TaxTMI 
TaxTMI 
2018 (2) TMI 1691
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....st u/s. 234 r/w 234B(3) 5, 54, 45, 230 7 Not granting credit of TDS 5, 35, 65, 670 8 2 2010-11 Validity of order u/s. 153A 1, 2, 3 & Addl. Gr. 1 Bogus Purchase 15, 46, 02, 444/- 4 (a) Interest on investment 4, 370/- 5 (b) Fees 19, 00, 000/- (c) prior period Expenses 1, 67, 854/- (d) PF 59, 90, 318/- (e) Income Cessation 1, 25, 040/- Not allowing depn. On asset of Malanpur Steel Ltd 1, 53, 62.000/- 6, 7 & 8 Merged vide BIFR order. Disallowance of set off Of b/f loss on asset of AY 2000-01 of Malanpur Steel Ltd. 18, 63, 71, 316/- 9 Addition for difference of assets and liabilities of Malanpur Steel Ltd 3, 18, 98, 060 10 Interest u/s. 234B r.w234B (3) Interest u/s. 234D 8, 06, 26, 679 11 & 12 13 3 2011-12 Validity of order ....
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....) 12, 88, 83, 249 7 7 2015-16 Validity of order u/s. 153A 1, 2, 3 & Addl. Ground 1 Not allowing depn. On assets of Malanpur Steel Ltd merged vide order of BIFR 33, 01, 23, 000 4, 5, 6 & 7 Interest u/s. 234B r/w 234B(3) 12, 88, 83, 249 8 Interest u/s. 234D 24, 808 9 2 At the outset itself, the Ld.AR Shri Siddharth Jhajharia drew our attention to the fact that assessments of AYs 2009-10, 2010-11 and 2011-12 were completed originally u/s 143(3) of the Act before the search which took place on 23rdDecember, 2014. He also drew our attention to the fact that for AY 2013-14, assessment u/s 143(1) of the Act was also passed before search and the time limit for selection of scrutiny assessment became time barred on 30.09.2014. Therefore, according to the Ld. Counsel, since the original assessments pertaining to AY 2009-10, 2010-11 and 2011-12 were completed by scrutiny assessments u/s 143(3) of the Act and assessment for AY 2013-14 u/s 143(1) of the Act was not selected for scrutiny by 30.09.2014, no proceedings in-respect to these assessments were pending before the AO on t....
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.... before the AO on the date of search, the assessee is precluded from making any new claim based on BIFR order. 4 The Ld. AR in his rejoinder to the contention of Ld.CIT, DR that BIFR order is an incriminating material which was unearthed during search, he drew our attention to the original assessment passed for AY 2011-12 to point out that the AO in the original scrutiny assessment order dated 31.03.2014 itself at page 17 has taken note of BIFR order and has duly mentioned about it and considered and discussed about the BIFR order and thereafter only had passed the original assessment order u/s 143(3) of the Act. So, according to Ld. AR, the action of AO as early as 31.03.2014 clearly goes on to show the fact that AO had in his knowledge and possession the BIFR order very well before the search which happened only on 23.12.2014. Therefore, according to the Ld. Counsel, the question of BIFR order becoming an incriminating material unearthed during the search cannot arise at all. Countering the argument raised by the Ld.CIT, DR that the fact of M/s. MSL not functioning at all and which fact came to the notice of revenue only during the search proceedings, therefore, this informati....
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.... 2015-16 143(3) Abated - -Do- 6 A perusal of the aforesaid chart, reveals that proceedings for AYs.2009-10, 2010-11, 2011- 12 and 2013-14 were not pending before the AO on the date of search i.e. on 23.12.2014. We note from a perusal of the impugned assessments passed u/s 153A of the Act that the disallowance/additions for the aforesaid assessment years have been made based on two issues i.e. (a) investigation report of Excise Department alleging bogus purchase (AYs 2010-11 and 2011-12) and (b) the set off of loss and other reliefs as per the order of BIFR which was passed on 04.09.2012. In respect to the investigation report of Excise Department, we note that AO in the original assessments passed on 28.03.2013 and 31.03.2014 for AYs 2010-11 and 2011-12 respectively had already made the addition on the basis of such report while completing assessment u/s.143(3) of the Act. So the said report of Excise Department cannot be treated as incriminating material seized/unearthed during the search conducted on 23.12.2014. Coming next to the contention of the Ld.CIT, DR that the BIFR order should be considered as an incriminating material cannot be accepted for t....
