TaxTMI 
TaxTMI 
2018 (2) TMI 1691
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....70 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 u/s. 153A 1 to 3 & Addl.Gr.1 Bogus purchase 8, 66, 49, 802 4 (a) Prior period expenses 60, 309 5 (b) PF & ESI u/s.36(1) (va) 3, 03, 447 Not allowing Depn. On as....
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....efore 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 the date of search i.e. on 23.12.2014 for the said years and consequently, according to Ld. Counsel for the assessee, no addition/disallowance could be made without the aid of incriminating material which had been seized/unearthed during the search and for the said proposition of law he relied on the decisions of the Hon'ble Delhi High Court in CIT vs.Kabul Chawla (2016)380 ITR 573 (Del) and, Hon'ble Jurisdictional High Court in CIT vs.Veerprabhu Marketing Ltd (2016) 388 ITR 574 (Cal). He submitted that since no incriminating material was unearthed and seized, the additi....
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....nal 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 information/fact should be treated as incriminating material, the Ld. Counsel submitted that the information about M/s.MSL being non-functional when the search happened is common knowledge and is in public domain and, therefore, cannot be considered as an incriminating material unearthed during search. Therefore, according to him, no addition/ disallowance can be made in the assessment years which were not pending before the AO on the date of search, without nexus with the incriminating material unearthed during search. 5 We have considered the rival submissions and have perused th....
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....te 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 the simple reason that in the original assessment for AY 2011-12 itself the AO has discussed about the BIFR order which was completed u/s 143(3) of the Act on 31.0.3.2014, therefore, the AO was very well aware of the BIFR order which was passed on 04.09.2012 well before the search. Moreover, we note that the Director General Income-tax, (Admn) and Director of Income Tax (Recovery) was a party in the BIFR proceedings as early as on 10.05.2012, and the department received the BIFR's Draft Rehabilitation Scheme (DRS) dated 20.4.2012, which was replied to by the department vide letter dated 08.06.2012, wherein objection were in fact raised by the department before the BIFR. We note tha....
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....ect 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, the assessment for AY 2013-14 cannot be said to be pending before AO on date of search. Therefore, no addition/disallowance can be made without the aid of an incriminating material unearthed for the years referred as a result of search. The Hon'ble Delhi High Court in Kabul Chawla (supra) has laid down the law as under: "Summary of legal position 37. On a conspectus of Section 153A(1) of the Act, read with provisions thereto, and in the light of the law explained in the aforementioned decisions, the legal position that emerges is as under: i. Once a search takes place under Section 132 of the Act, notice under Section 153 A(1) will have to be mandatorily issued to the per....
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....een 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 Technical Education Society 397 ITR 344 has held as under: "18) In this behalf, it was noted by the ITAT that as per the provisions of Section 153C of the Act, incriminating material which was seized had to pertain to the Assessment Years in question and it is an undisputed fact that the documents which were seized did not establish any co-relation, document-wise, with these four Assessment Years. Since this requirement under Section 153C of the Act is essential for assessment under that provision, it becomes a jurisdictional fact. We find this reasoning to be logical and valid, having regard to the provisions of Section 153C of the Act. Para 9 of the order of the ITAT reveals that the ITAT had scanned through the Satisfaction Note and the mater....
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....ve 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/s 147 to assess the escaped income, is therefore, for the benefit of revenue and the assessee cannot be given another innings during the re-assessment proceedings pursuant to reopening to make fresh claims. 12 We also note of the fact that assessee has already made claims arising from BIFR order in the regular appeals before Ld.CITA) from the completed original assessment already made before search, because BIFR order dated 04.09.2012 was received later on i.e. after the original assessment was completed u/s 143(3) of the Act in certain years. 13 The appellate proceedings before the Ld. CIT(A) from original assessments is a continuation of the assessment proceeding itself and the assessee can make a fresh claim before the Tribunal/Ld.CIT(A) as held by the Hon'ble Supreme Court in Goetze (India) Ltd. vs.CIT (2006....
