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?
The Tribunal held that once the scheme of merger has been duly approved by the High Court, having in mind the larger public interest, it cannot be disturbed by the Revenue merely by alleging that the merger was done only to buy losses and was a colourable device — the more so where the Income Tax department, being part of the Union of India which is a party to the scheme petition, filed no objection before the High Court and preferred no appeal under section 391(7) of the Companies Act, 1956. But the Tribunal did not stop there. It went on expressly to address "the next crucial aspect" — whether the assessee had complied with section 72A read with Rule 9C, "which alone would enable it to get the benefit of set off of accumulated losses of amalgamating company in addition to the scheme of merger approved by the Hon'ble Bombay High Court" — and found on the facts that the conditions and the Rule 9C production and Form No. 62 requirements were satisfied.
Decided by the ITAT (Shri Vikas Awasthy, Judicial Member and Shri M. Balaganesh, Accountant Member (Income Tax Appellate Tribunal, 'B' Bench, Mumbai)) on 2021-10-05, reported as ITA No. 4000/Mum/2007 and ITA No. 4345/Mum/2007 (ITAT Mumbai), with a third appeal, ITA No. 2238/Mum/2009, appearing in some renderings of the disposal; assessment year 2003-04; no law-report citation printed on the document. It bears on section 72A, section 72A(2), section 72 of the Income Tax Act 1961, in Assessment & Scrutiny, How Tax Law Is Read and Deductions & Disallowances matters.
This order is useful precisely because it holds both halves of the line that this area of the law requires. The sanction of the scheme disposes of the genuineness attack: the Tribunal noted that the petition for sanction was filed on 15 January 2003, well after the slump sale of 1 November 2002 which the Departmental Representative said the amalgamation had been engineered to follow, so the factual premise of the colourable-device argument was wrong, and it added that a scheme sanctioned by the court has statutory force and can be challenged only by an appeal under section 391(7), not collaterally in an assessment. What the sanction does NOT do is supply the conditions of the Income-tax Act, and the Tribunal said so in terms by treating section 72A and Rule 9C as the provisions which "alone" would enable the set-off, "in addition to" the sanctioned scheme. A practitioner should carry both propositions or neither. There is a defect in the order that a reader must know about: at para 7.6 the Tribunal reproduced section 72A(2) "as it stood then as is relevant to A.Y.2003-04" as a provision stipulating three conditions, and the text it set out is the three conditions on the AMALGAMATED company — what the section calls clause (b) — with no separate mention of the clause (a) conditions on the amalgamating company. The departmental Year 2003 edition of section 72A prints the clause (a)/(b) structure. The consequence is that the order should not be cited as authority on the content of section 72A(2), and a reader relying on it must still test the clause (a) conditions independently.
Binding on the AO and CIT(A) within the Tribunal's jurisdiction. Persuasive elsewhere.
Read aloud by your device. Press again to stop.
GBDFC amalgamated with the assessee company, Nicholas Piramal India Ltd. (later Piramal Enterprises Ltd.), with an appointed date of 1 January 2003, the Bombay High Court having sanctioned the scheme on 20 February 2003. Before the merger, GBDFC had transferred its Ibuprofen undertaking by way of slump sale to its sister subsidiary Alpex International Private Limited with effect from 1 November 2002 for a stated Rs. 50 lakhs, pursuant to a board resolution of 1 October 2002; after that slump sale GBDFC's total installed capacity fell from 870 MT to 150 MT. The assessee's board resolved to consider the merger on 29 November 2002 and the petition for sanction was filed before the Bombay High Court on 15 January 2003. The Assessing Officer treated the arrangement as a colourable device to acquire GBDFC's accumulated losses, the profitable Ibuprofen unit having been hived off to a sister concern and the loss-making Hyderabad unit alone being merged. Before the Commissioner (Appeals) the assessee produced the merger agreement, the High Court's sanction order, the minutes of its board meeting, GBDFC's returns and balance sheets, and a certificate in Form No. 62 under Rule 9C, and the Commissioner (Appeals) allowed the claim, noting that both companies were in pharmaceuticals and that the assessee had achieved fifty per cent of the installed capacity existing at the date of amalgamation. The Revenue appealed. Before the Tribunal the assessee said it held no shares in GBDFC or its holding company Nidus Fincom Pvt. Ltd., that none of its directors sat on their boards, that GBDFC was not a related party, and that the merger had a commercial rationale in building an export business, relying among other things on a news report of 29 November 2002. The Departmental Representative argued that the amalgamation was only to buy losses and that the petition could have been filed before the slump sale.
