BIFR-sanctioned rehabilitation scheme overrides inconsistent laws and can satisfy section 72A consent requirements without separate approval.

A BIFR-sanctioned rehabilitation scheme under the Sick Industrial Companies (Special Provisions) Act, 1985 was treated as binding and conclusive, with overriding effect over inconsistent laws under section 32. The scheme could operate as compliance with the consent requirements linked to section 72A of the Income-tax Act, 1961, and no separate approval from the Central Government or CBDT was necessary where the Board acted within its statutory power. The BIFR order also exempted the assessee from sections 80 and 139, supporting validity of the revised loss return, and the Tribunal was required to decide the alternative timeliness objection under those provisions.

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Issues: (i) Whether a scheme sanctioned under the Sick Industrial Companies (Special Provisions) Act, 1985 could be treated as conclusive evidence that the requirements relating to consent under section 72A of the Income-tax Act, 1961 had been complied with; (ii) whether the sanctioned scheme had overriding effect over other laws; (iii) whether separate approval or consent of the Central Government or the Central Board of Direct Taxes was necessary notwithstanding the BIFR sanction; (iv) whether the revised return of loss filed by the assessee was valid in view of the BIFR order and the exemption from sections 80 and 139 of the Income-tax Act, 1961; and (v) whether the Tribunal was justified in not deciding the alternative contention regarding timeliness of the revised return under sections 139(3) and 80.

Issue (i): Whether a scheme sanctioned under the Sick Industrial Companies (Special Provisions) Act, 1985 could be treated as conclusive evidence that the requirements relating to consent under section 72A of the Income-tax Act, 1961 had been complied with.

Analysis: The scheme sanctioned by the Board for Industrial and Financial Reconstruction under section 18 became conclusive by virtue of section 18(7). Section 32(2) specifically empowered the Board to exercise the Central Government's power under section 72A of the Income-tax Act, 1961 without recommendation by the specified authority. Once the sanctioned scheme provided for amalgamation and the declaration under section 72A was issued by the Board, the statutory requirements were treated as satisfied.

Conclusion: The issue was answered in favour of the assessee.

Issue (ii): Whether the sanctioned scheme had overriding effect over other laws.

Analysis: Section 32(1) of the Sick Industrial Companies (Special Provisions) Act, 1985 gives the Act and schemes made thereunder overriding effect over inconsistent provisions of other laws, except the specifically saved enactments. The court treated the sanctioned scheme as binding and operative according to its terms, including the date from which it was made effective.

Conclusion: The issue was answered in favour of the assessee.

Issue (iii): Whether separate approval or consent of the Central Government or the Central Board of Direct Taxes was necessary notwithstanding the BIFR sanction.

Analysis: In view of section 32(2), the Board itself could exercise the relevant power under section 72A of the Income-tax Act, 1961. A further separate consent from the Central Government or the Central Board of Direct Taxes was therefore not required once the BIFR had sanctioned the scheme and acted within its statutory competence.

Conclusion: The issue was answered against the Revenue and in favour of the assessee.

Issue (iv): Whether the revised return of loss filed by the assessee was valid in view of the BIFR order and the exemption from sections 80 and 139 of the Income-tax Act, 1961.

Analysis: The BIFR order exempted the assessee from the application of sections 80 and 139, and the sanctioned scheme operated from the date specified in it. On that footing, the revised return claiming loss was to be treated as validly filed.

Conclusion: The issue was answered in favour of the assessee.

Issue (v): Whether the Tribunal was justified in not deciding the alternative contention regarding timeliness of the revised return under sections 139(3) and 80.

Analysis: The alternative contention had independent significance because, even apart from the BIFR-based exemption, the court found that the original return had been filed within time and the revised return had to be tested on the footing of sections 139(3) and 80. The Tribunal ought to have considered and decided that contention.

Conclusion: The issue was answered against the Tribunal and in favour of the assessee.

Final Conclusion: The reference was substantially decided in favour of the assessee, with the sanctioned rehabilitation scheme given full legal effect and the revised loss return upheld, though one question was answered against the Revenue on the necessity of separate governmental consent.

Ratio Decidendi: A scheme sanctioned by the BIFR under the Sick Industrial Companies (Special Provisions) Act, 1985 is binding and conclusive, has overriding effect over inconsistent laws, and where section 32(2) applies the Board may exercise the Central Government's power under section 72A of the Income-tax Act, 1961 without a separate governmental consent.

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