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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 ..... LHI HIGH COURT] which deals with the similar issue present before us in the appeal. Considering the facts and circumstances of the present case which are similar to those dealt with by the Co-ordinate bench of ITAT, Kolkata and by the Hon ble Delhi High Court (supra) and the detailed findings given by the Ld. CIT(A), we do not find any reason to interfere with the order of the Ld. CIT(A) on this issue. Accordingly, we allow the adjustment of brought forward business loss against the current year s business income and also the set off of brought forward capital loss as claimed by the assessee. Thus, the grounds raised by the revenue are dismissed. Accordingly, the appeal of the revenue is dismissed. - ITA No.240/Kol/2022 - - - Dated:- 20-10-2022 - Shri Rajpal Yadav, Vice President And Shri Girish Agrawal, Accountant Member For the Appellant : Shri P. P. Barman, Addl. CIT For the Respondent : Shri Ravi Tulsiyan, FCA ORDER PER GIRISH AGRAWAL, ACCOUNTANT MEMBER: This appeal filed by the revenue is against the order of Ld. CIT(A)-21, Kolkata vide order No. ITBA/APL/S/250/2021- 22/1039861290(1) dated 17.02.2022 passed against the assessment order by DCIT, C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y forward of unabsorbed losses of Rs.42,98,533/- was made. Assessee had also claimed loss on sale of securities of Rs.2,57,986/- whereon at the time of holding these securities, earned exempt income in the form of dividend income. 3.1. On the above, Ld. AO required the assessee to explain why the brought forward losses under the two heads should not be disallowed in terms of provision of section 79 of the Act, since the beneficial ownership of 51% voting rights has changed with amalgamation taking effect from 01.04.2010 and also why the losses claimed to be carried forward in future year should not be disallowed as per section 79 of the Act. In this respect, assessee explained its case that if the management and control remains with the same group, section 79 is not applicable. He referred to the decision of Hon ble Delhi High Court in the case of CIT Vs. Select Holding Resorts Pvt. Ltd. (2013) 35 taxmann.com 368 (Del.) wherein it was held that where there was no change in management of company which continued to remain with same set of people and change in shareholding was only due to merger, carry forward losses of company could not be denied. However, Ld. AO proceeded to disa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the Companies Act especially s. 396 would not prevail over the provisions, of the Act. Whatever may be the other provisions with regard to the amalgamations under the Companies Act, the amalgamation ordered under s. 396 with a specific provision about the treatment of losses as in this case, the result would be that the order of amalgamation will have to be given effect to and, to that extent the provisions of the Act may be overridden. 4.2. It was also submitted that this identical issue was dealt by the Coordinate Bench of ITAT, Kolkata in assessee s own group company case in Electrocast Sales India Ltd. Vs. DCIT for AY 2011-12 in ITA No. 2145/Kol/2014 dated 09.03.2018 wherein also there was an amalgamation of six companies and the AO in his wisdom had not allowed the brought forward loss. Ld. CIT(A) gave finding by following the decision of the Co-ordinate Bench of ITAT, Kolkata in the case of Electrocast Sales India Ltd. (supra) and held that losses claimed by the assessee belong to the amalgamated assessee company for the purpose of the Act. Relevant extract from the order of Electrocast Sales India Ltd. (supra) of the said finding is reproduced hereunder: 4. We ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amalgamated, created for the sole purpose of facilitating transfer of capital asset through its medium, have not been carried on in a manner prejudicial to public interest. Public interest looms large in this background and the machinery of judicial process is sought to be utilized for defeating public interest and the court would not lend its assistance to defeat public interest. The court would, therefore, not sanction the scheme of amalgamation. Hence it could be safely inferred that the Court would exercise due diligence and would conduct detailed enquiries before sanctioning the scheme. A scheme formulated for the purposes of tax evasion cannot be held to be in public interest and hence the same cannot be sanctioned under the provisions of Companies Act, 1956. The fact that the Hon ble Calcutta High Court had accorded its sanction to the scheme of amalgamation in the assessee s case implies that the same had been done by considering representations from the various fields and by duly considering the tax evasion point for income tax purposes. In this regard, we would like to place reliance on the functions, powers and discretions of the court that had been noted by Shri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion to the scheme of amalgamation. In such circumstances , we are of the view that the revenue has nothing to say at the time of approval of the scheme by Hon ble High Court in the present case. 4.5. We find that the Hon ble Madras High Court in the case of Pentamedia Graphics Ltd vs ITO reported in 236 CTR 204 (Mad) had categorically held that once the scheme had been sanctioned with effect from a particular date by the Court, it is binding on everyone including the statutory authorities. It further held that having regard to the law declared by the Hon ble Apex Court as to the effect of the