The Revenue's ground on section 72A was dismissed (para 7.7). Once a scheme of merger has been duly approved by the High Court, having in mind the larger public interest, it cannot be disturbed by the Revenue by merely alleging that the merger was done only to buy losses and was a colourable device; the department, being part of the Union of India which is a party to a scheme petition, had filed no objection before the High Court and had preferred no appeal under section 391(7) of the Companies Act, 1956, and could not object collaterally in the assessment (paras 7.4 and 7.5). The Departmental Representative's factual premise was wrong: the petition for sanction was filed on 15 January 2003, much after the slump sale of 1 November 2002, so the argument that the amalgamation process had been initiated before the slump sale was factually incorrect. The sanction, however, is not by itself enough: compliance with section 72A read with Rule 9C is what alone enables the set-off, in addition to the sanctioned scheme (para 7.6), and on the facts the assessee had satisfied the conditions and the Rule 9C requirement of using a minimum of fifty per cent of the installed capacity of the amalgamating company within four years, supported by a certificate from an accountant in Form No. 62 in the paper book (para 7.7). The Commissioner (Appeals) had rightly directed the Assessing Officer to allow the set off of the amalgamating company's losses. Both of the 2007 appeals — ITA No. 4345/Mum/2007 by the Revenue and ITA No. 4000/Mum/2007 by the assessee — were partly allowed; the paragraph number of the disposal, and the fate of a third appeal, could not be established on any route and are not stated here (see editor_note).
The Tribunal took the undisputed dates first — the slump sale on 1 November 2002, the appointed date of 1 January 2003 and the sanction on 20 February 2003 — and then fixed on the date the sanction petition was filed, 15 January 2003, to show that the Departmental Representative's argument that the amalgamation process preceded the slump sale was factually wrong, so that the colourable-device allegation founded on it fell away. It reasoned that on the date of amalgamation all the assets and liabilities of GBDFC vested in the assessee from the appointed date, and that what mattered was whether GBDFC had accumulated losses in its kitty at that date, which was not disputed and which had been placed before the High Court with the scheme. It held that the sanction implied that the court had considered the scheme holistically, including the tax-evasion aspect, since the Union of India is a party and all Central Government regulatory authorities have a right to object, and no objection had been filed. It relied on the Madras High Court in Penta Media Graphics Ltd. v. ITO and the Bombay High Court in Casby CFS (P) Ltd., In Re for the proposition that a sanctioned scheme binds everyone including statutory authorities, and on the Supreme Court in J.K. (Bombay) P. Ltd. v. New Kaiser-I-Hind Spinning & Weaving Company and the Bombay High Court in Sadanand Varde v. State of Maharashtra for the statutory force of a sanctioned scheme and for the proposition that an amalgamation order can be challenged only by an appeal under section 391(7) and not in a collateral proceeding. Having disposed of the genuineness attack, it turned expressly to the section 72A and Rule 9C compliance as a separate and necessary question, set out section 72A(2), found no dispute that the conditions and the Rule 9C production requirement were satisfied, noted the Form No. 62 certificate in the paper book, and accepted the commercial rationale, adding that although a tax dispute cannot be determined on newspaper reports the rationale reported before the merger had been ratified by the events that followed it. It accepted that the assessee was not in control of GBDFC before the merger and could not be held responsible for the pre-merger slump sale of the Ibuprofen undertaking to Alpex.
Having observed so, it would be relevant to address the next crucial aspect as to whether the assessee had complied with the provisions of Section 72A of the Act r.w.rule 9C of the Rules which alone would enable it to get the benefit of set off of accumulated losses of amalgamating company in addition to the scheme of merger approved by the Hon'ble Bombay High Court.
Upload it and we will read it, work out your deadline and draft the reply. A CA reviews before anything is filed.
