Section 72A

Section 72A — the law in short

What the courts have decided on section 72A, in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.

• Aspinwall and Co Ltd v Inspecting Assistant Commissioner Supreme CourtHelps department
  My company absorbed a loss-making company under a court-sanctioned scheme of amalgamation, and the scheme says the transferor's losses are to be treated as mine. Can I set those accumulated losses off against my own income under the Kerala Agricultural Income Tax Act, 1991?
  No. The Kerala Agricultural Income Tax Act, 1991 contains no provision answering to s.72A of the Income-tax Act, 1961, and counsel could point to none under which the losses of the amalgamating company may be set off against the income of the amalgamated company. A clause in the scheme of amalgamation saying the transferor's losses shall be deemed to be the transferee's does not supply the missing statutory right, and Dalmia Power does not help where the State of Kerala was never noticed in the amalgamation proceedings. The five appeals were dismissed.
• CIT v Eastman Exports Global Clothing Pvt Ltd High CourtHelps taxpayerValidity unconfirmed
  The Commissioner has issued a s.263 notice saying the transferor companies had not been in business for three years, so the losses we took over cannot be carried forward. Our arrangement was a demerger, not an amalgamation. Does the three-year condition apply?
  No. The three-year condition is in s.72A(2), which governs amalgamation. A demerger is governed by s.72A(4), which contains no such condition. The Madras High Court held that a revision order built on the wrong sub-section, and which merely remitted the matter to the assessing officer for enquiry, did not satisfy the requirement that the order sought to be revised be erroneous.
• Cargill India Pvt Ltd v CBDT High CourtHelps departmentValidity unconfirmed
  We could not reach 50 per cent of the amalgamating company's installed capacity within four years. Will the Central Government relax Rule 9C if we show we genuinely tried?
  Not as a matter of course. The Delhi High Court held that the proviso to Rule 9C(a) is an exception, that the power to relax is not to be exercised liberally but only in exceptional cases and only to the extent necessary, and that the guiding purpose is the revival of the amalgamating company's industrial undertaking. Rejection was upheld where the threshold had still not been reached even within the extended period the applicant itself had asked for.
• PCIT v Lotte India Corporation Ltd High CourtHelps taxpayerValidity unconfirmed
  We took over a loss-making company by amalgamation and did not file Form 62 for the third year after the merger. Does that by itself destroy the s.72A carry forward?
  Not on this view. The Madras High Court held that filing the Form 62 certificate for the third assessment year is not a condition precedent or a mandatory condition, but at best directory, and that non-compliance does not disentitle the amalgamated company. What matters is that the level of production prescribed by Rule 9C is in fact achieved, and that can be reached at any point within four years of the merger.

Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.