Financial viability under section 72A turns on real liquidity and solvency, not asset value or share exchange ratio.

Section 72A relief depends on whether the amalgamating company was financially non-viable immediately before amalgamation and whether the amalgamation served the public interest. The Court held that the public interest requirement was satisfied because the merger preserved production, employment, and rehabilitation of an important industrial unit. On financial viability, the decisive test was the company's real condition at the relevant date, including liquidity, solvency, accumulated losses, capital erosion, creditor pressure, and access to finance. Market value of assets, the share exchange ratio, and isolated statements in company-court proceedings were irrelevant. The refusal of relief was therefore unsustainable and the impugned recommendations and order were quashed.

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Issues: Whether the amalgamating company was not, immediately before amalgamation, financially viable within the meaning of section 72A of the Income-tax Act, 1961; whether the amalgamation was in the public interest; and whether the refusal of the declaration under section 72A and the consequent recommendations and order were sustainable.

Analysis: Section 72A grants relief only where the amalgamating company was financially non-viable immediately before amalgamation and the amalgamation served the public interest. The record showed that the public interest condition stood satisfied, as the amalgamation preserved production, employment, and rehabilitation of an important industrial unit. On financial viability, the decisive inquiry was the company's condition at the relevant date, judged by profitability, liquidity, solvency, accumulated losses, and access to finance. The material established heavy accumulated losses, negative liquidity, erosion of capital and reserves, pressing creditor demands, and inability to raise further funds. Market value of assets, the share exchange ratio, and isolated statements in company-court proceedings were held irrelevant to that statutory test. The authorities had relied on irrelevant considerations and had failed to address the real financial position of the unit.

Conclusion: The company was financially non-viable immediately before amalgamation, the public interest requirement was satisfied, and the refusal of relief under section 72A was unsustainable.

Final Conclusion: The impugned recommendations and order were quashed, and the statutory authorities were directed to reconsider the application and the consequential certificate in accordance with section 72A.

Ratio Decidendi: For relief under section 72A, the relevant test is the amalgamating company's financial viability immediately before amalgamation, determined by real liquidity, solvency, losses, and access to finance; market value of assets or the share exchange ratio cannot displace that statutory inquiry.

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