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TMI Blog1988 (3) TMI 91X X X X Extracts X X X X X X X X Extracts X X X X ..... 's claim of terminal allowance, in the following manner:— "(v) The assessee has written off the old machineries worth Rs. 6,11,000 this year as per the lists 'A' 'B' submitted by the assessee. These machineries include following:— (a) Machineries of old Farmsons Pharmaceuticals Rs. 80,037.10 (b) Machineries of Ugachem Rs. 2,82,348.65 (c) Preoperative expenses on installation of Ugachem Mach. Rs. 2,49,037.44 These assets were taken over at WDV by the amalgamated company from amalgamating companies and, therefore, the whole scheme of writing it off immediately after amalgamation is an attempt to save taxes by claiming more than the allowable normal depreciation in one year. The depreciation already allowed on these machineries written off was Rs. 4,11,200. The difference of Rs. 1,99,800 was claimed as terminal depreciation. For allowability of terminal depreciation certain conditions are laid down in s. 32(1)(iii) of the IT Act. Firstly, it is allowable only if the assets are sold, discarded, demolished or destroyed in the previous year. Secondly, the scrap value of such discarded assets is to be determined, so that the deficien ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on, he stated that the assessee is engaged in the manufacture of fine chemicals, particularly, Paracetamol. Due to corrosion, various plant and machineries have become useless and worthless and, therefore, the assessee had discarded the same. In support of his submission, he referred to pages 223 to 235 of his Paper Book containing certificate of Shri Sayed Moinuddin, a Technical Expert certifying that the plant and machineries mentioned in the said certificate have become useless and worthless. He, therefore, advised the assessee not to use them in the Plant for the purpose of production of goods. The details of plant and machineries written off during the relevant previous year, working of the terminal allowance of the plant and machineries written off, journal entries passed in the books in respect of writing off of plant and machineries, list of new plant and machineries purchased during the relevant previous year and details of sale of scrap over the years were given. He also highlighted the fact that whenever the scrap was sold, the income therefrom was invariably included in the total income of the assessee in the relevant years. He, therefore, strongly urged that the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m for deduction of Rs. 10,800 on the ground that the provisions of Payment of Bonus Act were not applicable to the employees drawing salary of more than Rs. 1,600 P.M. 11. In appeal, the Commissioner(A) confirmed the action of the ITO, in the following manner:— "30. Before me, the learned counsel, Shri J.P. Shah contended that the amount has been actually paid and if it is not allowable under s. 36, it should be allowed under s. 37 of the Act. I am afraid, this contention cannot be accepted. If any item of expenditure is covered by a particular section, then, it cannot be allowed by invoking the provisions of general section like 37. In the instant case, payment of bonus to employees getting more than Rs. 1,600 P.M. is not an admissible deduction under the law. Therefore, this payment cannot be allowed by resorting to the provisions of s. 37 of the Act. If that is done, it would amount defeating the very purpose of inserting a particular section in the Act to cover a particular situation. Therefore, the addition made by the ITO is confirmed." 12. The learned counsel for the assessee reiterated the submission which were made before the IT authorities and strongly urged that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see would be entitled to claim deduction of Rs. 10,800 under s. 37(1) of the Act. We would, therefore, direct the ITO to accept the assessee's claim for deduction of Rs. 10,800 and modify the assessment accordingly. 14. The only point involved in the appeal filed by the Revenue pertains to the treatment to be accorded to unabsorbed loss/depreciation of Ugachem Pvt. Ltd., earlier to Farmson Pharmaceuticals Gujarat Pvt. Ltd., amalgamated with it. It may be mentioned that Ugachem Pvt. Ltd., had unabsorbed loss of Rs. 17,581 and unabsorbed depreciation of Rs. 2,23,755 in respect of the asst. yr. 1976-77. Similarly, it had unabsorbed loss of Rs. 4,33,634 in respect of the asst. yr. 1977-78. The assessee claimed the carry forward and set off of unabsorbed loss/depreciation in the year under consideration. Referring to ss. 72A and 79 of the Act, the ITO came to the conclusion that the assessee would not be entitled to the carry forward and set off of unabsorbed loss/depreciation. The ITO took a novel point that since Ugachem Pvt. Ltd., has changed its name to Farmason Pharmaceutical Pvt. Ltd., within a short time of Farmson Pharmaceuticals Gujarat Pvt. Ltd., amalgamated with it, an alt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Gujarat Private Ltd., have been taken over M/s Ugachem Private Limited survives as it has taken over the assets and liabilities of M/s Farmson Pharmaceutical Gujarat Private Ltd., ceased to exist. The claim of set off of past losses is in respect of M/s. Ugachem Private Ltd. The appellant has asked for the set of past losses of M/s Ugachem Pvt. Ltd., and since M/s Ugachem Pvt. Ltd., survived after the amalgamation, I do not find any merit in the stand of the Department. After all, appellant is claiming for allowing set off of its own past losses and that too, in its own assessments and not in the assessment of third entity. 17. A stress has been laid on M/s Ugachem Private Ltd., changing its name to Farmson Pharmaceutical Pvt. Ltd., four months after the amalgamation. In my considered opinion, it is not material to decide the point. The change was requested 'for, four months after the amalgamation and it has been effected after getting prior approval of the Government of India as well as the Registrar of Companies. Even though the name had been changed, it is M/s. Ugachem Pvt. Ltd., which continued to do the business in the new name after passing of the Amalgamation order by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in the case of Wood Polymer Ltd., In re (1977) 109 ITR 177 (Guj) to urge that if there was an attempt on the part of the assessee to avoid/reduce any liability, the Hon'ble High Court would not have approved the amalgamation of M/s Farmson Pharmaceutical Gujarat Pvt. Ltd., as was done in that case. The learned counsel for the assessee also highlighted the fact that on amalgamation, the existence of Farmson Pharmaceutical Gujarat Pvt. Ltd., is eliminated as it amalgamated with Ugachem Pvt. Ltd. Since unabsorbed loss/depreciation was of Ugachem Pvt. Ltd., prior to the amalgamation, the Commissioner(A) was fully justified in accepting the assessee's stand in this regard. He, therefore, urged that we would uphold the order of the Commissioner(A) in this point. 18. On due consideration of the rival submissions of the parties as well as the material contained in the paper book to which our attention was drawn, we do not find any infirmity in the order of the Commissioner(A) accepting the assessee's claim as in our view the point at issue is fully covered in favour of the assessee by the aforesaid decision of the Hon'ble Gujarat High Court in the case of Shree Subhhalaxmi Mills Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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