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....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, when undisputedly, the M/s MSL declared lay-off on 20.10.1998 due to a major fire mishap in the substation on 15, .10.1978 and on 04.03.2000 the unit of M/s. MSL was closed by Secretary, Labour Dept. (Govt.of MP). Therefore, M/s. MSL filed reference to BIFR and was declared sick company on 03.08.2005. The list of dates given below tabulates the events that took place leading to amalgamation of M/s MSL with the assessee M/s. HEIL by BIFR order 04.09.2012 w.e.f.01.04.2009; 1. 11.09.1944 Hindustan Development Corporation Ltd. (HDCL) was incorporated 2. 1989 MP Iron & Steel Co. (MPISC) as steel division of HDCL was formed. (Later name changed to M/s. MSL) 3. 03.1993 MPISC (later Malanpur Steels Ltd. (MSL) company's performance remained unsatisfactory since then. 4. 15.10.1998 Major fire in the sub-station, operatio....
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....ion. 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 did not remain a "person" either in fact or in law after amalgamation. For this proposition, we rely on the Hon'ble Supreme Court decision in Mcdowell & Company Ltd Vs.CIT, Karnataka (2017) 393 ITR 570 (SC). So, in the present assessment year before us, the assessee has claimed depreciation on its assets, because by amalgamation, the assets of amalgamated company (MSL) gets vested with assessee and have become part of "Block of Assets" of the assessee company. We note that after the amendment of sec.32 by the Taxation Laws (Amendment) Act, 1986, major change happened in respect to the manner in which the depreciation is to be allowed after the concept of "block of assets" was introduced. Let us look into the definition of "block of assets" given in sub-clause (ii) to sec.2 of the Act. "26. Section 2 (11) of the Act defines the term "block of assets" as under: "2(11) " Block of assets" means a group of ass....
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....tage 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 use. 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. We 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 23.09.1986, wherein the rationale behind the aforesaid amendment is described as under: "6.3 As mentioned by the Economic Administration Reform Commission (report No.12, Para 20), the existing system in this regard requires the calculation of depreciation in respect of each capital assets separately and not in respect of block of assets. This requires elaborate book-keeping and the process of checking by the Assessing Officer is time consuming. The greater differentiation in rate....
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....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 Revenue "that for allowing the depreciation, user of each and every asset is essential even when a particular asset forms part of "block of assets" Repelling this argument of Revenue, their Lordship in his own words held " Acceptance of this contention would mean that the assessee is to be directed to maintain the details of each asset separately and that would frustrate the very purpose for which the amendment was brought about. It is also essential to point out that the Revenue is not put to any loss by adopting such method and allowing depreciation on a particular assets forming part of the "block of assets" even when that particular asset is not used in the relevant assessment year. Whenever such an asset is sold, it would result in short term capital gain, which would be exigible to tax and for this reason, we say that there is not loss to Revenue either." 21 It would be worthwhile to discuss the facts in CIT Vs. Oswal Agro Mills Ltd 341 ITR 467 (Del) in brief:- "For the rele....
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....e 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 depreciation on the entire block of assets instead of each individual asset. The block of assets has also been defined to include the group of assets falling within the same class of assets [Para 31]. Another significant and contemporaneous development, which needs to be noticed, is that the Legislature has also deleted the provision for allowing terminal depreciation in respect of each asset, which was previously allowable under section 32(1)(iii) and also taxing of balancing charge under section 41(2) in he year of sale. Instead 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 assesses are not required to maintain particulars of each asset separately and in the absence of of such particular, it cannot be ascertained whether on sale of any asset, there is any profit liable to be taxed under section 41(2) or terminal losses allowable under section 32(1)(iii).This amen....
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....ck 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 previous year along with additions made to the assets in the subject Assessment Year depreciation is allowable. The individual asset looses its identity for purposes of depreciation and the user test is to be satisfied at the time the purchased Machinery becomes a part of the block of assets for the first time. In the circumstances the respondent's appeal was allowed and the disallowance of depreciation was deleted. d. Mrs. Bharucha, learned Counsel for the revenue fairly states that the issue arising herein is identical to the issue which arose before the Tribunal in Boskalis Dredging India (supra) where also the dredger concerned was a part of the block of assets and not put to use. On instructions, she further states that the Revenue has accepted the decision of the Tribunal in Boskalis Dredging India (supra) which the impugned order has merely followed. No distinguishing feature in the present facts has been pointed out which would warrant taking a different view. Besides the Tribunal in its order in Boskali....
