TaxTMI 
TaxTMI 
2018 (2) TMI 50
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....e audit for equity related investment to be made by investors on the contention that expenditure has not been incurred by your appellant, by holding that the liability to pay the said expenditure was not that of the appellant company and also concluding that the same was capital in nature; 2. The learned AO and CIT(A) grievously erred in denying carry forward of business losses of previous years of Rs. 2,00,60,988/- by invoking the provisions of section 79 of the Income Tax Act, 1961, on the ground that 51% voting power in the appellant company as at 31 March 2009 was not held by persons holding 51% of the voting power in the years in which the losses were incurred; and 3. For these and other grounds that may be adduced at the time of hearing, the order of the Joint Commissioner of Income Tax, to the extent upheld by the CIT(A), may be set aside and this appeal be allowed." Grounds raised for Assessment Year 2010-11 in ITA No. 1901/Bang/2016 "1. The learned AO and CIT(A) have grievously erred in denying carry forward of unabsorbed depreciation loss of Rs. 3,70,22,124/- under section 72A of the Income Tax Act, 1961, on the ground that the amalgama....
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.... noted that the assessee's business model was to provide various support services to its parent company located in USA and the concerned Services Agreement clearly provides that the assessee company would be reimbursing the expenditure incurred with a markup of 8%. It is also noted that in the course of service provided to the parent company which is in the hotel business, the assessee has availed the services of Control Risk Group, Singapore in order to carry out the due diligence and risk analysis of the target hotels. Under these facts, it was held by CIT (A) in that case that these expenses are incurred in the normal course of business and accordingly, are revenue in nature. Under these facts the Tribunal confirmed the order of CIT (A) in that case. In the present case, the facts are totally different. In the present case, due diligence was not carried out in regular course of business but it was carried out for the purpose of inviting investments from prospective investors. Hence in the present case, this Tribunal order is not applicable. 5. Regarding various other judgments on which reliance has been placed before CIT (A) as noted by CIT (A) in Para no. 4 of its order, it ....
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....ase as noted above, we find that more than 51% of shares, in fact, to the extent of 55.90% of the total shares, only two persons were holding those shares as on 31.03.2008 being the year in which loss was incurred and as on 31.03.2009 being the year in which the set off of brought forward depreciation is being claimed and hence, the claim of the assessee cannot be disallowed by invoking the provisions of section 79 of the IT Act. Therefore, on this issue, we decide the issue in favour of the assessee. This ground of the assessee is allowed. 8. In the result the appeal of the assessee for Assessment Year 2009-10 is partly allowed. 9. Now we take up the appeal of the assessee for Assessment Year 2010-11. The only issue involved in this year is regarding denial of carry forward of unabsorbed depreciation loss of Rs. 3,70,22,124/- u/s. 72A of the IT Act on the ground that the amalgamating company, M/s. Banashankari Medical Oncology Research Centre Limited (BMORCL) is not an industrial undertaking as per the provisions of the said section. Regarding this issue, it was submitted by ld. AR of assessee that in respect of the provisions of section 72A of the IT Act, clause (aa) of sub....
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....mpany; or (b) a banking company referred to in clause (c) of section 5 of the Banking Regulation Act, 1949 (10 of 1949) with a specified bank; or (c) one or more public sector company or companies engaged in the business of operation of aircraft with one or more public sector company or companies engaged in similar business, 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 unabsorbed 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. (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 private company or unlisted public company before conversion into limited liability partnership or the amalgamating company or the demerged company, as the case may be, under the head "Profits and gains of business o....
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....rtaking as has been defined as per clause (aa) of sub section 7 of section 72A as reproduced above. As per this definition, it has to be seen that the undertaking should be engaged in manufacture or processing of goods. In our considered opinion, an undertaking to be considered as an industrial undertaking, the total activities of the undertaking should be that of manufacturing or processing of goods and even if the undertaking is engaged in some other activities also, the primary activity of the said undertaking should be that of manufacturing or processing of goods. As per the judgment of Hon'ble Karnataka High Court rendered in respect of merger of M/s. Banashankari Medical and Oncology Research Centre Pvt. Ltd. with the assessee company available on pages 72 to 86 of paper book, it is noted in Para no. 2 of the judgment that this company M/s. Banashankari Medical and Oncology Research Centre Pvt. Ltd. is having main object to carry on the business of establishing developing, leasing, managing, operating and running of medical service centers such as nursing care homes, hospitals, polyclinics, health resorts, health clubs, in-patient and out-patient wards, laboratories, ther....
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....t of merger of that company with the assessee company, copy available on page no. 74 of the paper book, the assessee has not carried out any such activity and the only activity which can be said to be near to this activity is the activity of laboratories where for the purpose of carrying out certain diagnostic tests, it can be said that some processing is involved but this is not a primary activity. Therefore, this judgment also is not applicable. 15. The next judgment cited before us is a judgment of Hon'ble Madras High Court rendered in the case of CIT Vs. Commercial Laws of India (P.) Ltd. (supra). In that case, the assessee company was publisher of fortnightly journal and actual printing was done by a different concern and assessee was engaged in folding and stitching of printed sheets so as to be used as parts of journal which were later on dispatched to subscribers. Under these facts, it was held that the assessee was engaged in processing of goods. We have already seen that the only activity of the amalgamating company which can be equated with processing of goods is regarding its activity of laboratory but this is not a primary activity of the amalgamating company. There....