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....ly during search the truth that M/s MSL was not functional was revealed. So the contention of Ld. CIT, DR on this score cannot be accepted and so the fact of M/s MSL not functional cannot be treated as incriminating material unearthed during search. Therefore, the contentions raised by the Ld. CIT DR cannot be countenanced and consequently as per the order of Hon'ble Delhi High Court in Kabul Chawla (supra) wherein the law is settled that for completed assessments/for assessments which are not pending on the date of search, then completed assessments cannot be disturbed unless incriminating material have been unearthed during the search has to be followed and necessarily given effect to. Admittedly, no specific incriminating materials have been mentioned in the assessment orders for AYs 2009-10, 2010-11, 2011-12 which have been admittedly completed before search by original assessments conducted by scrutiny therefore, no addition/disallowance can be made by the AO in 153A proceedings. Likewise, for AY 2013-14, the assessment u/s 143(1) of the Act was passed prior to search and notice for scrutiny u/s 143(2) of the Act was not issued by AO before the limitation dated 30.09.2014, so,....
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....ly one assessment shall be made separately for each AY on the basis of the findings of the search and any other material existing or brought on the record the AO. vii. Completed assessment can be interfered with by the AO while making the assessment under Section 153A only on the basis of some incriminating material unearthed during the course of property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment. 7 The Hon'ble Jurisdictional Calcutta High Court in Veerprabhu Marketing Ltd (supra) has also held as under: "We agree with the view expressed by the Delhi High Court that incriminating material is pre-requisite before power could have been exercise u/s 153(C) R.W. Section 153(A). In the case before us, the AO has made a disallowance of the expenditure, which was held disclosed, for one reason or the order, but such disallowances made by the AO were upheld by the L.D.CIT (A) but the Ld. Tribunal deleted these disallowance. We find no infirmity in the aforesaid Act of the Ld. Tribunal. The appeal is therefore, dismissed. 8. Also, Apex court in the case of CIT v. Sinhgad Tech....
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.... the AYs 2009-10, 2010-11, 2011-12 and 2013-14 are ordered to be deleted. 11 We also further note that appellant has made fresh claims for AY 2010-11, 2011-12 etc., for giving effect to BIFR order, we are of the considered opinion since AYs 2010-11 and 2011-12 have been completed u/s.143(3) of the Act before the search, the assessment should not be disturbed in Sec.153A proceedings, unless there is incriminating material unearthed during search. On the same logic/analogy, the assessee also cannot make any fresh claim in sec.153A proceedings where original assessments are completed and (not pending before AO on the date of search) because the assessment in the case of search or requisition is for the benefit of Revenue. By doing search, the revenue authorities try to catch the assessee by surprise and by intrusive search conducted at their premises dig out materials which throws light to income undisclosed and kept away from the eyes of the revenue. Thus search conducted by revenue has to be for the benefit of revenue. The Hon'ble Supreme Court though while interpreting escapement of income u/s 147 of the Act in Sun Engineering (supra) has held that the reopening of assessment u/....
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.... return filed for the purpose of assessment which is pending would be treated as non-est in law. For this proposition, we rely on the ratio decidendi in CIT Vs. B.G Shirke Construction Technology Ltd by Hon'ble Bombay High Court (2017) 293 CTR 505 (Bom). 16. First of all, the assessee/appellant company is aggrieved by the action of AO/CIT(A) in not allowing depreciation of assets of amalgamating company M/s. MSL Ltd. Brief facts of the case are that a sick company called M/s.MSL was amalgamated by virtue of the order dated 04.09.2012 of BIFR with the assessee company. BIFR ordered the amalgamation with retrospective date i.e. from 01.04.2009 i.e. from AY 2010-11 onwards. The assessee company claimed depreciation of assets from AYs 2010-11 to 2015-16. In the present appeal also the assessee raised the claim, however, the AO denied the assessee's claim citing the order of Ld. CIT(A) in the case of M/s.MSL (preamalgamation) for AYs 2004-05 and 2006-07. In the pre-amalgamation original assessment, and appellate order of Ld.CIT(A) in the hands of pre-amalgamated company, the depreciation was denied, taking note of the fact that its plant and machinery was not used/non-user of it, whe....