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....w 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 action of AO/Ld. CIT(A) in disallowing the claim of assessee in respect to brought forward loss and claim of allowance of unabsorbed depreciation in the light of BIFR sanctioned scheme. Brief history of M/s. MSL can be taken note from the chart given below, which shows that M/s. MSL was initially incorporated in the year 1989 in the name of Madhya Pradesh Iron Steel (MPIS) as a steel division of Hindustan Development Corporation Ltd. (HDCL) which was Public Limited Company incorporated as early as in year 1944. Due to a major fire at its sub stations on 15.10.1998, company (now MSL) declared lay off, which action of it was later held by Hon'ble MP High Court as illegal; and on 04.03.2000, the Labour Department of Govt. of MP closed down the factory. Thereafter, the company filed a reference to BIFR and the company was declared sick by BIFR on 03.08.2005. BIFR after circulating Debt Rehabilitation Scheme (DRS) on 20.04.2012 to the nodal agent of the Revenue (Income Tax Department) i.e. the Director General of Income Tax (Admn) and Director ....
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....ounsel of the Department and objection/suggestions to all the reliefs as per letter dated 08.06.2012 and 13.07.2012. BIFR directed that except sub para (g) of para 15.8, all other sub paras (a) to (f) and (h) of para 15.8 be prefixed with word to consider. V Sub para (g) of para 15.8 be retained without any change and sanction the scheme. BIFR's SOP/order dated 16.07.2012 received in this Directorate on 09.08.2012. 17. 04.09.2012 BIFR Sanctioned a Scheme (SS-12), copy received in this Directorate on 12.09.2012. As per para 15.8 under the head CBDT, IT reliefs are for consideration [except sub para (g) ]. Accordingly, the reliefs are provided in sub para (a) to (f) and (h) pf 15.8 with the word 'to consider' and relief as per sub para- (g) of para 15.8 in SS retained without any change. Hence the present appeal. 27. We notice that in the impugned order of assessment, AO directed the appellant to explain the allowability of carry forward and set off of brought forward business loss/depreciation as per the provisions of the Act. It has been noted against the above the assessee submitted a letter dated 29.12.2016, where reliance was placed on the order dated 4.9.2012 of....
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.... Income Tax Act, 1961 or otherwise any statutory provisions for the time being is enforced. The order of the Hon'ble AAIFR lends credence to the discussions made in various paragraphs of this order in connection with allowability of brought forward business and depreciation loss of MSL in the hands of the assessee company after merger". 28 The appellant in respect of above claim in first appeal before CIT(A) submitted as under: "The appellant had claimed set off of brought forward loss of MSL at Rs. 1, 21, 06, 26, 360/- from A.Y 2000-2001 onwards which the AO denied on the ground that as per provisions of sec. 72, business loss of such years which have exceeded time period of 8 years and as such could not have been carried forward and set off beyond 8 years. The AO failed to appreciate the fact that the order of BIFR in such regard clearly and specifically directed the allowance of any "lapsed losses". The allowance of set off of "lapses losses" by the BIFR clearly made that the provision of sec. 72 were not at all applicable and such losses were eligible for set off by the amalgamated concern i.e. appellant company. The AO has chosen to apply the direction of BIFR as per it....