Handle my notice → Ask a CA on WhatsAppThe Tribunal held that once the scheme of merger has been duly approved by the High Court, having in mind the larger public interest, it cannot be disturbed by the Revenue merely by alleging that the merger was done only to buy losses and was a colourable device — the more so where the Income Tax department, being part of the Union of India which is a party to the scheme petition, filed no objection before the High Court and preferred no appeal under section 391(7) of the Companies Act, 1956. But the Tribunal did not stop there. It went on expressly to address "the next crucial aspect" — whether the assessee had complied with section 72A read with Rule 9C, "which alone would enable it to get the benefit of set off of accumulated losses of amalgamating company in addition to the scheme of merger approved by the Hon'ble Bombay High Court" — and found on the facts that the conditions and the Rule 9C production and Form No. 62 requirements were satisfied. This was decided by the ITAT (Shri Vikas Awasthy, Judicial Member and Shri M. Balaganesh, Accountant Member (Income Tax Appellate Tribunal, 'B' Bench, Mumbai)) and bears on section 72A, section 72A(2), section 72 of the Income Tax Act 1961. It is reported as ITA No. 4000/Mum/2007 and ITA No. 4345/Mum/2007 (ITAT Mumbai), with a third appeal, ITA No. 2238/Mum/2009, appearing in some renderings of the disposal; assessment year 2003-04; no law-report citation printed on the document. This order is useful precisely because it holds both halves of the line that this area of the law requires. The sanction of the scheme disposes of the genuineness attack: the Tribunal noted that the petition for sanction was filed on 15 January 2003, well after the slump sale of 1 November 2002 which the Departmental Representative said the amalgamation had been engineered to follow, so the factual premise of the colourable-device argument was wrong, and it added that a scheme sanctioned by the court has statutory force and can be challenged only by an appeal under section 391(7), not collaterally in an assessment. What the sanction does NOT do is supply the conditions of the Income-tax Act, and the Tribunal said so in terms by treating section 72A and Rule 9C as the provisions which "alone" would enable the set-off, "in addition to" the sanctioned scheme. A practitioner should carry both propositions or neither. There is a defect in the order that a reader must know about: at para 7.6 the Tribunal reproduced section 72A(2) "as it stood then as is relevant to A.Y.2003-04" as a provision stipulating three conditions, and the text it set out is the three conditions on the AMALGAMATED company — what the section calls clause (b) — with no separate mention of the clause (a) conditions on the amalgamating company. The departmental Year 2003 edition of section 72A prints the clause (a)/(b) structure. The consequence is that the order should not be cited as authority on the content of section 72A(2), and a reader relying on it must still test the clause (a) conditions independently. If it applies to you, the first step is this: Where the department alleges that a merger was a device to acquire losses, put the sanction order and the scheme petition on record and establish the chronology, as the Tribunal did here: the dates on which the board resolutions were passed, the petition was filed and the sanction was granted.
GBDFC amalgamated with the assessee company, Nicholas Piramal India Ltd. (later Piramal Enterprises Ltd.), with an appointed date of 1 January 2003, the Bombay High Court having sanctioned the scheme on 20 February 2003. Before the merger, GBDFC had transferred its Ibuprofen undertaking by way of slump sale to its sister subsidiary Alpex International Private Limited with effect from 1 November 2002 for a stated Rs. 50 lakhs, pursuant to a board resolution of 1 October 2002; after that slump sale GBDFC's total installed capacity fell from 870 MT to 150 MT. The assessee's board resolved to consider the merger on 29 November 2002 and the petition for sanction was filed before the Bombay High Court on 15 January 2003. The Assessing Officer treated the arrangement as a colourable device to acquire GBDFC's accumulated losses, the profitable Ibuprofen unit having been hived off to a sister concern and the loss-making Hyderabad unit alone being merged. Before the Commissioner (Appeals) the assessee produced the merger agreement, the High Court's sanction order, the minutes of its board meeting, GBDFC's returns and balance sheets, and a certificate in Form No. 62 under Rule 9C, and the Commissioner (Appeals) allowed the claim, noting that both companies were in pharmaceuticals and that the assessee had achieved fifty per cent of the installed capacity existing at the date of amalgamation. The Revenue appealed. Before the Tribunal the assessee said it held no shares in GBDFC or its holding company Nidus Fincom Pvt. Ltd., that none of its directors sat on their boards, that GBDFC was not a related party, and that the merger had a commercial rationale in building an export business, relying among other things on a news report of 29 November 2002. The