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....ents (pre-amalgamation) claimed depreciation, naturally it was denied to it by the AO as well as Ld.CIT (A) citing the reason that unit of M/s.MSL was non-functional, because there was no occasion for its plant and machinery was used during the lay-off/closed period. However, the factual matrix in AY 2010-11 onwards changed because of the order of BIFR dated 04.09.2012, wherein BIFR amalgamated M/s. MSL with the assessee/appellant company retrospectively with effect from 1.04.2009 i.e. from AY 2010- 11. It should be remembered that the true effect and character of the amalgamation largely depends on the terms of the scheme of merger. But there cannot be any doubt that when two companies amalgamate and merge into one, the transferor company loses it entity (in the present case M/s.MSL) as it ceases to have its business, though their respective rights or liabilities are determined under the scheme of amalgamation. We note that the assessee/appellant company had taken over the sick company M/s.MSL through the scheme of amalgamation sanctioned on 04.09.2012 with effect from 01.04.2009 (i.e. from AY 2010-11 onwards) and so in the eyes of law, M/s MSL ceased to have any identity as it di....
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....ear commencing on or after the 1st day of April, 1989, the written down value of the block of asses in the immediately preceding previous year as reduced by the depreciation actually allowed in respect of that block of assets in relation to the said preceding previous year and as further adjusted by the increase or the reduction referred to in item(i)". 18 Thus, in the present case before us for the assessment year i.e. 2012-13, the W.D.V. of any block of assets shall be the aggregate of the W.D.V of all the assets falling within that block of assets at the beginning of the previous year. From this, the adjustments have to be made for the increase or reduction in the block of assets during the year under consideration. The deduction from the block of assets has to be made in respect of any asset, sold discarded or demolished or destroyed during the previous year. As per amended Section 32, deduction is to be allowed - "In the case of any block of assets, such percentage on the written down value thereof as may be prescribed." Thus, the depreciation is allowed on block of assets, and the Revenue cannot segregate a particular asset there from on the ground that it was not put to u....
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.... to be taken note. The Parliament has also deleted the provision for allowing terminal depreciation in respect of each assets, which was previously allowable under section 32(1) (iii) and also taxing of balancing charge under section 41(2) in the year of sale. In substitution of these two provisions, now whatever is the sale-proceed of sale of any depreciable asset, it has to be reduced from the block of assets. This amendment was made because now the assessee are not required to maintain particulars of each asset separately and in the absence of such particular, it cannot be ascertained whether on sale of any asset, there was any profit liable to be taxed under section 41(2) or terminal loss allowable under section 32(1) (iii). This amendment also strengthened the claim that now only details for "block of assets" has to be maintained and not separately for each asset. In CIT Vs.Oswal Agro Mills Ltd (2011) 341 ITR 467 (Del) wherein their Lordship Justice A.K.Sikri (his Lordship then was ) has analysed the aforesaid law in detail and took into consideration the legislative intent which led to the aforesaid amendment. Therefore, his Lordship did not accept the submission of the Reven....
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....tion is to be allowed - 'In the case of any block of assets at such percentage on the written down value thereof as maybe prescribed'. Thus, the depreciation is allowed on block of assets, and the revenue cannot segregate a particular asset there from on the ground that it was not put to use. [Para 29]. With the aforesaid amendment, the depreciation is now to be allowed on the written down value of the 'block of assets' at such percentage as may be prescribed. With this amendment, individual assets have lost their identity and concept of 'block of assets' has been introduced, which is relevant for calculating the depreciation. It would be of benefit to take note of the circular issued by the revenue itself explaining the purpose behind the amended provision. The same is contained in CBDT Circular No.469, dated 23-9-1086, wherein the rationale behind the aforesaid amendment is described [Para 30]. It becomes manifest from the reading of the aforesaid circular that the legislature felt that keeping the details with regard to each and every depreciable asset was time consuming both for the assessee and the Assessing Officer. Therefore, it amended the law to provide for allowing of the....
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.... Court upheld the order of Tribunal and accepted that though the assets of the Bhopal unit were not functional since being part of "Block of Assets" they cannot be segregated and depreciation has to be allowed 23 Also Bombay High Court in the case of CIT v. M/s Sonic Biochem Extractions (P) Ltd. ITA No. 2088/2013 dated 17.11.2015 while dismissing the appeal of revenue whereby depreciation was claimed in respect of plant and machinery of discontinued business which is not likely to be revived has held as under: "c. On further appeal to the Tribunal the impugned order held that the refining machinery was a part of the block of assets of plant and machinery. In such a case depreciation is granted to the entire block of assets whether or not an individual item therein has been used during the subject assessment year. In support the impugned order placed reliance upon on its decision in the case of DCIT Vs. Boskalis Dredging India (P) Ltd. 53 SOT 17 (Mum) wherein it has been held that once the concept of block of assets was brought into effect from assessment year 1989-90 onwards then the aggregate of written down value of all the assets in the block at the beginning of the ....