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....e's claim that as per Hon'ble BIFR's order of merger the assessee is entitled to carry forward and set off of lapsed losses, does not hold good as per the existing provisions for carry forward of business loss in the I T Act. 1961. Accordingly, I think the AO is very much justified in disallowing the claim of the carry forward of business loss of Rs. 1886371316/- from the assessment year 2000-01. Thus, assessee's appeal on this issue is also dismissed. In the result, assessee's appeal on grounds on 7, 8, 9 and 10 are dismissed." 30 The ld. AR before us submitted that the appellant had claimed the following losses of the merged unit i.e. Malanpur Steel Ltd. aggregating to Rs. 2, 13, 01, 09, 473/- (Business loss-Rs. 1, 40, 44, 64, 925/- and unabsorbed deprecation - Rs. 72, 56, 44, 548/-) including the losses for AYs 2000-01, 2001-02 and 202-03. He submitted that the AO while giving effect to the order of Hon'ble BIFR in A.Ys 2009-10, 2010-11, 2011-12, 2012-13 & 2013-14 did not grant the benefit of unabsorbed depreciation of Rs. 72, 56, 44, 548/0 on the ground that since the factory at Malanpur is closed down and hence set off of unabsorbed depreciation was denied. As regards busine....
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....n 04.09.2012, we need to examine the scope and power of sanctioned scheme of BIFR and for that we need to refer the Sick Industrial Companies (Special provisions) Act, 1985 (hereinafter referred to as " SICA Act"). 35 The preamble to SICA Act states that SICA was introduced in the public interest to make special provisions for detection of sick units and expeditious enforcement of the measures determined by an expert Board (i.e. BIFR) to revive such sick unit, We therefore, has to keep this object of the SICA Act in mind while deciding the prayer of the assessee to give effect to BIFR order. 36 We note that SICA Act was enacted in the public interest, with special provisions enacted with a view to securing the timely detection of sick and potentially sick companies owing industrial undertakings, the speedy determination by a board of experts of the preventive, ameliorative, remedial and other measures which were needed to be taken with respect to such companies and the expeditious enforcement thereof. Section 4 constitutes the Board for Industrial and Financial Reconstruction (BIFR/Board) and section 5 constitutes the Appellate Authority (AAIFR), Chapter III deals with references....
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.... as it might specify as per subsection (4) of section 18 of the said Act which 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". 38 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. Sub-section 7 and sub-section 8 provides as follows: "Sub-s (7) - the sanction accorded by the Board under sub-s (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. Sub-s(8) - On ad from the date of the coming into operation of the sanc....
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....rantees or reliefs or concessions or sacrifices from the Central Government, State Government, any scheduled bank or other bank, a public financial intuition or state level intuition or any institution or other authority to the sick industrial company. Sec 19 refers to the aforesaid persons including Central Government who is required by the scheme to provide financial assistance. Sub-section (2) of section 19 requires every scheme prepared under sub-section (1) by the BIFR shall be circulated to every person required from the date of such circulation and if no consent is received then such period it shall be deemed that consent has been given. As per sub-section (3) of sec.19 consent refers in sub-section (2) is given then the Board should sanction the scheme on and from the date of such sanction the scheme shall be binding on all concerned. 40 Section 25 provides for appeal by any person aggrieved by an order of the Board. In this case, there has been an appeal preferred by the CBDT against the order sanctioning the scheme (which we will discuss later, but the appeal has been dismissed). Section 26 of the said Act provides bar of jurisdiction with regard to entertainment of any ....
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....o any orders passed by virtue of the power contemplated in this Act, we may take the aid of this maximum which is explained by Maxwell on the Interpretation of Statutes "Expressio unius exclusion alterius." 43 By the rule usually known in the form of this Latin maxim, mention of one or more things of a particular class maybe regarded as silently excluding all other members of the class: expressum facit cessare tacitum. Further, where a statue used two words or expressions, one of which generally includes the other, the more general term is taken in a sense excluding the less general one: otherwise there would have been little point in using the latter as well as the former. An illustration is given below: "In the Poor Relief Act, 1601, s.1. which imposed a poor rate on the occupiers of " Lands, " houses, tithes and "coal mines", the same word was similarly limited as not including mines other than coal mines; the mention of one kind of mine showed that the legislature understood the word "land", which would usually comprehend all kind of mine, as here not including any." 44 By applying the aforesaid maxim, the express mention of two Acts i.e. FERA (46 of 1993) and UL (C&R) Ac....