scheme sanctioned by the Court, the only course open to the revenue would be to act as per the scheme sanctioned effective from 1st Jan 2004, which means that the tax authorities are bound to take note of the state of affairs of the applicant as on 1st Jan 2004 and a return filed regarding the same cannot be ignored on the strength of section 139(5) of the IT Act. The merits or otherwise on the returns filed , however, is a matter of assessment for the authorities to consider and pass order in accordance with law. It was further held that when the claim of the assessee in the appeal had a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the view that the amalgamation, which has become final and binding, cannot be permitted to be challenged by the petitioners, without locus standi, in a collateral proceeding in the present writ petition. An amalgamation order can only be challenged under the Companies Act by an appeal under section 291(7) by any one of the parties, but no such appeal was ever filed. In the instant case before us, the ld AR informed that the Income Tax Department , which is part of Union of India, had not filed any appeal u/s 391(7) of the Companies Act, 1956 against the order of amalgamation sanctioned by the Hon ble High Court. This fact was not controverted by the ld DR before us. 4.6. The ld AR further argued that the scheme of amalgamation, as sanctioned by the Hon ble Calcutta High Court, was effective from 1.4.2010 and the parties had acted according to the said scheme and cannot be subjected to reversal after a period of 7 years by virtue of the principle of res judicata , constructive res judicata and acquiescence . In this regard, the ld AR placed reliance on the decision of Hon ble Supreme Court in the case of Forward Construction Co. and Others vs Prabhat Mandal reporte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cs in a manner inconsistent with their rights. As a result of acquiescence, the person whose rights are infringed may lose the ability to make a legal claim against the infringer, or may be unable to obtain an injunction against continued infringement. The doctrine infers a form of permission that results from silence or passiveness over an extended period of time. Applying this principle to the instant case before us, the assessee probably paid a consideration for the set off of accumulated losses taken over from the amalgamating companies and accordingly the share exchange ratio (as approved under the scheme) was acted upon assuming acceptance from the income tax department. Thus by applying the Doctrine of acquiescence, the department would be now barred from raising an objection to the scheme. Further a claim of estoppel arises when one party gives legal notice to a second party of a fact or claim, and the second party fails to challenge or refute that claim within a reasonable time. The second party may be said to have acquiesced to the claim, and thus to be estopped from later challenging it or making a counterclaim based upon the actions of the other party. In the instant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of amalgamation in respect of the assessee so also in view of the decision of the Co-ordinate Bench of ITAT, Kolkata in one of the assessee s own group companies i.e. Electrocast Sales India Ltd. (supra). The relevant extracts of the findings given by the Ld. CIT(A) in this respect are reproduced as under: The above discussions clearly bring out the fact that in view of the order of the Hon'ble Calcutta High Court, referred to above, approving the aforementioned scheme of amalgamation with regard to the present appellant, the present appellant would be entitled to carried forward established and admissible losses of the transferor companies to the appellant (transferee company) to the extent that they existed at the time of amalgamation - of course as declared before the Income Tax Department, and accepted by the latter as being correct at the time - to subsequent years for set off as per .the provisions of the Act. This scheme, as passed by the Hon'ble Calcutta High Court has been accepted by all parties involved, without challenge, either during the proceedings before the Hon'ble High Court or after that, for now more than ten years and therefore has statutory ef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the group companies of the assessee wherein also different set of six companies were merged vide the same order dated 06.10.2010 of the Hon ble High court of Calcutta by which the scheme of merger/amalgamation was approved. He also placed reliance on the decision of Hon ble High Court of Delhi in the case of CIT Vs. Select Holiday Resorts Pvt. Ltd. (supra). He submitted that carry forward losses cannot be denied on the ground of change in shareholding due to merger if management of the company continues to remain with the same set of people. He thus, submitted that Ld. CIT(A) has rightly concluded by allowing the appeal of the assessee on this issue. 9. We have heard the rival submissions and perused the material available on record. We note that the scheme of merger/amalgamation was approved by the Hon ble High Court of Calcutta vide its order dated 06.10.2010 by which the six companies along with their respective unabsorbed business loss and capital loss were allowed to be merged into the assessee company as referred in para 10(iii) of the said order. He also observed that Ld. CIT(A) has also exhaustively dealt with the aspect of binding nature of the order of Hon ble High cou ..... X X X X Extracts X X X X X X X X Extracts X X X X
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