TaxTMI 
TaxTMI 
2010 (10) TMI 192
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.... return stated to be a revised one on March 31, 1994, claiming total loss of Rs. 152.12 crores. This loss consisted of Rs. 7.97 crores pertaining to M/s. SPL and Rs. 134.15 crores pertaining to M/s. OSL, the amalgamated company. The loss of OSL included as follows : (i) unabsorbed business loss for earlier years, (ii) current year's business loss from February 1, 1992 to March 31, 1992, (iii) unabsorbed depreciation allowance for earlier years, and (iv) unabsorbed investment allowance for earlier years. 3. The above claim of set off and carry forward of loss attributed to M/s. OSL was pursuant to the order of the Board for Industrial and Financial Reconstruction (hereinafter referred to BIFR, dated January 25, 1994, sanctioning a scheme for rehabilitation of M/s. OSL The said OSL made a reference in 1990 and upon observing procedure namely appointment of operating agency, preparation of the above scheme for amalgamation/merger and upon deliberation the said scheme was ultimately sanctioned for rehabilitation by way of amalgamation/merger of OSL with the assessee. Subsequently, the BIFR also passed an order on March 17, 1994, whereby it amende....
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.... dated June 8, 1994 ([1994] 208 ITR (St.) 98) of the Central Board of Direct Taxes withdrawing earlier Circular No. 523 dated October 5, 1988, and Circular No. 576 dated August 31, 1996. 6. The Assessing Officer also disallowed the claim of Rs. 5 lakhs paid to PHD Chamber of Commerce for construction of Lakshmipat Singhania Auditorium and Rs. 10,000 paid to M/s. Price Waterhouse and Co. for valuation of shares. The Assessing Officer also disallowed Rs. 60,16,537 being roll-over charges for payment of foreign currency loans. A sum of Rs.41,12,177 claimed as deduction under section 36(1)(iii) on account of interest on funds borrowed for purchase of plant and machinery was disallowed by the Assessing Officer. 7. On appeal being taken the Commissioner of Income-tax (Appeals) (hereinafter referred to first appellate authority) however, held partly in favour of the assessee-company and partly in favour of the Revenue. The appellate authority held amongst others as follows : (i) that the revised return filed on March 31, 1994 claiming the loss was valid and was not affected by the provisions of section 80 showing profit was filed within time, (ii) relief un....
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.... the respondent/assessee ultimately referred by its order dated September 20, 1999 the following questions for opinion of this court : "(A) Whether, on the facts and in the circumstances of the case and on correct interpretation of the scope and ambit of sections 18(7) and 19(2) of the SIC (Special Provisions) Act, 1985, and harmonious construction of the above said provision of the SIC (Special Provisions) Act, 1985, the Tribunal was correct in law in holding that the sanctioned scheme shall be conclusive evidence of the said requirements regarding the consent of the Central Government/Central Board of Direct Taxes having been complied with as required in section 19(2) and mentioned in the Central Board of Direct Taxes Circular No. 683 dated June 8, 1994 ? (B) Whether, on the facts and in the circumstances of the case and on correct interpretation of the scope and section 32(1) of the SIC (Special Provisions) Act, 1985, the Tribunal was correct in law in holding that on a scheme having been sanctioned under the SICA, the provisions of the scheme have overriding effect over any other law except the FERA and the ULCRA ? (C) Whether the Tribunal was right in h....
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.... of the Income-tax Act. All the transactions had taken place prior to amalgamation. Moreover, consent of the Central Government in cases involving financial assistance for rehabilitation of sick industrial undertaking is required to be expressly given and it was given earlier by two Circulars being No. 523 dated October 5, 1988 and subsequent Circular No. 576 dated August 31, 1990. 15. Those circulars were of general nature. Subsequently, by new Circular No. 683 dated June 8, 1994 the Central Board of Direct Taxes has issued a circular superseding earlier circulars providing fiscal concession or financial assistance under direct taxes will now be considered in each individual case on the merits for the purpose of granting consent as contemplated in section 19(2) of the SICA, 1985. According to him the consent given by the Board is of no effect. 16. He submits that irrespective of the provisions in the SICA 1985 the consent of the Revenue is expressly required as it is contemplated in the said Act itself. This circular is binding upon the Assessing Officer and he has followed it. 17. When admittedly there has been no consent of the Central Government in terms....
