Ita/431/2012 Of The Commissioner Of Income-Tax v. M/S. Indus Fila Ltd

IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 18 DAY OF SEPTEMBER 2020. PRESENT THE HON’BLE MR. JUSTICE ALOK ARADHE AND| THE HON’BLE MR. JUSTICE H.T.NARENDRA PRASAD LT.A. NO.431 OF 2012 BETWEEN: 1.THE COMMISSIONER OF INCOME TAX. C.R. BUILDINGS, QUEENS ROAD| BANGALORE. 2 |THE DY. COMMISSIONER OF INCOME TAX. CIRCLE-11(4), C.R. BUILDINGS QUEENS ROAD, BANGALORE. ... APPELLANTS (BY Mr. K.V. ARAVIND, ADV.,) AND: M/S. INDUS FILA LTD.,NO.10/7, INDUSTRIAL SUBURBII STAGE, YESHWANTHPUR|BANGALORE-560027. .. RESPONDENT (BY Mr. S. PARTHASARATHI, ADV., A/W_ Ms. JINEETHA CHATTERJEE, ADV.,) THIS ITA IS FILED UNDER SECTION 260-A OF I.T. ACT,1961 ARISING OUT OF ORDER DATED 31.0/7.2017 PASSED IN [TANO.1193/BANG/2011 FOR THE ASSESSMENT YEAR 2008-09,|PRAYING THAT THIS HON'BLE COURT MAY BE PLEASED TO:(1) FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW.STATED THEREIN. (I) ALLOW THE APPEAL AND SET ASIDE THE ORDERS)PASSED BY ITAT, BANGALORE IN ITA NO.1193/BANG/2011 DATED|31-0/7-2012 CONFIRMING THE ORDER OF THE APPELLATECOMMISSIONER AND CONFIRM THE ORDER PASSED BY THE!ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-11(1),|BANGALORE, IN THE INTEREST OF JUSTICE AND EQUITY. THIS ITA COMING ON FOR FINAL HEARING, THIS DAY,ALOK ARADHE J.,DELIVERED THE FOLLOWING: JUDGMENT This appeal under Section 260A of the Income Tax|Act, 1961 (hereinafter referred to as the Act for short)has been preferred by the revenue. The subject matterof the appeal pertains to the Assessment year 2008-09.The appeal was admitted by a bench of this Court videorder dated 19.02.2013 on the following substantialquestion of law: (1)WhethertheAppellate|Authorities were correct in allowing set offof losses of amalgamating company (M/s.TulipApparel)against theprofitsofadSSCSSCEamalgamatedcompanyamounting to Rs.31.26 crores when theadSSCSSCEhas notsubstantiatedthegenuinenessDUSINCSS|PUFDOSEofamalgamation when the amalgamation was approved by the transferee company on31-01-2009 and the effect of amalgamationwas from 31-03-7008 and recorded aperverse finding? (il)WhethertheAppellate|Authorities were correct in holding that theset off of losses is permissible when boththe companies have claimed the set off ofsame losses in their respective returnsamounting to double claim of set off ofsame loss contrary to the provisions of theAct, and recorded an perverse finding?. (iii) Whether the Appellate Authorities.were correct in not examining the fact thatNo|returnWasrevisedaftertheamalgamation by clubbing the books ofaccounts, P & L account and the financialStatements and Form 627 wes not filed asreguired u/s. 72A of the Act, and recordeda perverse finding?.” 2 |Facts leading to filing of the appeal brieflystated are that assessee Is In the business” ofmanufacturing ready made garments. The assessee filed.the return of income on 31.03.7009 for Assessment Year 2008-09 declaring income as ‘NIL’ after setting off, ofloss of Rs.31,36,33,145/- in respect of M/s_ TulipApparels Private Limited, the amalgamating company. —The Assessing Officer by an order dated 21.12.2010inter alia did not accept the contention of the assesseethat effective date of amalgamation was 31.03.2008. Itwas further held that amalgamating company gotmerged with the assessee only after 06.02.2010 I.e., thedate on which the scheme of amalgamation wasapproved. The Assessing Officer therefore, disallowedtne claim of set off of loss of M/s Tulip Apparel PrivateLimited under Section 72(A) of the Act. Tne assesseefiled an appeal before the Commissioner of Income Tax(Appeals), who by an order dated 21.12.2010 inter alianeid that effective date of amalgamation is 31.03.2008and the addition made by the Assessing Officer wasdeleted. The appeal preferred by the assessee wasallowed. 