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....e the factory building is put to use, it is not possible to restrict the depreciation on the said building by stating that only a portion thereof has been put to use. Similarly, in relation to block of assets, it is not possible to segregate items falling within the block for the purposes of granting depreciation or restricting the claim thereof. Once it is found that the assets are used for business, it is not necessary that all the items falling within plant and machinery have to be simultaneously used for being entitled to depreciation." 25. Therefore, following the aforesaid judgments since the assets of M/s.MSL after amalgamation have become assets of assessee company by operation of Law it falls in to the "Block of assets" of the assessee company from 01.04.2009 and though such assets, non-functional, yet they cannot be segregated and depreciation has to be allowed taking the first year as AY 2010-11 onwards and WDV to be calculated for AY 2012-13 as discussed above and we order the AO to calculate the WDV accordingly and allow the same in accordance to law. Grounds 6, 7 and 8 for AY 2012-13 are therefore stands allowed. 26 Ground No. 9 of AY 2012-13 is regarding the ac....
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....iled reference in BIFR as a sick company and registered as BIFR case No. 158/2001 10. 03.08.2005 Company declared sick in terms of section 3(1)(0) of SICA amd PNB appointed as Operating Agency to formulate scheme u/s. 17(3) of SICA 11. 20.04.2012 BIFR circulated DRS which was received by DIT(R) on 10.05.2012. The IT reliefs in the DRS were provided in para 15.8 12. 10.05.2012 DIT (R) sent letter to company to file relevant details in support of the reliefs. 13. 08.06.2012 DIT (R) sent comments/objections to BIFR u/s. 19(2) of SICA within statutory time limit of 60 days opposing the granting the IT reliefs in DRS. 14. 21.06.2012 Company sent letter dated 04.06.2012 to the DIT (R) along with some details. 15. 13.07.2012 DIT(R) sent comments to BIFR after taking into consideration the company's reply dated 04.06.2012 and asked to retain u/s. 72(3) and 72A for consideration of the Department by prefixing the word to consider and opposing all other IT reliefs provided in para 15.8 of DRS. 16. 16.07.2012 Hearing held before BIFR to hear comments. Hearing attended by the counsel of the Department and objection/suggestions ....
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....ar that for State/Central Govt. Agencies the concessions indicated are of the nature of guidelines and not directives, to be considered by the concerned authorities and to be allowed only within the four concerns of the law. This fact, finds force from the order of Hon'ble AAIFR wherein it has clarified the exception provided by Hon'ble BIFR in sub-para (g) of para 15.8 . The Hon'ble AAIFR vide its order dated 22.03.2013, an Appeal No.180/12 (A/w MA no.350/12) has observed that:- "Heard that Ld. Counsel for the appellant as well as the Caveator. After considering the submissions and perusal of para 15.8(g) of the sanctioned scheme, this Authority is of the view that the relief granted under the said para does not override the provisions of section 72A of the Income Tax Act or any other statutory provision for the time being in force. As such, the contention and apprehensions of the appellant are completely misplace. There is no merit in the appeal. The Appeal is dismissed accordingly." In fact in the said sub-para (g( of para 15.8 of Hon'ble BIFR, it is clearly stated that "the effect of this provision shall be given in the manner as is provided under Section 72A ....
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....a speaking order vide Appeal No.227/CCXXV/ CIT(A)C-III/08-09 dated 30-11-2010. In this order my predecessor has confirmed the disallowance of depreciation and I find no reason to interfere in findings given my predecessor on the same issue in assessee's own case, therefore assessee's appeal on this issue is also dismissed. The AR has filed a letter along with or order of Hon'ble BIFR dt.06-09-2012 stating that the Hon'ble BIFR has granted reliefs and concession to the assessee. During the appellate proceedings the AR has also brought it on record that the assessee has written a letter to the CBDT in this regard. But so far no communication has been received from the CBDT. As per the direction of the Hon'ble Calcutta High Court to decide this case and pass an appeal order preferably within six weeks from the date of receipt of the Hon'ble High Court's direction, this case is being decided on the basis of material available on record and as per the provisions of the Income Tax Act, 1961. I think as per provision of section 72 of the I T Act, 1961, business loss can be carried forward to the following assessment year and so on for seven assessment years immediately succeeding....
