The Assessing Officer has denied our section 72A set-off in the very first year after the merger because we have not yet reached fifty per cent of installed capacity and have not filed Form No. 62. Can he do that before the four years are up?
No. The Tribunal held that Rule 9C(a) requires the fifty per cent production level to be achieved before the END of four years from the date of amalgamation, so it may be achieved in the first, second, third or fourth year, and the Assessing Officer of an earlier year is not required — and by implication not entitled — to examine that condition at that stage. The Form No. 62 certificate under Rule 9C(b) is due for the first time only for the assessment year relevant to the previous year in which the prescribed production level is achieved, so a demand for it before that is premature. Separately, the Tribunal held that the three-fourths of book value test in section 72A(2)(b)(i) is applied qua the particular amalgamating company whose loss is being claimed, and that where two companies amalgamate in the same year the disposals of the second company's assets cannot be aggregated with the first's.
Decided by the ITAT (Shri R.S. Syal, Accountant Member and Shri Sanjay Garg, Judicial Member (Income Tax Appellate Tribunal, Mumbai Benches "J", Mumbai)) on 2013-02-13, reported as ITA Nos. 6666 & 6667/Mum/2009 (ITAT Mumbai); assessment years 2003-04 and 2004-05; no law-report citation printed on the document. It bears on section 72A, section 72A(1), section 72A(2), section 72A(3), section 72 of the Income Tax Act 1961, in Assessment & Scrutiny, How Tax Law Is Read and Deductions & Disallowances matters.
This is the order that supplies the answer to the commonest section 72A assessment in practice — the one made in year one or year two of a five-year compliance period, on the footing that the taxpayer cannot yet prove what the statute does not yet require him to prove. The Tribunal's route through sub-sections (2) and (3) is what makes the point stick: it read the two together and held that the amalgamated company is entitled to the set-off from the very first year of the amalgamation, with sub-section (3) operating as a correcting provision that brings the earlier set-off back to tax if the conditions are not fulfilled within the prescribed time. That reading gives the taxpayer the cash flow and gives the Revenue the clawback, and it locates the withdrawal in the last year stipulated for compliance rather than in the year of the original set-off. The three-fourths point is narrower but valuable in a multi-company scheme: the Assessing Officer in this case had produced a 43.79 per cent disposal figure by adding together the disposals of both amalgamating companies, and the Tribunal held that was the wrong unit of measurement — the disposals of the company whose loss is claimed are what count, and on that basis the figure was around ten per cent over three years. The order also disposes of a free-standing "revival" objection: the Tribunal held that the mention of ensuring the revival of the business in section 72A(2)(b)(iii) is only a reference to the conditions prescribed in Rule 9C, and there is no separate stipulation for establishing that the amalgamated company took steps to revive the undertaking independent of clause (a) of that rule. The limit of the decision should be stated plainly: it is a Tribunal decision on assessment years 2003-04 and 2004-05, it is not a decision on section 2(1B), and it does not consider section 72A(6B), which did not then exist.
Binding on the AO and CIT(A) within the Tribunal's jurisdiction. Persuasive elsewhere.
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Two companies, Bayer TPU Pvt. Ltd. (BTPU) and BSPPL, amalgamated with the assessee company in the previous year relevant to the assessment year under consideration. The assessee claimed set off and carry forward of the brought forward business loss and unabsorbed depreciation of BTPU alone. The Assessing Officer refused the claim on four grounds. First, that the assessee had disposed of 43.79 per cent of the assets of BTPU and so had failed to hold three-fourths of the book value of the amalgamating company's fixed assets for five years under section 72A(2)(b)(i); that figure had been arrived at by including disposals of BSPPL's assets alongside BTPU's. On the assessee's paper book the assets of BTPU received on amalgamation stood at Rs. 15,53,42,000, of which Rs. 32.67 lakhs were disposed of in the previous year in question and Rs. 1,56,55,000 over three years in all, about ten per cent. Second, that the assessee had led no evidence that the amalgamation was to ensure the revival of BTPU's business. Third and fourth, that the assessee had not achieved the level of production of at least fifty per cent of BTPU's installed capacity and had not furnished the certificate in Form No. 62 as required by Rule 9C. The Assessing Officer noted that the amalgamation had taken place on 1 April 2003 and that three years and nine months had passed by the date of the assessment order. The assessee failed before the Commissioner (Appeals) and appealed to the Tribunal. The amalgamation itself, and the amounts of the brought forward business losses and unabsorbed depreciation of the amalgamating company, were not in dispute.