Departmental Representative argued that the amalgamation was only to buy losses and that the petition could have been filed before the slump sale. The matter was decided on 2021-10-05 by the ITAT (Shri Vikas Awasthy, Judicial Member and Shri M. Balaganesh, Accountant Member (Income Tax Appellate Tribunal, 'B' Bench, Mumbai)). On those facts the ITAT held as follows. The Revenue's ground on section 72A was dismissed (para 7.7). Once a scheme of merger has been duly approved by the High Court, having in mind the larger public interest, it cannot be disturbed by the Revenue by merely alleging that the merger was done only to buy losses and was a colourable device; the department, being part of the Union of India which is a party to a scheme petition, had filed no objection before the High Court and had preferred no appeal under section 391(7) of the Companies Act, 1956, and could not object collaterally in the assessment (paras 7.4 and 7.5). The Departmental Representative's factual premise was wrong: the petition for sanction was filed on 15 January 2003, much after the slump sale of 1 November 2002, so the argument that the amalgamation process had been initiated before the slump sale was factually incorrect. The sanction, however, is not by itself enough: compliance with section 72A read with Rule 9C is what alone enables the set-off, in addition to the sanctioned scheme (para 7.6), and on the facts the assessee had satisfied the conditions and the Rule 9C requirement of using a minimum of fifty per cent of the installed capacity of the amalgamating company within four years, supported by a certificate from an accountant in Form No. 62 in the paper book (para 7.7). The Commissioner (Appeals) had rightly directed the Assessing Officer to allow the set off of the amalgamating company's losses. Both of the 2007 appeals — ITA No. 4345/Mum/2007 by the Revenue and ITA No. 4000/Mum/2007 by the assessee — were partly allowed; the paragraph number of the disposal, and the fate of a third appeal, could not be established on any route and are not stated here (see editor_note).
The Tribunal took the undisputed dates first — the slump sale on 1 November 2002, the appointed date of 1 January 2003 and the sanction on 20 February 2003 — and then fixed on the date the sanction petition was filed, 15 January 2003, to show that the Departmental Representative's argument that the amalgamation process preceded the slump sale was factually wrong, so that the colourable-device allegation founded on it fell away. It reasoned that on the date of amalgamation all the assets and liabilities of GBDFC vested in the assessee from the appointed date, and that what mattered was whether GBDFC had accumulated losses in its kitty at that date, which was not disputed and which had been placed before the High Court with the scheme. It held that the sanction implied that the court had considered the scheme holistically, including the tax-evasion aspect, since the Union of India is a party and all Central Government regulatory authorities have a right to object, and no objection had been filed. It relied on the Madras High Court in Penta Media Graphics Ltd. v. ITO and the Bombay High Court in Casby CFS (P) Ltd., In Re for the proposition that a sanctioned scheme binds everyone including statutory authorities, and on the Supreme Court in J.K. (Bombay) P. Ltd. v. New Kaiser-I-Hind Spinning & Weaving Company and the Bombay High Court in Sadanand Varde v. State of Maharashtra for the statutory force of a sanctioned scheme and for the proposition that an amalgamation order can be challenged only by an appeal under section 391(7) and not in a collateral proceeding. Having disposed of the genuineness attack, it turned expressly to the section 72A and Rule 9C compliance as a separate and necessary question, set out section 72A(2), found no dispute that the conditions and the Rule 9C production requirement were satisfied, noted the Form No. 62 certificate in the paper book, and accepted the commercial rationale, adding that although a tax dispute cannot be determined on newspaper reports the rationale reported before the merger had been ratified by the events that followed it. It accepted that the assessee was not in control of GBDFC before the merger and could not be held responsible for the pre-merger slump sale of the Ibuprofen undertaking to Alpex. In the words reproduced by the source cited on this page: "Having observed so, it would be relevant to address the next crucial aspect as to whether the assessee had complied with the provisions of Section 72A of the Act r.w.rule 9C of the Rules which alone would enable it to get the benefit of set off of accumulated losses of amalgamating company in addition to the scheme of merger approved by the Hon'ble Bombay High Court." The decision followed or applied Penta Media Graphics Ltd. v. ITO, 236 CTR 204 (Madras) — relied on; Casby CFS (P) Ltd., In Re, 231 Taxman 89 (Bom), dated 19 March 2015 — relied on; J.K. (Bombay) P. Ltd. v. New Kaiser-I-Hind Spinning & Weaving Company, AIR 1970 SC 1041 — relied on and quoted; Sadanand Varde v. State of Maharashtra, 247 ITR 609 (Bombay) — relied on and quoted.