3. The revenue thereupon filed an appeal before|the Income Tax Appellate Tribunal (hereinafter referredto as the Tribunal for short). The Tribunal by an orderdated 31.07.2012 inter alia held that amalgamationtakes effect from the appointed day as mentioned in thescheme of amalgamation. It was further held thatfinding of the Assessing Officer that scheme _ oamalgamation is a device to avoid taxes is without anybasis and is in the realm of surmises and conjectures. Itwas held that the amalgamation is deemed to have beeneffected on 31.03.2008 and therefore, the claim of theassessee for set off is required to be allowed.Accordingly, the appeal preferred by the revenue wasdismissed. In the aforesaid factual background, therevenue has preferred this appeal. 4Learned counsel for the revenue submittedthat In order to claim the benefit of Section /J2ZA of thAct, the conditions prescribed in Section 72A(2)(bD)(iii)have to be complied with and in the instant case, the assessee failed to comply with the aforesaid conditionsinasmuch as neither requirements contained in Rule 9Cof the Income Tax Rules were complied with nor FormNo.62 was submitted. It is also urged that as aconsequence of amalgamation, revised return ougnt tohave been filed and the only object of amalgamationwas to evade payment of tax. It is further submittedthat amalgamation of the companies was not forbusiness purposes. It is also submitted that neither theCommissioner of Income Tax (Appeals) nor the IncomeTax Appellate Tribunal has considered the issue whetheror not the assessee had complied with the requirements.of Rule 9C of the Rules, which is a mandatoryrequirement. In support of aforesaid contention, learnedcounsel for the revenue has placed reliance on divisionbench decision of this court In‘COMMISSIONER OFINCOME-TAX, BELGAUM VS. SADASHIVA SUGARSLTD.’,(2017)8OTAXMANN.COM35)(KARNATAKA). 5.|On the other hand, learned counsel for theassessee submitted that Commissioner of Income Tax(Appeals) as well as the Tribunal have concurrently heldthat the date of amalgamation is 31.03.2008. Attention.of this court has also been invited to minutes of meetingof Board of Directors dated 11.03.2008. It ts alsopointed|OUTthat|informationwithregard.tO|amalgamation was given to Bombay Stock ExchangeLimited as well as National Stock Excnange Limited on12.03.2008. It is also pointed out that the scheme.approved by this court mentions the appointed date as31.03.2008, which has to be accepted as date ofamalgamation. Learned counsel for the assessee hasalso referred to Section 230(5) of the Companies Act. Itis also argued that there is no non compliance withprovisions of Section 72A(2)(b)(iii) of the Act. In supportof aforesaid submissions, reliance has been placed ondecisions In|“ENGINEERING INDS, LTD. VS. DEPUTYCOMMISSIONER OF INCOME TAX’, (2013) 218 TAXMAN 0259 (KARNATAKA), "MARSHALL SONS &CO. (INDIA) LTD. VS INCOME TAX OFFICER‘,(1997)223ITTR08039,‘ORISSA MININGCORPORATIONLTD,VS,COMMISSTONER|OF|INCOME TAX’, (2007) 293 ITR 0502. 6.|We have considered the submissions madeby learned counsel for the parties and have perused therecord. Before proceeding further, it is apposite to takenote of relevant extract of the provisions viz., Section72A(1)(2) & (3), which read as under: Provisions relating to carry forwardand set off of accumulated /oss andunabsorbeddepreciationallowance In.amalgamation or qemerger, etc. 772A. (1) Where there has been anamalgamation of— (a ) a company owning an industrialundertaking or a ship or a notel witnanotner company; or. (b ) a banking company referred toin clause (c ) of section 5 of the Banking Regulation Act, 1949 (10 of 1949) 45 witha specified bank; or (c) oneOrmore|publicSeCcTOrcompany or companies engaged in thebusiness of operation of aircraft with one ormore public sector company or companiesengaged in similar