The appeal on this ground was allowed and the order of the Commissioner (Appeals) overturned on the issue (para 11). The three-fourths of book value requirement in section 72A(2)(b)(i) is applied qua the amalgamating company whose accumulated loss and unabsorbed depreciation are sought to be carried into the amalgamated company's hands; disposals of the assets of another amalgamating company in the same year cannot be aggregated with them, and where there are two or more amalgamations in a year the conditions must be proved in respect of each amalgamating company separately (para 5). Rule 9C(a) requires the fifty per cent production level to be achieved before the end of four years from the date of amalgamation and it may be achieved in the first, second, third or fourth year; the Assessing Officer is required to restrict himself only to the year before him, and where that year is not the fourth year from the date of amalgamation he is not required to examine the production condition at that stage (para 6). The free-standing objection that the assessee had not shown revival of the amalgamating company's business fails for the same reason: the mention of revival in s.72A(2)(b)(iii) is only a reference to the conditions prescribed in Rule 9C, revival is "prescribed" in clause (a) of that rule, and it is premature to require material demonstrating efforts to revive before the end of the fourth year (para 7). The requirement of furnishing Form No. 62 arises for the first time only when the amalgamated company fulfils the condition of achieving the prescribed production level, and a demand for it in an earlier year is premature (para 8). Sub-section (3) of section 72A is a correcting provision: read with sub-section (2) it means the amalgamated company is entitled to the set off and carry forward from the very first year of the amalgamation, and if the conditions in clause (b) of section 72A(2) are not fulfilled within the prescribed time the set off allowed in earlier years is deemed to be the income of the amalgamated company of the last year stipulated for compliance (paras 9 and 10).
The Tribunal began from the undisputed facts of the amalgamation and the quantum of the losses, and noted that the Assessing Officer had not disputed the amalgamating company's compliance with clause (a) of section 72A(2), so the controversy lay in clause (b) (para 5). On the first objection it identified the unit of measurement: the requirement to hold at least three-fourths of the book value of the amalgamating company's fixed assets for five years is qua the amalgamating company whose loss is claimed, so what must be compared is the disposal of that company's assets against that company's loss; the benefit under section 72A(1) is allowed for the number of amalgamating companies in respect of which the amalgamated company succeeds in satisfying the conditions, one by one, and is not allowed or denied for all of them taken together as one unit. The Assessing Officer had erred in including BSPPL's disposals, and on the correct basis the disposal was about ten per cent over three years (para 5). On the Rule 9C objections it set out the two clauses of the rule and read clause (a) closely: the production level is to be achieved "before the end of four years from the date of amalgamation", and a cursory perusal divulges that it may therefore be achieved in the first, second, third or even before the end of the fourth year; there is nothing in the phraseology requiring it in the very first year. Since the year before the Assessing Officer was not the fourth year, and the four years had not expired even at the date of the assessment order, the officer was not required to examine the question at that stage. The free-standing revival objection failed because the mention of ensuring revival in section 72A(2)(b)(iii) is only a reference to the conditions prescribed in Rule 9C, the meaning of revival being prescribed in clause (a) of that rule, so that on satisfaction of the production condition the revival condition is automatically satisfied and revival can be adversely viewed only at the end of the fourth year. On Form No. 62 the Tribunal read clause (b) of the rule as categorical in tying the certificate to the assessment year relevant to the previous year during which the prescribed level of production is achieved, so the obligation arises for the first time only when that level is achieved (para 8). Finally it turned to sub-section (3) and read it with sub-section (2), holding it to be a correcting provision which gives logical meaning to the consequences of failure and which presupposes that the set off has been availed from the first year; if the clause (b) conditions are not met within the prescribed time the earlier set off becomes income of the last year stipulated for compliance (paras 9 and 10).