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....the Board is satisfied that all the conditions are fulfilled for giving consent for taking rehabilitation measures by way of amalgamation separate consent by notification by the Central Board of Direct Taxes is not required. 42. We could find this legal position from the decision of the Supreme Court in case of Indian Shaving Products Ltd. v. Board for Industrial and Financial Reconstruction reported in [1996] 218 ITR 140. In paragraph 28 of page 148 of the report Justice Bharucha for the Bench spoke legal position in this context as follows (headnote) : "By reason of section 32(2) of the said Act, where there has been under any scheme thereunder an amalgamation of a sick industrial company with 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....
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....cts and circumstances of the case. If the court so specifies a date, such date would be the date of amalgamation/date of transfer. But where the court does not prescribe any specific date but merely sanctions the scheme presented to it, the date of amalgamation/date of transfer is the date specified in the scheme as 'the transfer date'. It cannot be otherwise." 49. Hence, the income-tax authority has no competence to read the scheme differently as far as date of effect is concerned for any purpose. 50. Under those circumstances, we, therefore, are of the view that while answering question (A), that the Tribunal was correct in law in holding that the sanctioned scheme shall be conclusive evidence of fulfilling of requirements regarding consent of the Central Government/Central Board of Direct Taxes Circular No. 683 dated June 8, 1994. 51. While answering question (B) we express our opinion that the Tribunal was correct in law, on interpretation of the scope and purport of section 32(1) of the SICA, 1985 in holding that once a scheme having been sanctioned under this Act, the provisions of the scheme will have the overriding effect over any other laws except the FERA and....
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....s passed by Board of Industrial & Financial Reconstruction (BIFR) in an approval scheme of reconstruction/rehabilitation be given during the course of an assessment after granting all the reliefs under the IT ACT, 1961 including those reliefs were the BIFR had recommended consideration of such reliefs under the IT Act by the Central Government. In supersession of this, the CBDT now directs that wherever the order of the BIFR in an approved scheme of reconstruction/rehabilitation (a) 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." 47 We also note that Vide CBDT circular No.683 dated....
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....T vs.Vasudeo V. Dempo (1992) 196 ITR 216, that circulars issued by the department are normally meant to be followed and accepted by the authorities. 55. In K.P.Varghese vs. ITO (1981) 131 ITR597 (SC), the Hon'ble Court had gone one step further and observed that circulars issued by the CBDT are legally binding on the revenue and this binding character attaches to the circulars even if they are found not in accordance with the correct interpretation of a statutory provision and they depart or deviate from such construction. 56 The above dictum of law laid down by the Supreme Court show that although the circulars are not binding on the courts or an assessee, they are certainly binding on the revenue and it is not open to the revenue to advance an argument or filing an appeal contrary to the circulars. In fact, the department cannot even take contrary stand to the circulars as well. 57 In UCO Bank vs. Commissioner of Income Tax (1999) 237 ITR 889, the Hon'ble Supreme Court while considering the circulars issued in exercise of power under Section 119 of the Income Tax Act regarding the interest on sticky advances has held that the circulars were in the nature of concessions, which ....
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.... terms of Section 15(1) of Sick Industrial Companies )Special). Provisions) Act, 185 (SICA) and the same was considered by Hon'ble BIFR in the hearings held on 14.06.2002 and 11.03.2003. The BIFR accordingly declared MSL to be a sick industrial company in terms of Section 3(1)(0) of SICA. (4) Hon'ble BIFR circulated a Draft Rehabilitation Scheme (DRS) vide order dated 20.04.2012, which was received in this Directorate on 10.05.2012. The Income Tax reliefs sought in the said DRS in para 15.08 are as under: a) To exempt/grant relief to the company from the provisions of section 40A(3), 40(a)(ia), 41(1), 43B, 45, 56(2), 72A(2) 72(3), 79, 80 read with 139, 115JB and provisions of Chapter XVII of the Income Tax Act. b) To allow the company to capitalize amount of Rs. 245.80 crore, which was disallowed as revenue expenditure in the assessment for AY 2001-02 by debiting the Capital Work in Progress Account and crediting the P & L A/c in the FY 2010-11. This amount of capital work in progress will be treated as part of the cost of the assets. c) To exempt the company from chargeability of interest and penalties for defaults committed till date of production of Rolling Mill a....