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....laced on following judgments: a) CIT v. J.K. Corporation Ltd. (2011) 331 ITR 303 (Kol) [Pg 153) : Jurisdictional High Court even observed at para 28, 29 "when the Board is satisfied that all conditions are fulfilled for giving consent for taking rehabilitation measures by amalgamation, separate consent by CBDT not required". b) Indian Shaving Products v. BIFR (1996) 218 ITR 140 (SC) [Pg 164] c) CIT v. Tube Investment India Ltd. (Madras HC) [Pg 176] d) DCIT v. Sree Janadan Mills (Madras HC) [Pg. 179] 33 The ld. DR drew support from the orders of AO and CIT(A) and vehemently opposed the contention of the assessee that lapsed losses after eight years can be claimed because of BIFR order. According to the Ld. DR, condition stipulated in sub-section (2) of sec. 72A have to be complied with before grant of carry forward losses claimed by assessee company and since MSL has not started functional, the AO rightly did not allow the claim and he does not want us to interfere in the order of the authorities below. 34 We have heard the rival submissions and carefully perused the records and judicial precedents cited before us. In order to appreciate the....
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....y specify (In this case, Punjab National Bank (PNB) was appointed as operating agency (OA) by BIFR by its order dated 03.08.2005). Under section 17, the Board passes a suitable order for completion of the enquiry made by operating agency. The Board as per Sec.18 having considered everything as mentioned in Sec.17 prepares and sanctions the scheme for revival and rehabilitation with various measures, which includes amalgamation of the sick company with another company. 37 Where an order has been made under section 17(3) in relation to any sick industrial company, the operating agency specified in the order shall prepare a scheme with respect to such company providing for the measures set out therein. The following measures is referred to in Section 18 includes clause (c ) (i), namely, " the amalgamation of the sick industrial company with any other company". The scheme prepared by the operating agency is required to be examined by the BIFR and its copies sent with such modifications, if any, as may have been made by the BIFR to the sick industrial company, the operating agency and to the other company concerned in the proposed amalgamation and, after consideration of objections, ....
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....itution or any institution or other authority required by a scheme to provide for such financial assistance being hereafter in this section referred to as the person required by the scheme to provide financial assistance) to the sick industrial company. (2) every scheme referred to in sub-section (1) shall be circulated to every person required by the scheme to provide financial assistance for his consent within a period of sixty days from the date of such circulation for within such further period, not exceeding sixty days, as may be allowed by the Board, and if no consent is received within such period or further period, it shall be deemed that consent has been given]. (3) Where in respect of any scheme the consent referred to in sub-section (2) is given by every person required by the scheme to provide financial assistances, the Board may, as soon as may be, sanction the scheme and on and from the date of such sanction the scheme shall be binding on all concerned.", 39 From a bare perusal of sec.19 of the SICA Act reveals the scheme by which rehabilitation has to be given to the Sick Industrial Company as a preventive measure, ameliorative remedial and other....
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....ban Land (Ceiling and Regulation) Act, 1976 (33 of 1976) for the time being in force or in the Memorandum or Articles of Association of an Industrial company or in any other instrument having effect by virtue of any law other than this Act." "(2) Where there has been under any scheme under this Act an amalgamation of a sick industrial company with another company, the provisions of section 72A of the Income-tax Act, 1961 (43 of 1961), shall subject to the modification that the power of the Central Government under that section may be exercised by the Board without any recommendation by the specified authority referred to in that section, apply in relation to such amalgamation as they apply in relation to the amalgamation of a company owning an industrial undertaking with another company." From a reading of the above provision of law clearly indicates the Parliament's intention that this Act will prevail over other Acts in case there are inconsistency with them. The only laws which have been specifically excluded from this feature of this Act is (i) Foreign Exchange Regulation Act, 1973 (46 of 1973) and (ii) the Urban Land (Ceiling and Regulation) Act, 1976 (33 of ....
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.... grounds mentioned therein. 40. In the context as aforesaid, we now examine the legal effect of the scheme sanctioned by the BIFR which remains unchallenged. The SICA is a special Act and the scheme framed thereunder is of tremendous implication. So, it is binding upon everyone, as it has assumed the character of conclusiveness by virtue of section 18 sub-section (4) and also sub-section (8). The scheme has mentioned the date on which it will become operative. It has been specifically mentioned that the said scheme would be operative from February 1, 1992, though the same was sanctioned on January 25, 1994. the scheme operative from any day and we have quoted its authority under the said Act. Before the scheme had been prepared the draft was circulated by advertisement in the newspaper and no one had raised any objection. According to us the right of objection has been waived as by and under section 32(2) of the Act on behalf of the Central Government the Board has been empowered to give consent as is required to be done under the provisions of section 72A of the Income-tax Act, 1961. Under the aforesaid sub-section all the powers of the Central Government c....
