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TMI Blog2022 (10) TMI 904X X X X Extracts X X X X X X X X Extracts X X X X ..... ilability of the provision of Section 72 and 74 of the said Act and thereby ignoring the provision under Sub Section (2) of Section 78 of the said Act. 3. For that the Learned CIT(A) erred in holding that the provision of Section 72 and 74 would come into play with respect to set off of such accumulated loss of amalgamating companies against respective incomes of the amalgamated company. 4. For that the Learned CIT(A) failed to appreciate the fact that the case relied upon is distinguishable both in fact as well as in law and the instant case of the assessee is identical to the decision of the Hon'ble Punjab and Haryana High Court in the case of Smt. Harjit Kaur and in the case of Eastern Dooars Tea Company Limited. 5. For that the Learned CIT(A)'s Order is ex-facie bad, illegal, perverse, arbitrary without considering the materials on record. 6. For that the Learned CIT(A) erred in holding that the assessee had duly discharged is burden of proving the genuineness of the loss and are not perverse since the document did not prove any materials to controvert the claim of the assessee. 3. Brief facts of the case are that assessee filed its return on 14.09.2011 reporti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) shall be deemed to be that of the transferee (amalgamated company) for all purposes including for the purpose of Income-tax Act. It was contended that the scheme is approved by the Hon'ble jurisdictional High Court of Calcutta and is binding under Article 227 of the Constitution. Accordingly, under the scheme, losses claimed by the assessee pertains to the amalgamated assessee company. 4.1. Attention in this regard was invited to the provisions of section 72 and 74 of the Act. In this respect reference was made to the judgment of Coordinate Bench of ITAT, Delhi in the case of Bharat Heavy Electricals Ltd. Vs. ITO 5 ITD 361 wherein it was observed that "The scheme, in regard to the carried forward unabsorbed losses and depreciation had been specifically mentioned in the Act. That scheme has nothing to do with a situation where by an order of the Government the losses of one unit are treated as the losses of other unit. What BHEL is claiming now is not carry forward of unabsorbed loss or depreciation. It is claiming its own losses which have to be determined with reference to the order of amalgamation particularly cl. 4. By virtue of cl. 4 the loss of BHEL is increased to the exte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me is not prejudicial to the interests of its members or to public interest. Hence the merger scheme approved by the Hon'ble High Court having in mind the larger public interest, cannot be disturbed by the revenue merely because the assessee is not entitled for benefits u/s 72A of the Act. The expression 'Public interest' was discussed by the Hon'ble Gujarat High Court in the case of Wood Polymer Ltd reported in 109 ITR 177 (Guj) wherein the Hon'ble Court refused to sanction the scheme of amalgamation formulated solely for the purpose of avoiding taxes. It was held that : "The court is charged with a duty, before it finally permits dissolution of the transferor company by dissolving it without winding up, to ascertain whether its affairs have been carried on, not only in a manner not prejudicial to its members but in even public interest. The expression "public interest" must take its colour and content from the context in which it is used. The context in which the expression "public interest" is used, enables the court to find out why the transferor company came into existence, for what purpose it was set up, who were its promoters, who were controlling it, what object was sough ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under:- Notice to be given to Central Government for applications under sections 391 and 394 - The court shall give notice of every application made to it under section 391 or 394 to the Central Government, and shall take into consideration the representations, if any, made to it by that Government before passing any order under any of these sections. Hence if there be any objections for the income tax department , they could raise the same at that stage i.e prior to sanction of scheme by the court. Once the scheme is approved, it implies that the same has been done after duly considering the representations from the Government / revenue. Similar view was expressed by the Co-ordinate bench of this Tribunal in the case of ITO vs Purbanchaal Power Co. Ltd in ITA No. 201/Kol/2010 dated 17.7.2014 wherein it was held that :- From the above provisions of section 394A of the Companies Act, 1956, legal position enunciated in the decisions of Hon'ble Gujarat High Court in the case of Wood Polymer Ltd ., in re and Bengal Hotels Pvt Ltd in re, supra and Vodafone Essar Gujarat Ltd., supra, evidently makes the purpose clear that if the revenue wants to object to the proposed scheme of ama ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... axman 89 (Bom) dated 19.3.2015 (underlining provided by us) 4.5.1. We also find that the Hon'ble Supreme Court in the case of J.K.