Amalgamation and tax losses: carried-forward business loss and unabsorbed depreciation do not transfer without express statutory authority.

On amalgamation, the amalgamated company is not entitled to carry forward and set off the amalgamating company's business loss or unabsorbed depreciation unless the Act expressly permits it. The Income-tax Act treats each company as a separate assessee, and the carry forward of business loss under section 72 and unabsorbed depreciation under section 32(2) ordinarily remains confined to the entity that incurred the loss. Although the Act contains specific transfer provisions for certain allowances in limited amalgamation cases, no comparable provision extends these benefits for business loss or unabsorbed depreciation to the amalgamated company. The absence of a statutory exception was decisive, and revision under section 263 was therefore justified.

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Issues: Whether, on amalgamation of two companies, the amalgamated company could claim carry forward and set-off of the amalgamating company's business loss and unabsorbed depreciation in the absence of a specific statutory provision, and whether the Commissioner was justified in revising the assessment under section 263.

Analysis: The scheme of the Income-tax Act treats each corporate assessee as a separate assessable entity. Carry forward of unabsorbed depreciation under section 32(2) and business loss under section 72 is, in the ordinary course, confined to the assessee that incurred the loss. The Act contains special provisions permitting transfer of certain allowances in specified amalgamation situations, such as sections 32A(6), 33(3) and 33A(5), but no provision extends the benefit of carry forward of business loss or unabsorbed depreciation under sections 32(2) and 72 to the amalgamated company. The distinction between amalgamation and succession did not assist the assessee, because the absence of a statutory exception remained decisive.

Conclusion: The amalgamated company was not entitled to take over and set off the amalgamating company's carried forward business loss and unabsorbed depreciation, and the Commissioner's revision under section 263 was justified.

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