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....It appears that the text of the said circular dated June 8, 1994 relied on by the Assessing Officer is clearly inconsistent with the provision of the said section 32(2). 45. Having regard to the language used in section 26 it is clear that neither the civil court nor any other authority including the quasi-judicial authority can pass any order which would impede the operation of the said scheme. In other words, the scheme can be set at naught only by the BIFR or the AAIFR under the said Act itself and not otherwise except by the constitutional provision. 46. In view of the aforesaid provisions of the said Act which is a special one the income-tax authority cannot have any jurisdiction to render the operation of the said scheme nugatory. 47. It is rightly argued by Mr. Bajoria with the authority of the Supreme Court decision reported in Marshall Sons and Co. (India) Ltd. v. ITO reported in [1997] 22 ITR 809 that date of effect of the scheme is the date as mentioned therein. 48. It is appropriate to quote the relevant portion of the judgment as follows (headnote) : "Every scheme of amalgamation of companies has necessarily to provide a dat....
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....original return having been filed within the time allowed under section 139(1) the revised return filed on March 31, 1994, claiming loss was not beyond the time as contemplated in the provision of section 139 sub-section (3) and section 80. 55. Thus the aforesaid reference is disposed of in the above lines."(emphasis given by us) 45 In view of the Hon'ble jurisdictional High Court's order in CIT Vs. J.K. Corporation (supra), we hold that provisions of SICA Act and the scheme sanctioned by the Board will override the Income Tax Act. Moreover, we note that in Morgan Securities and Credit Pvt. Ltd. JT 2007(1) SC 432, the Hon'ble Supreme Court answered to the question as to whether the provision of Arbitration Act would prevail over the provision of Sick Industrial Company (Special provisions) Act, 1985 (SICA). It was held that when there is a conflict between Arbitration Act and the SICA, the later which have been made to seek to achieve the higher goal would be applicable despite nonobstante clause contained in Sec. 5 of Arbitration Act. 46 Let us now look at the CBDT Circular which has given instruction to the officers under it, how to give effect to the sanctioned sc....
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.... and other Hon'ble High Courts which held that CBDT circular is binding on the authorities serving in the Income-tax Department. 50 In Navnit Lal C. Jhaveri Vs. K.K.Sen (1965) 56 ITR 198 (SC), the Hon'ble Supreme Court has an occasion to examine the statutory basis and background of the circulars issued by the Central Board of Revenue under the provisions of the Income Tax Act, and the scope and the effect of such circulars. In that case, the CBDT was empowered to issue circulars under section 5(8) of the Income Tax Act, 1922 and the Hon'ble Supreme Court observed that the circular issued by the CBDT is binding on all officers and persons employed in the administration of the Act. 51 In Ellerman Lines Ltd., vs. CIT (1971) 82 ITR 913 (SC), the observation made in Navnit Lal C. Jhaveri vs. K.K.Sen (1965) 56 ITR 198 (SC) was quoted with approved by the Hon'ble Supreme Court. 52 In State of Travancore vs.CIT (1986) 158 ITR 102, the Hon'ble Supreme Court once again reiterated the law that the circulars, which are in the nature of concessions, could always be withdrawn only prospectively. 53 In KeshavjiRavji& Co., vs.CIT (1990) 183 ITR 1 (SC), a Bench of three Judges of the H....
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....then it should be allowed and the effect of such order must be given immediately. However, in case, if the BIFR recommends any relief under the Income Tax Act, the relief to be allowed to the assessee, if during the course of proceedings before the BIFR, the views of the Income Tax Department have been considered by the BIFR. Now, let us see whether the views of the Department were taken into consideration by the BIFR before the final order was passed. The fact that the department's view was in fact considered by the BIFR before the order was passed on 04.09.2012 is clear from the pleadings of department in its appeal against BIFR order before the AAIFR wherein we note that the nodal officer of the Department Director General of Income Tax (Admin.) and Director Income Tax (Recovery)'s views of the Income Tax Department have been considered by the BIFR is clearly discerned and certain submission of the department before the AAIFR which throws light on this fact is reproduced below :- "(2) The Applicant No.1 is the Director General of Income Tax (Admn.) is the Nodal agency on behalf of the CBDT as per the CBDT circular no.683 dared 08.06.1994 and another Circular No.5/2009 d....