Sub-section (3) is a correcting provision and gives logical meaning to consequences flowing from the failure to comply with the requirements with in the specified number of years as set out in sub-section (2) after having availed the benefit of set off and carry forward of accumulated loss of the amalgamating company as per sub-section (1) of section 72A.
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Handle my notice → Ask a CA on WhatsAppNo. The Tribunal held that Rule 9C(a) requires the fifty per cent production level to be achieved before the END of four years from the date of amalgamation, so it may be achieved in the first, second, third or fourth year, and the Assessing Officer of an earlier year is not required — and by implication not entitled — to examine that condition at that stage. The Form No. 62 certificate under Rule 9C(b) is due for the first time only for the assessment year relevant to the previous year in which the prescribed production level is achieved, so a demand for it before that is premature. Separately, the Tribunal held that the three-fourths of book value test in section 72A(2)(b)(i) is applied qua the particular amalgamating company whose loss is being claimed, and that where two companies amalgamate in the same year the disposals of the second company's assets cannot be aggregated with the first's. This was decided by the ITAT (Shri R.S. Syal, Accountant Member and Shri Sanjay Garg, Judicial Member (Income Tax Appellate Tribunal, Mumbai Benches "J", Mumbai)) and bears on section 72A, section 72A(1), section 72A(2), section 72A(3), section 72 of the Income Tax Act 1961. It is reported as ITA Nos. 6666 & 6667/Mum/2009 (ITAT Mumbai); assessment years 2003-04 and 2004-05; no law-report citation printed on the document. This is the order that supplies the answer to the commonest section 72A assessment in practice — the one made in year one or year two of a five-year compliance period, on the footing that the taxpayer cannot yet prove what the statute does not yet require him to prove. The Tribunal's route through sub-sections (2) and (3) is what makes the point stick: it read the two together and held that the amalgamated company is entitled to the set-off from the very first year of the amalgamation, with sub-section (3) operating as a correcting provision that brings the earlier set-off back to tax if the conditions are not fulfilled within the prescribed time. That reading gives the taxpayer the cash flow and gives the Revenue the clawback, and it locates the withdrawal in the last year stipulated for compliance rather than in the year of the original set-off. The three-fourths point is narrower but valuable in a multi-company scheme: the Assessing Officer in this case had produced a 43.79 per cent disposal figure by adding together the disposals of both amalgamating companies, and the Tribunal held that was the wrong unit of measurement — the disposals of the company whose loss is claimed are what count, and on that basis the figure was around ten per cent over three years. The order also disposes of a free-standing "revival" objection: the Tribunal held that the mention of ensuring the revival of the business in section 72A(2)(b)(iii) is only a reference to the conditions prescribed in Rule 9C, and there is no separate stipulation for establishing that the amalgamated company took steps to revive the undertaking independent of clause (a) of that rule. The limit of the decision should be stated plainly: it is a Tribunal decision on assessment years 2003-04 and 2004-05, it is not a decision on section 2(1B), and it does not consider section 72A(6B), which did not then exist. If it applies to you, the first step is this: If the assessment year before the Assessing Officer is not the fourth year from the date of amalgamation, take the prematurity point first and cite Bayer Material Science Pvt. Ltd. v. ACIT (ITAT Mumbai, 13 February 2013) at para 6 for the production condition, para 7 for the revival objection and para 8 for Form No. 62, with paras 9 to 11 for the consequence. It is a jurisdictional-in-substance objection that disposes of the disallowance without any evidence of production.