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....ing Products Ltd. v. Board for Industrial and Financial Reconstruction reported in [1996] 218 ITR 140 (SC). 23. His next contention is in relation to the fifth question that when the Tribunal has decided in favour of his client with relation to applicability of section 32 and section 85 the learned Tribunal should have considered other aspects and decided that the loss claimed in the revised return filed on March 31, 1994, was not beyond the time stipulated in the provision of section 139(3) and section 80, and exemption should have been allowed from the applicability of the provisions of sections 80 and 139 of the Income-tax Act. 24. We have carefully considered the contention of learned counsel for both parties and we have gone through the judgment and order of the Assessing Officer, Commissioner of Income-tax (Appeals) and the learned Tribunal. While noting the questions referred to by the learned Tribunal about the power of the BIFR as aforesaid, we think that before we give answer to the question specifically raised it is appropriate to discuss the power of the BIFR in sanctioning scheme once a sick industrial company makes a reference under the said Act.  ....
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....ved from the sick industrial company and the operating agency and also from the transferee industrial company and any other company concerned in the amalgamation and from any shareholder or any creditors or employees of such companies. 32. After compliance with all the aforesaid finally the Board sanctions the scheme under section 18 sub-section (4) of the said Act which specifically provides as follows : "(4) The scheme shall thereafter be sanctioned, as soon as may be, by the Board (hereinafter referred to as the `sanctioned scheme') and shall come into force on such date as the Board may specify in this behalf." 33. Thus, it is plain that date of operation of the scheme may be prospective or may be retrospective as the situation will demand and as per the decision of the Board. Sub-section (5) of the said section also provides for review, modification of any sanctioned scheme at the instance of the operating agency. 34. Section 19 of the said Act provides for rehabilitation arranging financial assistance and concerned financial institutions who have stake in the sick industrial company are notified for consenting and if no consent is received within a pa....
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....ction (8) provide as follows : "(7) The sanction accorded by the Board under sub-section (4) shall be conclusive evidence that all the requirements of this scheme relating to the reconstruction or amalgamation, or any other measure specified therein have been complied with and a copy of the sanctioned scheme certified in writing by an officer of the Board to be a true copy thereof, shall, in all legal proceedings (whether in appeal or otherwise) be admitted as evidence." "(8) On and from the date of the coming into operation of the sanctioned scheme or any provision thereof, the scheme or such provision shall be binding on the sick industrial company and the transferee company or, as the case may be, the other company and also on the shareholders, creditors and guarantors and employees of the said companies." 39. In this case, it appears that the Assessing Officer has altogether ignored the legal effect of the scheme taking note of Circular No. 683 dated June 8, 1994 as the consent was not accorded by the Central Government. In other words, the Assessing Officer thought that the circular is having overriding effect over the said provision of the sancti....
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....th another company, the provisions of section 72A of the Income-tax Act shall apply in relation to such amalgamation, subject to this modification that the power of the Central Government is to be exercised by the BIFR without the necessity of a recommendation by the specified authority mentioned in section 72A of the Income-tax Act. This is because, for the purposes of according sanction to a scheme of amalgamation of a sick industrial undertaking with any other company under section 18 of the said Act, the BIFR has to be satisfied that the amalgamating company is not financially viable, which is the effect of section 3(1)(o) of the said Act, and that the amalgamation is necessary or expedient in the public interest, which is the effect of sections 17 and 18 of the said Act read together. Sanction of a scheme of amalgamation under section 18 of the said Act necessarily implies that the requirements of section 72A of the Income-tax Act have been met and the BIFR must exercise the power conferred upon it by section 32(2) of the said Act and make the declaration contemplated by section 72A of the Income-tax Act." 43. In other words, once the scheme is framed by virtue of sect....