business, Provisions relating to carry forwardand set off of accumulated /oss andunabsorbeddepreciationallowance In.amalgamation or qemerger, etc. 772A. (1) Where there has been anamalgamation of— (a ) a company owning an industrialundertaking or a ship or a notel witnanotner company; or. (b ) a banking company referred toin clause (c ) of section 5 of the Banking Regulation Act, 1949 (10 of 1949) 45 witha specified bank; or (c) oneOrmore|publicSeCcTOrcompany or companies engaged in thebusiness of operation of aircraft with one ormore public sector company or companiesengaged in similar business, then,notwithstandinganythingcontained in any other provision of this Act,the accumulated loss and the unabsorbeddepreciation of the amalgamating companyShall be deemed to be the /oss or, as thecase may be, allowance for unabsorbeddepreciation of the amalgamated companyfor.thepreviousYearIn|whichtheamalgamation was effected, and otherprovisions of this Act relating to set off andcarry forward of loss and allowance. fordepreciation shall apply accordingly. (2)NotwithstandinganythingcontainedIn|sub-section|(1),theaccumulated loss shall not be set off orcarriedforwerd|andtheunabsorbeddepreciation shall not be allowed in theassessment of the amalgamated company unless— (a ) the amalgamating company— (i) has.been|engagedIn|thebusiness, in which the accumulated lossoccurred|Ordepreciationremainsunabsorbed, for three or more years;| (ii) has held continuously as on the)date of the amalgamation at least three-fourths of the book value of fixed assetsheld by it two years prior to the date ofamalgamation; (b ) the amalgamated company—| (i) holds continuously for a minimum|period of five years from the date ofamalgamation at least three-fourths of thebook|value|OF|fixedassetsoftheamalgamatingcompanyacquiredIn|adscheme of amalgamation; (ii) continues the business of the)amalgamating company for a minimumperiod of five years from the date ofamalgamation; (iii) fulfils such other conditions as|may be prescribed 47 to ensure the revivalof the business of the amalgamating COM PallOrCO eChNSUrthat|theamalgamation is for genuine’ businessDUFDOSEe. (3) In a case where any of theconditions laid down in sub-section (2) arenot complied with, the set off of loss orallowance of depreciation made in anyprevious|YearIn|thehandsoftheamalgamated company shall be deemed tobe|theincomeoftheamalgamatedcompany chargeable to tax for the year inwhich such conditions are not compliedwith. J |Thus, from perusal of the aforesaid provision,it is axiomatic that in order to claim benefit of set off, ofaccumulated loss, the amalgamated company has tosatisfy the conditions laid down in /1A(2)(a)(b) and (c)..It is pertinent to note that Sub-Section (2) starts with anon obstante clause. In other words, it shall have effectnotwithstanding other provisions of the Act. Thus, thecompliance with the conditions prescribed in Section71A(2) of the Act is mandatory. However, it is pertinent to mention here that the Tribunal has not adverted to'the aforesaid aspect of the issue and has not satisfieditself whether the assessee has complied with theconditions laid down in Section 71A(2) of the Act is sinequa non, to enable the assessee to claim the benefit ofthe set off under Section 71A of the Act. Since, theaforesaid aspect requires factual adjudication, therefore,we deem it appropriate to remit the matter to theTribunal afresh for adjudication. In view of preceding analysis, it is not necessary toanswer the substantial questions of law framed by thiscourt. In the result, the order passed by the Income TaxAppellate Tribunal is hereby quashed and the matter isremitted to the Tribunal to decide the issue afresh in thelight of observations made in this order. ,,� �6�9/3�&3,549 �9/3�122314�0,�70,2:,37�:;�� ����������� �����������