Two companies, Bayer TPU Pvt. Ltd. (BTPU) and BSPPL, amalgamated with the assessee company in the previous year relevant to the assessment year under consideration. The assessee claimed set off and carry forward of the brought forward business loss and unabsorbed depreciation of BTPU alone. The Assessing Officer refused the claim on four grounds. First, that the assessee had disposed of 43.79 per cent of the assets of BTPU and so had failed to hold three-fourths of the book value of the amalgamating company's fixed assets for five years under section 72A(2)(b)(i); that figure had been arrived at by including disposals of BSPPL's assets alongside BTPU's. On the assessee's paper book the assets of BTPU received on amalgamation stood at Rs. 15,53,42,000, of which Rs. 32.67 lakhs were disposed of in the previous year in question and Rs. 1,56,55,000 over three years in all, about ten per cent. Second, that the assessee had led no evidence that the amalgamation was to ensure the revival of BTPU's business. Third and fourth, that the assessee had not achieved the level of production of at least fifty per cent of BTPU's installed capacity and had not furnished the certificate in Form No. 62 as required by Rule 9C. The Assessing Officer noted that the amalgamation had taken place on 1 April 2003 and that three years and nine months had passed by the date of the assessment order. The assessee failed before the Commissioner (Appeals) and appealed to the Tribunal. The amalgamation itself, and the amounts of the brought forward business losses and unabsorbed depreciation of the amalgamating company, were not in dispute. The matter was decided on 2013-02-13 by the ITAT (Shri R.S. Syal, Accountant Member and Shri Sanjay Garg, Judicial Member (Income Tax Appellate Tribunal, Mumbai Benches "J", Mumbai)). On those facts the ITAT held as follows. The appeal on this ground was allowed and the order of the Commissioner (Appeals) overturned on the issue (para 11). The three-fourths of book value requirement in section 72A(2)(b)(i) is applied qua the amalgamating company whose accumulated loss and unabsorbed depreciation are sought to be carried into the amalgamated company's hands; disposals of the assets of another amalgamating company in the same year cannot be aggregated with them, and where there are two or more amalgamations in a year the conditions must be proved in respect of each amalgamating company separately (para 5). Rule 9C(a) requires the fifty per cent production level to be achieved before the end of four years from the date of amalgamation and it may be achieved in the first, second, third or fourth year; the Assessing Officer is required to restrict himself only to the year before him, and where that year is not the fourth year from the date of amalgamation he is not required to examine the production condition at that stage (para 6). The free-standing objection that the assessee had not shown revival of the amalgamating company's business fails for the same reason: the mention of revival in s.72A(2)(b)(iii) is only a reference to the conditions prescribed in Rule 9C, revival is "prescribed" in clause (a) of that rule, and it is premature to require material demonstrating efforts to revive before the end of the fourth year (para 7). The requirement of furnishing Form No. 62 arises for the first time only when the amalgamated company fulfils the condition of achieving the prescribed production level, and a demand for it in an earlier year is premature (para 8). Sub-section (3) of section 72A is a correcting provision: read with sub-section (2) it means the amalgamated company is entitled to the set off and carry forward from the very first year of the amalgamation, and if the conditions in clause (b) of section 72A(2) are not fulfilled within the prescribed time the set off allowed in earlier years is deemed to be the income of the amalgamated company of the last year stipulated for compliance (paras 9 and 10).
The Tribunal began from the undisputed facts of the amalgamation and the quantum of the losses, and noted that the Assessing Officer had not disputed the amalgamating company's compliance with clause (a) of section 72A(2), so the controversy lay in clause (b) (para 5). On the first objection it identified the unit of measurement: the requirement to hold at least three-fourths of the book value of the amalgamating company's fixed assets for five years is qua the amalgamating company whose loss is claimed, so what must be compared is the disposal of that company's assets against that company's loss; the benefit under section 72A(1) is allowed for the number of amalgamating companies in respect of which the amalgamated company succeeds in satisfying the conditions, one by one, and is not allowed or denied for all of them taken together as one unit. The Assessing Officer had erred in including BSPPL's disposals, and on the correct basis the disposal was about ten per cent over three years (para 5). On the Rule 9C objections it set out the two clauses of the rule and read clause (a) closely: the production level is to be achieved "before the end