9911796707
TMI Blog1983 (5) TMI 49X X X X Extracts X X X X X X X X Extracts X X X X ..... s approved by the Bombay High Court by their order, dated 16-10-1975, in the Company Petition No. 308 of 1975. The amalgamation was effective with effect from 1-7-1975 subject to the terms of the order of the High Court according to the scheme of amalgamation attached to the order. In spite of the amalgamation with effect from 1-7-1975 whereunder the Orkay Knitting Industries (P.) Ltd. went out of existence on its merger with the present assessee, the Orkay Knitting Industries (P.) Ltd., filed its return of income for the assessment year 1976-77. The income-tax assessment with reference to this return was completed by the ITO on 31-3-1977. The ITO found that the Orkay Knitting Industries (P.) Ltd. had a distributable surplus of Rs. 4,31,820 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cted to the order of the ITO in appeal before the Commissioner (Appeals) on various grounds. One of the principal objections was that on the date of the amalgamation, i.e., 1-7-1975, the assessee was not liable for the declaration of the dividends out of the profits of Orkay Knitting Industries (P.) Ltd., as required under section 104. Nor was Orkay Knitting Industries (P.) Ltd., liable to declare any dividends as required by section 104 on the date of amalgamation, The Commissioner (Appeals) rejected this plea observing that it was not denied by the assessee that the amalgamated company had taken over all the assets and liabilities of the amalgamating company. There was no denying of the fact that there was a liability under section 104 in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt assessment year was the year ended 30-6-1975. It was an admitted fact that both the companies were industrial companies. Being industrial companies, under the provisions of section 104 as they were before their amendment by the Taxation Laws (Amendment) Act, 1975, both the companies were exempt from the operation of section 104. By section 27 of the Taxation Laws (Amendment) Act, 1975, the exemption in favour of industrial companies was removed and section 104(4) exempted only a company which was neither an Indian company nor a company which had made the prescribed arrangements for the declaration and payments of dividends within India. By Notification No. SO 475(E), dated 5-9-1975, issued by the Central Government in exercise of the pow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issued by the Court on 16-10-1975, the assessee was not liable for any such liability. Further, it is submitted on behalf of the assessee that the profits of the amalgamating company in the previous year were not the profits of the assessee for the previous year. They continued to be the profits of a separate entity in the preceding year. Therefore, the assessee could not be held responsible under section 104 in respect of the profits of a separate entity. 6. We have carefully considered the facts and circumstances of the case and the arguments. The assessee, viz., the Orkay Silk Mills (P.) Ltd., and Orkay Knitting Industries (P.) Ltd. were amalgamated with effect from 1-7-1975 by the High Court' order dated 16-10-1975. The accounting pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aving come to an end on 30-6-1975, section 104, which was amended with effect from 1-4-1976 in consequence of the Government notification dated 5-9-1975, did not apply to the assessee for the year under consideration. This argument of the assessee is based on the Calcutta High Court decision in the case of Bombay Photo Stores (P.) Ltd. The facts of that case show that the assessment year involved was 1960-61 for which that the assessee's previous year ended on 30-6-1959. The income-tax authorities sought to apply the provisions of section 23A of the Indian Income-tax Act, 1922, corresponding to section 104 of the 1961 Act, as amended with effect from 1-4-1960 for levying additional taxes in respect of the undistributed profits. The Calcutta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o contrary decision of any other High Court on the subject. In the circumstances, we are inclined to hold that, following the Calcutta High Court decision in the case of Bombay Photo Stores (P.) Ltd., the provisions of section 104 as amended by the Taxation Laws (Amendment) Act, 1975, which took effect from 1-4-1976, did not apply to the facts of the case. The question whether the provisions of section 104 applied to the assessee's case will have to be considered in the light of the law before its amendment, according to which the assessee and both the amalgamating companies being industrial companies, they were not exposed to the action under section 104. 8. In the result, the appeal filed by the assessee is allowed. - - TaxTMI - TMIT ..... X X X X Extracts X X X X X X X X Extracts X X X X
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