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....bsorbed depreciation as per the Income Tax Act, 1961 till such losses are set off fully against income in the assessment years subsequent to the assessment year during which merger of MSL as above shall take place. The effect of this provision shall be given in the manner as is provided under Section 72A of the Income Tax Act, 1961 or otherwise any statutory provisions for the time being is enforced. h) To all depreciation on plant & machineries of MISC unit of Malanpur Steel Ltd. for the period when the Steel Plant was under suspension of operation/closed/shut down (From October, 1998 to the date of restart). (5) The applicant Department filed its first reply within stipulated time limit vide its letter dated 08-06-2012 to BIFR stating therein in para 3 & 6, relevant portion is reproduced below: .......... 3. Further in the same decision of the Hon'ble Delhi High Court, it is also observed that DRS should quantify the extent of reliefs and concessions to be provided to the sick industrial company. 6. Hence, the company may be directed to furnish the same and the word 'to consider' should be prefixed before IT reliefs sought in para 15.8....
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....s and circumstances of the case." 60 The aforesaid appeal against the said BIFR order (relevant portions of which have been reproduced above, along with prayer before AAIFR) was dismissed by the AAFIR vide order dated 22.03.2013 which is reproduced as below: "Heard the Ld. Counsel for the appellant as well as the caveator. After considering the submissions and perusal of para 15.8(g) of the sanctioned scheme, this authority is of the view that the relief granted under the said para does not override the provisions of section 72A of the Income-tax Act or any other statutory provision for the time being in force. As such, the contention and apprehension of the appellant are completely misplaced. There is no merit in the appeal. The appeal is dismissed accordingly." 61 From perusal of the order of AAIFR (supra) dismissing the appeal of the revenue, it is evident that Hon'ble AAIFR held that relief granted in para 15.8(g) of the sanctioned scheme does not override the provisions of section 72A of the Act or any other statutory provisions for the time being in force and therefore, the Hon'ble AAIFR concluded that there is no merit in the appeal and dismissed it accordingl....
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.... BIFR in an approved scheme of reconstruction/rehabilitation (b) directs that the reliefs be allowed under the I.T. Act, 1961 the effect to such orders be given immediately. recommends that the reliefs under the I.T. Act, 1961 may be considered by the Central Government, the relief be allowed to the assessee if during course of the proceedings before the BIFR, the views of the I. Tax Department have been considered by the BIFR. However, if the order of BIFR has been passed without making I. Tax Department a party or without giving a chance to the I. Tax Department to submit its views the effect of BIFR recommendations is to be given only after such recommendations of the BIFR are considered by the CBDT." 63 From the aforesaid, it is clear that the CBDT's objection/view was considered by the BIFR in terms of Circular which is binding on the officers of the department. 64 In the above factual and judicial backdrop, the sum and substance of the issue involved relates to the claim of unabsorbed lapsed losses and unabsorbed depreciation of the amalgamating company namely MSL with the appellant company on the basis of the order of BIFR dated4.9.2012. There is no d....
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....f the relief is also contrary to the circular of the CBDT whereby it has been provided that once the Income Tax Department has been heard by BIFR, then such scheme is to be given effect and then it should be kept in mind that there is no distinction between direction and consideration of relief/grant. In the instant case it has been amply demonstrated that the Income Tax Department was heard by BIFR and therefore there remains no occasion to draw adverse inference and deny the legitimate claim arising from the scheme. To sum up the triad comprising of the judgment of the Hon'ble Apex Court in the case of Indian Shaving Products Ltd. v. Board of Industrial and Reconstruction and Another (supra), the Hon'ble Jurisdictional High Court in the case of CIT v. J. K. Corporation (supra) and Circular of Board dated 16.2.2000 (supra) and section 32 of SICA when applied to the scheme, the claim of the appellant is in accordance with law and has to be given effect to. 66 Before parting with the matter we also consider it appropriate to independently consider the sanctioned scheme BIFR dated 4.9.2012 67 The directions of CBDT are found at sub-clause (g) to para 15.8 which reads as under: ....
