI 96 - MADRAS HIGH COURT ] wherein held 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. Jurisdiction exercised by the CIT to correct the alleged error in assessment was in terms of section 263 of the Act. Section 263 empowers the Commissioner of Income tax to revise an order of assessment if the order in question is erroneous and prejudicial to the interests of the revenue, both conditions to be satisfied concurrently. The jurisdiction exercised by the CIT to correct the alleged error in assessment was in terms of section 263 of the Act. Section 263 empowers the Commissioner of Income tax to revise an order of assessment if the order in question is erroneous and prejudicial to the inte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arlier Assessment Year, which travelled up to the Hon'ble Division Bench of this Court in the case of The Commissioner of Income Tax-II Vs. Lakshmi Machine Works Limited in T.C.A.No.747 of 2009 dated 13.02.2019 and the appeal filed by the Revenue was dismissed. This judgment was followed by the Hon'ble Division Bench of this Court in the assessee's own case for the Assessment Year 2005-06 in T.C.A.No.1199 of 2010, wherein there is a reference to the judgment dated 13.02.2019 in T.C.A.No.747 of 2009. For better appreciation, we quote the judgment in T.C.A.No.747 of 2009 as hereunder: The Commissioner of Income Tax (II) (in short 'CIT') is aggrieved with an order of the Income Tax Appellate Tribunal (in short 'Tribunal') dated 08.08.2008 allowing the appeal filed by the assessee challenging an order passed under section 263 of the Income Tax Act, 1961 (in short 'Act') dated 15.04.2008. 2. The following substantial question of law has been raised and admitted for our adjudication: 'Whether on the facts and in the circumstances of the case the Income Tax Appellate Tribunal was right in law in quashing the order passed under section 263 of the Inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TCL with LMW or with its wholly owned subsidiary or subsidiaries in existence or to be formed, at the option of LMW. The merger Scheme (copy placed at Appendix I) would be operative from April 1, 2003 (the appointed date) and shall be effective from effective date . 7.0 RELIEFS AND CONCESSIONS DIRECTORATE OF INCOME TAX (RECOVERY) To consider extending tax benefits under sections 72 A of the Income Tax Act on account of carry forward losses of TCL to the merged company.' 5. Now coming to the scrutiny assessment proceedings, in considering the claim of the assessee for carry forward of loss and unabsorbed depreciation, the Assessing Authority had called upon the assessee to produce various particulars. A questionnaire under section 142(1) accompanied with a notice under section 143(2) of the Act dated 09.06.2006 was issued calling upon the assessee to show compliance with the conditions laid down under section 72A. 6. In reply, the assessee, vide communication dated 29.05.2006, referred to the scheme dated 22.10.2003 sanctioned by the BIFR under the SICA in the case of Textool, pointing out that the provisions of section 72A have been referred to by the BIFR and no separate sati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lowing the claim of the assessee for carry forward of loss was confirmed. It is as against the aforesaid order that the revenue is in appeal before us. 11. We have heard learned counsel and the detailed rival submissions advanced. 12. The SICA is a special enactment, the purpose of which is rehabilitation and revival of sick industries. The provisions of section 32(2) thereof read as under: '32. Effect of the Act on other laws.- (2)Where there has been under any scheme under this Act an amalgamation of a sick industrial company with another company, the provisions of Section 72- A of the Income Tax Act, 1961 (43 of 1961), shall, subject to the modifications that the power of the Central Government under that section may be exercised by the Board without any recommendation, by the specified authority referred to in that section, apply in relation to such amalgamation as they apply in relation to the amalgamation of a company owning an industrial undertaking with another company.' 13. The provisions of Section 32(2) of the SICA as well as 72A of the Act and the interplay thereof came to be considered by the Supreme Court in the case of Indian Shaving Products Ltd (supra). The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Government from social costs in terms of loss of production and unemployment. With such objective in view, in order to facilitate the merger of sick industrial units with sound ones and as and by way of offering an incentive in that behalf s. 72A was introduced in the Act where under by a deeming fiction the accumulated loss or unabsorbed depreciation of the amalgamating company is treated to be a loss or, as the case may be, allowance for depreciation of the amalgamated company in the previous year in which the amalgamation was effected; but the amalgamated company, although a successor in interest, would be entitled to carry forward and set-off the accumulated loss and unabsorbed depreciation of the amalgamating company only where the amalgamating company was not, immediately before such amalgamation, financially viable and the amalgamation was in public interest. The expression financial non- viability had not been defined in the Act but the Finance Minister's speech, the notes on Clauses of the Bill and the Memorandum explaining the provisions thereof make it clear that the financial non- viability of an undertaking has been equated with the 'sickness' of such un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Section 32(2) of the said Act, where there has been under any scheme thereunder an amalgamation of a sick industrial company with another company, the provisions of Section 72A of the Income Tax Act shall apply in relation to such amalgamation, subject to this modification that the power of the Central Government is to be exercised by the BIFR without the necessity of a recommendation by the specified authority mentioned in Section 72A of the Income Tax Act. This is because, for the purposes of according sanction to a scheme of amalgamation of a sick industrial undertaking with any other company under Section 18 of the said Act, the BIFR has to be satisfied that the amalgamating company is not financially viable, which is the effect of Section 3(o) of the said Act, and that the amalgamation is necessary or expedient in the public interest, which is the effect of Sections 17 and 18 of the said Act read together. Sanction of a scheme of amalgamation under S ection 18 o f the said Act necessarily implies that the requirements of S ection 72A o f the Income Tax Act have been met and the BIFR must exercise the power conferred upon it by Section 3 2 ( 2} of the said Act and make the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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