TaxTMI 
TaxTMI 
2011 (3) TMI 578
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....ium Health Care Products and Equipments Ltd., got amalgamated with SKOL Breweries Ltd. We can call this first amalgamation 4. As on 1-4-2002, SKOL Breweries Ltd. Amalgamated with M/S. Morkutir Investments and Trading Company Private Ltd. Simultaneously the Beer Business of M/S.Maharastra Breweries Ltd. Demerged and merged with M/S. Morkutir Investments and Trading Company Private Ltd. We can call this second amalgamation. M/S. Morkutir Investments and Trading Company Private Ltd., later changed its name to M/S.SKOL Breweries Ltd. This happened on 22/5/2003. 5. The assessee company filed return of income for A.Y 2003-04 declaring business income at Rs. Nil. A perusal of the computation of income reveals that against the total income of Rs.6,54,53,103/- it set off carried forward business loss u/s. 72(1) of Rs.4,56,28,025/- and brought forward unabsorbed depreciation of Rs.1,98,24,078/- thus wiping of full profit. The computation of income does not show claim of any other loss/depreciation brought forward or carried forward by the assessee. The return was also accompanied by the tax audit report. As per item No.25 of the audit report, the assessee has given year wise ....
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....p; 6. 1985-1986 2,273,437 7. 1986-1987 2,827,965 8. 1987-1988 2,400,294 9. 1988-1989 457,356 10. 1989-1990 3,724,778 11. 1990-1991 1,954,795 12. 1991-1992 - 13. 1992-1993 - 23,425,969 14. 1993-1994 - 15. 1994-1995 1,657,254 7,807,268 16. 1995-1996 6,172,940 17. 1996-1997 20,145,481 10,298,590 18. 1997-1998 6,601,855 19. 1998-1999 2,263,656 36,348 20. 1999-2000 10,794,734 21. 2000.2001 7,062,297 45,104 22. 2001-2002 23,877,193 23. 2002-2003 - 4,014,746 Total 104,835,810 45,628,025 8. The AO did not allow the claim of the Assessee as made by the Assessee for set of unabsorbed depreciation/loss as claimed in the revised computation of income filed by the Assessee alongwith the letter dated 11/1/2006 for the following reas....
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....d and set off of accumulated loss and unabsorbed depreciation allowance in amalgamation or demerger, etc.- (1) Where there has been an amalgamation of a company owning an industrial undertaking or a ship with another company, then, notwithstanding anything contained in any other provision of this Act, the accumulated loss and the unabsorbed depreciation of the amalgamating company shall be deemed to be the loss or, as the case may be, allowance for depreciation of the amalgamated company for the previous year in which the amalgamation was effected, and other provisions of this Act relating to set-off and carry forward of loss and allowance for depreciation shall apply accordingly. (2) Notwithstanding anything contained in sub-section (1), the accumulated loss shall not be set off or carried forward and the unabsorbed depreciation shall not be allowed in the assessment of the amalgamated company unless the amalgamated company- (i) holds continuously for a minimum period of five years from the date of amalgamation at least three-fourths in the (2) book value of fixed assets of the amalgamating company acquired in a scheme of amalgamation; (ii) continues the bu....
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....n which business reorganisation was effected and other provisions of this Act relating to set off and carry forward of loss and allowance for depreciation shall apply accordingly: Provided that if any of the conditions laid down in the proviso to clause (xiii) or the proviso to clause (xiv) to section 47 are not complied with, the set-off of loss or allowance of depreciation made in any previous year in the hands of the successor company, shall be deemed to be the income of the company chargeable to tax in the year in which such conditions are not complied with. (7) For the purposes of this section,- (a) "accumulated loss" means so much of the loss of the predecessor firm or the proprietary concern or the amalgamating company or the demerged company, as the case may be, under the head "Profits and gains of business or profession" (not being a loss sustained in a speculation business) which such predecessor firm or the proprietary concern or amalgamating company or demerged company, would have been entitled to carry forward and set off under the provisions of section 72 if the reorganisation of business or amalgamation or demerger had not taken place; ....
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.... Breweries and Distilleries Ltd. and Charminar Breweries Ltd. (companies that amalgamated with SKOL Breweries Limited with effect from July 1, 2000) under section 72A of the Act. 2.4 That on the facts and in the circumstances of the case and in law, the ld. A.R has erred in law in denying set off of unabsorbed depreciation of Rs. 23,877,193 for the assessment year 2001-02 for erstwhile SKOL Breweries Ltd. under section 72A of the Act." 14. As can be seen ground No.2.1 to 2.3 relates to addition made by AO invoking Sec.72A(3) of the Act. While Ground No.2.4 relates to addition made by AO invoking Sec.72A(2). The common thread that runs through both the above grounds is the interpretation of Sec.72A(2) regarding holding continuously for a minimum period of five years from the date of amalgamation at least three-fourths in the (2) book value of fixed assets of the amalgamating company acquired in a scheme of amalgamation. The difference would be that the application of Sec.72A(3) is in respect of the unabsorbed depreciation/loss of amalgamating companies already set off by erstwhile SKOL Breweries Ltd. after amalgamation in the year 2000(first amalgamation). While the ....
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....of unabsorbed business losses and, unabsorbed depreciation of Rs. 14,09,44,626/- instead of Rs.2,38,77,193. It is submitted that, the aforesaid sum of Rs. 14,09,44,626 comprises of unabsorbed business losses of Rs. 4,11,61,336 and unabsorbed depreciation of Rs. 9,97,83,291/-. 4. It is therefore, prayed that the aforesaid clarified ground may kindly be considered and adjudicated in the instant appeal." 16. The Hon'ble ITAT reversed the order of the CIT(A) and allowed ground No.3 as raised in the revised grounds of appeal. 17. In this M.A. the plea of the revenue is that vide Para 3 of ITAT's order the assessee has taken grounds of appeal that the CIT(A) erred in not allowing the benefit of unabsorbed business losses of Rs. 4,11,61,335/-, unabsorbed depreciation of Rs. 9,97,87,291/- aggregating to Rs.14,09,44,926/- of erstwhile Skol Breweries Ltd. (As against this claim, as per note 1 or 7 to the Annexure 11 of tax audit report, the depreciation pertaining to erstwhile Skol Breweries Ltd. amounts to Rs.2,38,77,193/- only) The figures adopted by the assessee in appeal before the Tribunal do not appear in the original return, revised return and the revised computation ....
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....6/- the assessee has only been able to produce documents for s. 1,202,51,164 and for the balance Rs.2,06,93,461/- no documents have been submitted by the assessee. Thus, the assessee is allowed depreciation in terms of the decision of Hon'ble ITAT of Rs. 12,02,51,164/-. Further out of the aforesaid amount of Rs. 12,02,51,164/- an amount of business losses and unabsorbed depreciation has already been allowed to be set off from the assessable income to the extent of Rs. 3,18,94,029/- while giving effect to the order of CIT(A) for the assessment year 2002-03 vide appeal effect order dated 23/1/2006. Accordingly the assessee is allowed the benefit of the balance business loss and unabsorbed depreciation of Rs. 8,83,57,135/- u/s.72A of the IT Act. Also the assessee is allowed the benefit of business losses of Rs. 40,96,198 u/s. 72 of the IT Act in terms of the decision of Hon'ble ITAT." 20. He also explained the figure of Rs.14,09,44,625/- claimed in Ground No.3 of the revised grounds of appeal before the Tribunal as follows: "The final quantification of the unabsorbed business losses and depreciation of Rs.1,09,44,926/- (as stated in the revised/modified grounds of appe....