(Bombay) (P) Ltd vs New Kaiser -I-Hind Spg.& Wvg.Co. reported in 1970 AIR 1041 (SC) dated 22.11.1968 had held : The Principle is that a scheme sanctioned by the court does not operate as a mere agreement between the parties ; it becomes binding on the company, the creditors and the shareholders and has statutory force , and therefore the joint-debtor could not invoke the principle of accord and satisfaction. By virtue of the provisions of sec. 391 of the Act, a scheme is statutorily binding even on creditors , and shareholders who dissented from or opposed to its being sanctioned. It has statutory force in that sense and therefore cannot be altered except with the sanction of the Court even if the shareholders and the creditors acquiesce in such alteration. (underlining provided by us) 4.5.2. We find that the aforesaid observations of the Hon'ble Supreme Court had been followed by the Hon'ble Bombay High Court in the case of Sadanand Varde and Others vs State of Maharashtra reported in 247 ITR 609 (Bom) wherein it was held that : "Once a scheme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... algamation , when the scheme was presented before the Hon'ble High Court for approval. Thus applying the principles of res judicata as explained by the Hon'ble Apex Court in the aforesaid case, the issue can be deemed to be heard and decided . Accordingly, the argument that the same cannot be agitated in appeal u/s 391(7) of the Companies Act, 1956 deserves attention and merit. The English Court of Chancery in case of Henderson vs Henderson reported in (1843-60) All ER Rep 378 while construing Explanation IV to Section 11 of Code of Civil Procedure quoted hereunder:- The plea of res judicata applies, except in special case (sic), not only to points upon which the Court was actually required by the parties to form an opinion and pronounce a Judgement, but to every point which properly belonged to the subject of litigation and which the parties, exercising reasonable diligence, might have brought forward at the time". 4.7. It would be relevant to note tha the scheme of amalgamation was approved on 6.10.2010 and intimation to this effect was sent by the assessee to the income tax department in January 2011 (copies of letters enclosed in pages 33 to 37 of paper book) . The same was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rlier, and did not come because they have accepted legality and validity of amalgamation". Applying the Doctrine of Acquiescence and Estoppel the Hon'ble Court held that "It appears to us all the appellants have accepted the scheme of amalgamation and now these companies against whom relief is sought for are no longer in existence and they cannot be reverted back to their earlier position as by this time third parties right have been created by reallocation or reallotment of shareholding for there may be fresh subscribing. In true sense there has been sea change in the shareholding pattern of these companies. Therefore we dismiss the appeal." 4.8. In view of the aforesaid observations and findings in the facts and circumstances of the case, we hold that the accumulated losses of amalgamating companies, comprising of unabsorbed short term capital loss of Rs 10,26,44,123/- ; unabsorbed long term capital loss of Rs 6,34,784/- and unabsorbed business loss of Rs 6,63,574/- , would belong to the amalgamated company pursuant to clause in para 10(iii) of the scheme of amalgamation which was approved by the Hon'ble Calcutta High Court vide order dated 6.10.2010. Since the losses belonge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... above confirmations, the Grounds No.1 and 2 raised by the appellant are allowed." Aggrieved, revenue is in appeal before the Tribunal. 6. Before us Ld. Counsel for the assessee Shri Ravi Tulsiyan, FCA represented the assessee and Shri P. P. Barman, Addl. CIT represented the department. 7. Before us, Ld. Sr. DR referred to the provisions of section 79 of the Act and submitted that there was change in the shareholding pattern of the assessee. He pointed out that assessee submitted that there was no change in management of the company which continued to remain with the same set of people and change in shareholding was only due to merger. Thus, on this, Ld. Sr. DR contended that Ld. AO has rightly disallowed the set of brought forward losses and carry forward for the balances. 8. Per contra, Ld. Counsel for the assessee submitted that the assessee is a NBFC and during the year under consideration by virtue of the order dated 06.10.2010 of the Hon'ble High Court at Calcutta, six companies were merged along with their respective unabsorbed business loss and capital loss with the assessee company, effective from 01.04.2010. The six companies which were merged into the assessee compan ..... X X X X Extracts X X X X X X X X Extracts X X X X
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