of four years from the date of amalgamation", and a cursory perusal divulges that it may therefore be achieved in the first, second, third or even before the end of the fourth year; there is nothing in the phraseology requiring it in the very first year. Since the year before the Assessing Officer was not the fourth year, and the four years had not expired even at the date of the assessment order, the officer was not required to examine the question at that stage. The free-standing revival objection failed because the mention of ensuring revival in section 72A(2)(b)(iii) is only a reference to the conditions prescribed in Rule 9C, the meaning of revival being prescribed in clause (a) of that rule, so that on satisfaction of the production condition the revival condition is automatically satisfied and revival can be adversely viewed only at the end of the fourth year. On Form No. 62 the Tribunal read clause (b) of the rule as categorical in tying the certificate to the assessment year relevant to the previous year during which the prescribed level of production is achieved, so the obligation arises for the first time only when that level is achieved (para 8). Finally it turned to sub-section (3) and read it with sub-section (2), holding it to be a correcting provision which gives logical meaning to the consequences of failure and which presupposes that the set off has been availed from the first year; if the clause (b) conditions are not met within the prescribed time the earlier set off becomes income of the last year stipulated for compliance (paras 9 and 10). In the words reproduced by the source cited on this page: "Sub-section (3) is a correcting provision and gives logical meaning to consequences flowing from the failure to comply with the requirements with in the specified number of years as set out in sub-section (2) after having availed the benefit of set off and carry forward of accumulated loss of the amalgamating company as per sub-section (1) of section 72A." The decision followed or applied Followed and reproduced at length by a coordinate bench in Embio Ltd v. ACIT (ITAT Mumbai, 23 April 2019, ITA Nos. 2460/Mum/2017 and 5414/Mum/2017) at para 18, which restored the issue to the Assessing Officer with a direction to decide it following this order.
It was decided by the ITAT on 2013-02-13 and is reported as ITA Nos. 6666 & 6667/Mum/2009 (ITAT Mumbai); assessment years 2003-04 and 2004-05; no law-report citation printed on the document. Binding on the AO and CIT(A) within the Tribunal's jurisdiction. Persuasive elsewhere. A Tribunal decision binds the assessing officer and the Commissioner (Appeals) within that Tribunal's jurisdiction, and is persuasive before other benches. It is not binding on a High Court, and a contrary co-ordinate bench decision will be argued against you, so check whether the point has been taken the other way before you build a reply around it. On section 72A, section 72A(1), section 72A(2), section 72A(3), section 72, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. The appeal on this ground was allowed and the order of the Commissioner (Appeals) overturned on the issue (para 11). The three-fourths of book value requirement in section 72A(2)(b)(i) is applied qua the amalgamating company whose accumulated loss and unabsorbed depreciation are sought to be carried into the amalgamated company's hands; disposals of the assets of another amalgamating company in the same year cannot be aggregated with them, and where there are two or more amalgamations in a year the conditions must be proved in respect of each amalgamating company separately (para 5). Rule 9C(a) requires the fifty per cent production level to be achieved before the end of four years from the date of amalgamation and it may be achieved in the first, second, third or fourth year; the Assessing Officer is required to restrict himself only to the year before him, and where that year is not the fourth year from the date of amalgamation he is not required to examine the production condition at that stage (para 6). The free-standing objection that the assessee had not shown revival of the amalgamating company's business fails for the same reason: the mention of revival in s.72A(2)(b)(iii) is only a reference to the conditions prescribed in Rule 9C, revival is "prescribed" in clause (a) of that rule, and it is premature to require material demonstrating efforts to revive before the end of the fourth year (para 7). The requirement of furnishing Form No. 62 arises for the first time only when the amalgamated company fulfils the condition of achieving the prescribed production level, and a demand for it in an earlier year is premature (para 8). Sub-section (3) of section 72A is a correcting provision: read with sub-section (2) it means the amalgamated company is entitled to the set off and carry forward from the very first year of the amalgamation, and if the conditions in clause (b) of section 72A(2) are not fulfilled within the prescribed time the set off allowed in earlier years is deemed to be the income of the amalgamated company of the last year stipulated for compliance (paras 9 and 10). It arises in Assessment & Scrutiny, How Tax Law Is Read and Deductions & Disallowances matters, on section 72A, section 72A(1), section 72A(2), section 72A(3), section 72 of the Income Tax Act 1961, and was decided by Shri R.S. Syal, Accountant Member and Shri Sanjay Garg, Judicial Member (Income Tax Appellate Tribunal, Mumbai Benches "J", Mumbai). Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Meet a Form No. 62 objection by reading Rule 9C(b) aloud: the certificate is due with the return for the assessment year relevant to the previous year during which the prescribed level of production is achieved, and for subsequent years within the five years. Before that year there is nothing to certify. Where more than one company amalgamated with you in the same year, insist that the three-fourths of book value computation under section 72A(2)(b)(i) be done separately for the company whose accumulated loss you are claiming, and produce that company's own fixed asset schedule. If you are claiming the losses of only one of several amalgamating companies, say so expressly in the return, because that is what confines the disposal test to that company's assets. Answer a free-standing "you have not shown revival" objection by pointing to Rule 9C(a) as the prescribed content of the revival condition under section 72A(2)(b)(iii), and cite para 7 of this order, where the Tribunal held in terms that "it is pre-mature to require the material for demonstrating efforts taken by the amalgamated company for reviving the business of amalgamating company". Do not read this order as excusing eventual compliance. It postpones the test to the end of the fourth year; if you then fail, section 72A(3) charges the earlier set-off as income of the year of non-compliance. Check the date the amalgamation was effected before relying on the order at all: for an amalgamation effected on or after 1 April 2025, section 72A(6B) separately caps the carry-forward period, and this 2013 order says nothing about it.
Still good law. Nothing overruling or doubting this order has been found, and no appeal against it to the Bombay High Court has been traced. The order is not widely cited under its own name, which is a feature of Tribunal orders on s.72A rather than a sign of weakness; but it has been applied. In Embio Ltd v ACIT (ITAT Mumbai, 23 April 2019) the Bench set out the holding on s.72A(2)(b)(iii) and the conditions prescribed by Rule 9C, and made it the ground of its direction: 'Considering the decision of the Mumbai Tribunal in Bayers Material Science (P) Ltd (supra) this grounds of appeal is restore to the file of assessing officer to reconsider the issue afresh'. The appeals were partly allowed in the assessee's favour for assessment years 2012-13 and 2013-14. A companion Embio order of 10 May 2019 cites it again, on Rule 9C(a). Weigh it for what it is. This is a Tribunal order, so it binds nobody outside the case; its value is that it reads Rule 9C and s.72A(3) together and gives a coherent account of when each condition falls due, which an Assessing Officer has to meet rather than ignore. It is an order on assessment years 2003-04 and 2004-05. It is not a decision on s.2(1B), and it does not consider s.72A(6B), which did not then exist — so it says nothing about the position of a successor in a business reorganisation of the kind that sub-section now covers. What would displace it: a High Court holding that Rule 9C(a) requires the production level to be tested year by year rather than by the end of the fourth year; a decision reading s.72A(3) as withholding the set-off until the conditions are met, rather than as a correcting provision that claws it back in the last year stipulated for compliance; or an amendment to Rule 9C changing the year in which Form No. 62 falls due. None has been located. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
A paragraph map for the stretch this entry uses, because the numbering matters when the order is cited. Paragraph 5 is the three-fourths point and the disposal figures. Paragraph 6 sets out both clauses of Rule 9C and then construes clause (a), holding that the production level 'may be achieved in the first year or second year or third year or even before the end of the fourth year' and that 'The Assessing Officer is required to restrict himself only to the year before him'. Paragraph 7 disposes of the free-standing revival objection as premature. Paragraph 8 holds the Form No. 62 requirement premature. Paragraph 9 construes s.72A(3) as a correcting provision. Paragraph 10 restates the four-year rule and the interregnum. Paragraph 11 allows the ground, in terms: 'This impugned order is overturned on this issue and this ground is allowed.' Two sentences that are sometimes cited to paragraph 7 or paragraph 8 — 'Before examining this aspect, it would be apt to' and 'On going through clause (a) of' — are in fact mid-paragraph inside paragraph 6. A pinpoint to them should be to paragraph 6. One attribution is weaker than the rest and is flagged as such. The three-fourths sentence relied on