It was decided by the ITAT on 2021-10-05 and is reported as ITA No. 4000/Mum/2007 and ITA No. 4345/Mum/2007 (ITAT Mumbai), with a third appeal, ITA No. 2238/Mum/2009, appearing in some renderings of the disposal; assessment year 2003-04; 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(2), 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 Revenue's ground on section 72A was dismissed (para 7.7). Once a scheme of merger has been duly approved by the High Court, having in mind the larger public interest, it cannot be disturbed by the Revenue by merely alleging that the merger was done only to buy losses and was a colourable device; the department, being part of the Union of India which is a party to a scheme petition, had filed no objection before the High Court and had preferred no appeal under section 391(7) of the Companies Act, 1956, and could not object collaterally in the assessment (paras 7.4 and 7.5). The Departmental Representative's factual premise was wrong: the petition for sanction was filed on 15 January 2003, much after the slump sale of 1 November 2002, so the argument that the amalgamation process had been initiated before the slump sale was factually incorrect. The sanction, however, is not by itself enough: compliance with section 72A read with Rule 9C is what alone enables the set-off, in addition to the sanctioned scheme (para 7.6), and on the facts the assessee had satisfied the conditions and the Rule 9C requirement of using a minimum of fifty per cent of the installed capacity of the amalgamating company within four years, supported by a certificate from an accountant in Form No. 62 in the paper book (para 7.7). The Commissioner (Appeals) had rightly directed the Assessing Officer to allow the set off of the amalgamating company's losses. Both of the 2007 appeals — ITA No. 4345/Mum/2007 by the Revenue and ITA No. 4000/Mum/2007 by the assessee — were partly allowed; the paragraph number of the disposal, and the fate of a third appeal, could not be established on any route and are not stated here (see editor_note). It arises in Assessment & Scrutiny, How Tax Law Is Read and Deductions & Disallowances matters, on section 72A, section 72A(2), section 72 of the Income Tax Act 1961, and was decided by Shri Vikas Awasthy, Judicial Member and Shri M. Balaganesh, Accountant Member (Income Tax Appellate Tribunal, 'B' Bench, 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. Check whether the department objected before the sanctioning forum. The Tribunal treated the absence of any objection, and of any appeal under section 391(7) of the Companies Act, 1956, as material to whether the Revenue could re-agitate the scheme in an assessment. Do not stop at the sanction. Prove the section 72A(2) conditions and the Rule 9C conditions separately and on the documents — this Tribunal treated them as the provisions which alone unlock the set-off, in addition to the sanction. Put the Form No. 62 certificate in the paper book. The Tribunal recorded that a certificate from an accountant in Form No. 62 was at page 76 of the factual paper book, and it mattered. Test the clause (a) conditions on the amalgamating company yourself — three or more years in the business in which the loss occurred, and three-fourths of the book value of fixed assets held two years before the amalgamation — because this order's reproduction of section 72A(2) omits them. Where the amalgamating company disposed of an undertaking before the merger, be ready to show that the amalgamated company was not in control of it at the time, which is the point on which the Tribunal absolved the assessee of the pre-merger slump sale.
Validity check could not be completed. Validity check could not be completed. I did not search for any later consideration of this order, and I did not check whether the Revenue took it further. Two matters limit its use quite apart from later treatment. First, the order reproduces section 72A(2) for assessment year 2003-04 as a three-condition provision corresponding to what the section calls clause (b), without the clause (a) conditions on the amalgamating company which the departmental Year 2003 edition prints; the order should not be cited on the content of section 72A(2). Second, the proposition that a sanctioned scheme cannot be attacked collaterally is drawn from the Companies Act, 1956 and section 391(7); it is not a holding that a sanction supplies the conditions of section 2(1B) or section 2(19AA), and the Tribunal in terms treated section 72A and Rule 9C as separate hurdles. 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.
