Amalgamation and devolution of capital assets treated as succession under tax law, preserving continuity of business identity.

In an amalgamation, the capital assets and business of the transferor company were treated as having passed to the assessee by devolution under section 49(1)(iii) of the Income-tax Act, 1961. The reasoning was that the court-sanctioned amalgamation preserved the identity and continuity of the business, and the provision was read as in pari materia with section 12B(3) of the Indian Income-tax Act, 1922. On that basis, the transfer was regarded as a devolution by operation of law and within the statutory expression "by succession", so the capital assets became the assessee's property.

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Issues: Whether, on amalgamation, the capital assets of the transferor company became the property of the assessee by succession or devolution within section 49(1)(iii) of the Income-tax Act, 1961.

Analysis: The assets and business of the amalgamating company stood transferred to the assessee under the court-sanctioned amalgamation, and the identity and continuity of the business were preserved. The provision in section 49(1)(iii) of the Income-tax Act, 1961 was treated as being in pari materia with section 12B(3) of the Indian Income-tax Act, 1922. On that basis, the transfer was regarded as a devolution by operation of law, bringing the case within the expression "by succession" in the statute.

Conclusion: The capital assets became the property of the assessee by devolution within section 49(1)(iii), and the first question was answered in the affirmative in favour of the assessee.

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