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.... 72.56 crores it is noted that section 32(2) comes into play which provides as under: "2 Where in the assessment of the assessee, full effect cannot be given to any allowance under sub-section (1) in any previous year, owing to there being no profits or gains, chargeable for that previous year, or owing to the profits or gains chargeable being less than the allowance, then, subject to the provisions of sub-section (2) of section 72 and sub38 section (3) of the section 73, the allowance or the part of the allowance to which effect has not been given, as the case may be, shall be added to the amount of the allowance for deprecation for the following previous year and deemed to be part of that allowance, or if there is no such allowance for that previous year, be deemed to be the allowance for that previous year, and so on for the succeeding previous years." 70 It is thus noted that the deprecation is to be carried forward as per section 32(2) of the Act without any time limitation. Further, clause (b) of section 72A(7) provides that "unabsorbed depreciation" means so much of the allowance for deprecation of the amalgamating company which remains to be allowed and which wo....
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....Y 2010-11 onwards. As per the definition of accumulated loss given u/s. 72A of the Act, the accumulated loss of M/s. MSL in this case has to be so much of loss of amalgamating company i.e. M/s. MSL, computed under the head "Profit & Gain of Business", which such amalgamating company i.e. M/s. MSL would have been entitled to carry forward and set of under the provision of sec.72 of the Act, as if the amalgamation has not taken place. As per sec. 72 of the Act, where for any assessment year, the net result of the computation under the head profit and gains of business is a loss to the assessee (not loss sustained in a speculation business) and such loss cannot be or is not wholly set off against the income under any head of income in accordance with the provisions of sec.71, so much of the loss as has not been so set off or where the assessee has no income under any other head, the whole loss shall subject to the other provisions of this chapter be carried forward to the following assessment year and it shall be set off against the profit and gains if any of any business of profession carried on by the assessee and assessable for that assessment year. And if the loss cannot be wholly....
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....e (h) the BIFR recommends to allow depreciation on plant and machinery of MSL unit of Malanpur Steel Ltd. for the period when the steel plan was under suspension of operation/closed/shut down (From October 1998 to the date of restart) also becomes directory in the light of the CBDT circular since the department's view has been considered by the BIFR before sanctioned scheme was passed. Therefore, the intent of the BIFR is very clear and the AO was duty bound to give effect to the order of BIFR since the circular passed by the CBDT is binding on the Income Tax authorities and as held by the Hon'ble jurisdictional High Court that the SICA Act overrides all other statutes except Foreign Exchange Regulation Act, 1973 and Urban Land Ceiling & Regulation) Act, 1976. Therefore, the AO was duty bound to give effect to the order passed by the BIFR and the accumulated loss and the unabsorbed depreciation needs to be granted. 74 We also take note that the special provision in case of amalgamated companies i.e. sec. 72A(1) is subject to sec. 72A(2). There are certain conditions which have been prescribed u/s. 72A(2) which the amalgamating company as well as the amalgamated company has to fu....
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....y in this case or not. As per the section 72, business loss cannot be set off against business income beyond eight years. However capital gain can never be allowed to be set off against business loss brought forward. Therefore income tax act never allows set off of capital gain against business loss brought forward. However the BIFR under SICA has power to allow any concession it considered appropriate for the revival of the company. As discussed earlier, BIFR has clearly allowed set off of capital gain against accumulated losses. The order nowhere talks of brought forward business losses. The limitation of 8 years applies to brought forward business losses. However accumulated losses have no such limit. The set off is of the accumulated losses against capital gain which are otherwise not permissible under IT Act. Since SICA has overriding power as discussed earlier, the set off of capital gain is permitted by BIFR against accumulated losses. Therefore while implementing the order of BIFR, assessing officer has to apply the order even if it is not consistent with the provisions of IT Act. Since the order of BIFR is inconsistent with the provisions of IT Act as far as setti....
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....be accepted as such benefit should be dealt with in the scheme itself. Therefore, the substantial question of law is answered in the negative i.e. against the revenue." 78 Having regard to the above we also notice that the AO held that the claim is not maintainable in the instant year as set off on account of carry forward business loss and unabsorbed of deprecation off stands exhausted in the preceding years and there is no left over business loss brought forward and, unabsorbed depreciation. He has also held that without prejudice any loss that could have been set off in the hands of merged company in the instant year as a result of merger would ultimately be taxed in AY 2013-14 by virtue of section 72A of the Act read with rule 9C of the Rules. On consideration of the above, we are of opinion that, so far as former objection is concerned, the same is factual and AO is directed to allow the claim after considering the availability of losses for the instant year subject to the claims made in the preceding year in the light of the observations and decision given in the preceding paras. However as regards the latter is concerned, the fact that losses claimed and allowed in the in....