The order was read at https://indiankanoon.org/doc/18625968/ and paragraphs 6.5 to 6.12 and 7.1 to 7.7 were transcribed continuously from the plain document. A SERIOUS NUMBERING CONFLICT AROSE AND HAS BEEN RESOLVED IN FAVOUR OF THE 7.x NUMBERING. On a first fetch the paragraph beginning "There is absolutely no dispute that assessee in the instant case had fulfilled all the three conditions cumulatively" was returned numbered 6.7; a second full fetch returned 6.7 as "Per contra, the ld. DR vehemently argued..." and the passage at 7.7; a structural listing requested on verification returned yet a third numbering, 7.4 and 7.5, and was self-contradictory, giving paragraphs 7.1 and 7.8 identical opening words. Two /docfragment/ retrievals, run on separate passes and each printing the number alongside the text, returned 7.6 for the paragraph beginning "Having observed so, it would be relevant to address the next crucial aspect" and 7.7 for the paragraph beginning "There is absolutely no dispute". That numbering is independently corroborated by the sequence in which the Revenue's grounds are dismissed in this order — ground 1(a) at paragraph 3.2, ground 1(b) at paragraph 4.1, ground 1(e) at paragraph 8.11 — which places ground 1(d), the section 72A ground, in the 7.x range. The citations 7.6 and 7.7 used in this entry are therefore sound. Any 6.x citation to this order, and any structural listing of it, should be rejected. The passage quoted as the key quote, paragraph 7.6, was transcribed on two independent routes — the plain document and a /docfragment/ retrieval keyed to "which alone would enable it to get the benefit" — and came back in identical words both times, save that the plain document renders the apostrophe in "Hon'ble" as a broken character and the docfragment renders it as an apostrophe; I have used the apostrophe form and have made no other change. THE DISPOSAL CANNOT BE ESTABLISHED AND IS NOT STATED. Five renderings were obtained across two passes and no two agree. A first plain-document fetch returned paragraph 22 disposing of three appeals and adding "The appeal of the assessee in ITA No. 2238/Mum/2009 for A.Y.2003-04 is dismissed as infructuous"; a /docfragment/ retrieval returned paragraph 22 disposing of two only, both partly allowed; a second plain-document fetch on verification returned paragraph 22 disposing of three, the third being "ITA No.2238/Mum/2009 is dismissed as withdrawn as stated supra"; a /docfragment/ retrieval on verification returned a paragraph numbered 26 headed "To Sum Up" containing a table giving ITA 4345/Mum/2007 (Revenue) Partly Allowed, ITA 4000/Mum/2007 (Assessee) Partly Allowed and ITA 2238/Mum/2009 (Assessee) Allowed; and a further /docfragment/ retrieval keyed to "To Sum Up" could not find that phrase at all. The only proposition every route supports is that the two 2007 appeals were each partly allowed, and that is all this entry states. The paragraph number of the disposal is NOT established — it is given as 22 on three routes and 26 on a fourth — and the fate of ITA No. 2238/Mum/2009 is NOT established, three routes giving three different answers. No paragraph number should be cited for the disposal of this order. The section 72A ground itself was dismissed at the end of paragraph 7.7 in terms — "Accordingly, ground No. 1(d) raised by the revenue is dismissed" — which is the operative outcome this entry reports. No law-report citation was printed on either route. 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 Revenue's ground on section 72A was dismissed (para 7.7). Once a scheme of merger has been duly approved by the High Court, having in mind the larger public interest, it cannot be disturbed by the Revenue by merely alleging that the merger was done only to buy losses and was a colourable device; the department, being part of the Union of India which is a party to a scheme petition, had filed no objection before the High Court and had preferred no appeal under section 391(7) of the Companies Act, 1956, and could not object collaterally in the assessment (paras 7.4 and 7.5). The Departmental Representative's factual premise was wrong: the petition for sanction was filed on 15 January 2003, much after the slump sale of 1 November 2002, so the argument that the amalgamation process had been initiated before the slump sale was factually incorrect. The sanction, however, is not by itself enough: compliance with section 72A read with Rule 9C is what alone enables the set-off, in addition to the sanctioned scheme (para 7.6), and on the facts the assessee had satisfied the conditions and the Rule 9C requirement of using a minimum of fifty per cent of the installed capacity of the amalgamating company within four years, supported by a certificate from an accountant in Form No. 62 in the paper book (para 7.7). The Commissioner (Appeals) had rightly directed the Assessing Officer to allow the set off of the amalgamating company's losses. Both of the 2007 appeals — ITA No. 4345/Mum/2007 by the Revenue and ITA No. 4000/Mum/2007 by the assessee — were partly allowed; the paragraph number of the disposal, and the fate of a third appeal, could not be established on any route and are not stated here (see editor_note).
Every entry in this library links to where it was found, so you can check it yourself rather than take our word for it.
Must my 10A unit's profits be reduced by other units' losses before the deduction?
A declaration was required by the due date and you filed it late. Is that fatal?
I filed my loss return late on my CA's advice and lost the carry-forward. Will the delay be condoned?
Our shares moved from one group company to another. Do we lose our carried forward losses?