in the summary sits within paragraph 5 on a continuous reading of the order, and the same words have been confirmed separately without a paragraph number attached; the paragraph attribution therefore rests on the continuous reading alone. The order is longer than the stretch used here, and the reader should know it. It does not end at paragraph 11. It runs to paragraph 41 and decides further, unrelated issues — income from shares, the transfer of the H&R business, the year of that transfer, the computation of gain or loss, the initiation of reassessment and the initiation of penalty proceedings. The two appeals are disposed of at paragraph 33 and at paragraph 41, each in the words 'In the result, the appeal is partly allowed.' This entry states the section 72A ground only, and says nothing whatever about the other issues, which have not been read. Anyone citing the order for a proposition outside paragraphs 5 to 11 is on his own. Two smaller points. The appellant is named 'M/s. Bayer Material Science Pvt. Ltd.' and the respondent 'Asstt. Commissioner of Income-tax, Circle 10(3), Mumbai' in the order's own heading; shorter and garbled forms of the name are in circulation and refer to the same order. And no printed law-report citation has been found, so the 'reported' field carries the appeal numbers only. Later treatment has not been checked beyond the orders named in the validity note. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The appeal on this ground was allowed and the order of the Commissioner (Appeals) overturned on the issue (para 11). The three-fourths of book value requirement in section 72A(2)(b)(i) is applied qua the amalgamating company whose accumulated loss and unabsorbed depreciation are sought to be carried into the amalgamated company's hands; disposals of the assets of another amalgamating company in the same year cannot be aggregated with them, and where there are two or more amalgamations in a year the conditions must be proved in respect of each amalgamating company separately (para 5). Rule 9C(a) requires the fifty per cent production level to be achieved before the end of four years from the date of amalgamation and it may be achieved in the first, second, third or fourth year; the Assessing Officer is required to restrict himself only to the year before him, and where that year is not the fourth year from the date of amalgamation he is not required to examine the production condition at that stage (para 6). The free-standing objection that the assessee had not shown revival of the amalgamating company's business fails for the same reason: the mention of revival in s.72A(2)(b)(iii) is only a reference to the conditions prescribed in Rule 9C, revival is "prescribed" in clause (a) of that rule, and it is premature to require material demonstrating efforts to revive before the end of the fourth year (para 7). The requirement of furnishing Form No. 62 arises for the first time only when the amalgamated company fulfils the condition of achieving the prescribed production level, and a demand for it in an earlier year is premature (para 8). Sub-section (3) of section 72A is a correcting provision: read with sub-section (2) it means the amalgamated company is entitled to the set off and carry forward from the very first year of the amalgamation, and if the conditions in clause (b) of section 72A(2) are not fulfilled within the prescribed time the set off allowed in earlier years is deemed to be the income of the amalgamated company of the last year stipulated for compliance (paras 9 and 10).
TaxSphere, “Bayer Material Science Pvt. Ltd. v. ACIT, Circle 10(3), Mumbai (ITAT Mumbai) — the three-fourths test is applied to each amalgamating company separately, and Rule 9C bites only at the end of four years”, https://taxnotice.vittsphere.com/caselaw/case/bayer-material-science-72a-2-b-rule-9c-timing-form-62-and-the-year-of-clawback/ (validity last checked 2026-09-08)
The judgment itself is a government work and may be quoted freely. The summary, the validity note and the reasoning on this page are this library's own writing: quote them with attribution, and please do not present either as the words of the court — this page keeps the two apart and so should a quotation of it.
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We took over an amalgamating company's brought-forward losses. What exactly must we satisfy under section 72A(2) and Rule 9C, and if we fail, in which year does the department take the set-off back?
We got the section 72A set-off in year one, then production collapsed and we fell below fifty per cent of installed capacity. Can the Assessing Officer withdraw the set-off, and if so for which year?
We amalgamated a loss-making service company into ours. The Assessing Officer says section 72A does not apply at all because there is no industrial undertaking. Is that right, and what does the section actually cover?
The Assessing Officer says our merger was a device to buy the target's losses, even though the High Court sanctioned the scheme. How far does the sanction protect us, and what must we still prove?