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....ed 13.07.2012 to BIFR/OA. Vide the said reply the Department requested that only relief u/s. 72(3) and 72A provided in para 15.8 may be retained for consideration for the Department by prefixing the word 'to consider' and all the remaining reliefs be deleted. The Sr. Standing Counsel was advised to communicate these facts/objections/suggestions before the Hon'ble BIFR during hearing of the case on 16.07.2012. The appellant Department requests the Hon'ble Authority to grant following prayer:- (a) To allow the appeal. (b) To quash/set-aside the BIFR's order dated 16.07.2012 and SS-12 dated 04.09.2012 and modify the observations in paragraph 2. 11(b) in the sanctionedscheme and para 15.8 of SS-12 and prefix the words 'to consider' in respect of the relief claimed under sub-para (g) of 15.8 (under the heading CBDT) of the Rehabilitation Scheme so that the Petitioner Department could limit the relief to the merged entity to the extent of benefits available under section 72A of Income Tax Act 1961 subject to fulfillment of the conditions laid down in that section read with Rule 9-C of Income Tax Rules 1962. (c) To delete relief u/s 80 read with 139 as not required by the comp....
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....sputed fact is that the department's Nodal Agency (Director General of Income-tax (Admn.) and the Director of Income Tax (Recovery) has gone through the draft rehabilitation scheme and have conveyed their view point's/objections to the BIFR and BIFR has passed the order after considering the department's view/observations, which is clearly discernible from the averments/pleadings of the CBDT Nodal Officers (Director General of Income-tax (Admn.) and the Director of Income-tax (Recovery) in the appeal preferred before the AAIFR. This fact that department's views were considered emerges from a perusal of the appeal of the CBDT before the Hon'ble AAIFR relevant portions of which have been reproduced (supra) will clearly reveal that the department's view has been considered by the BIFR before the sanctioned scheme was passed on 04.09.2012. So, once we have taken note that department's view/objection has been taken note by the BIFR before passing the sanctioned scheme read with the circular issued by the CBDT, imposes a duty on the AO to give effect to even all the recommendations (i.e. reliefs to be given for proposals for consideration of CBDT given at sub para (a) to (h) of para 15.8....
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.... only provided for "consideration" of the relief and since there is no order of CBDT providing for such relief, the claim is not maintainable. This reasoning is apparently flawed for it runs contrary to the judgment of the Hon'ble Apex Court in the case of Indian Shaving Products Ltd. v. Board of Industrial and Financial Reconstruction and Another218 ITR 140, and the Hon'ble Jurisdictional High Court in the case of CIT v. J. K. Corporation (supra) and Circular of CBDT dated 16.2.2000 (supra). The Apex Court in the case of Indian Shaving Products Ltd. (supra) has held that 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 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. Further Hon'ble Jurisdictional High Court has also in no uncertain terms have held that the scheme of BIFR override the Incometax Act and the said scheme can be set at naught only by the BIFR or the AAIFR under the said SICA Act itself and not otherwise except by the Constitutional provision. It h....
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....me being is enforced." 68 Other reliefs/grants for the consideration of CBDT are found at sub-clause (a) to (h) (except g) above at para 15.8 of the sanctioned scheme of BIFR, which reads as under: (a) To exempt/grant relief to the company from the provisions of section 41A(3), 40A(a)(ia), 41)1), 34-B, 45, 56(2), 72(2), 72(3), 79, 80 read with 139, 115JB and provisions of Chapter XVII of the Income Tax Act. (b) To allow the company to capitalize amount of Rs. 245.80 crore, which was disallowed as revenue expenditure in the assessment for AY 2001-02 by debiting the Capital Work in Progress Account and crediting the P&L A/c in the FY 2010-11. This amount of capital work in progress will be treated as part of the cost of the assets. (c) To exempt the company from chargeability of interest and penalties for defaults committed till date of production of Rolling Mill and Still Plant respectively. (d) To exempt the company from Section 72 & section 32 of the Income Tax act so as to allow company to carry forward its accumulated losses and allowances beyond the period eight years till it is fully adjusted against the profits of the company in the subsequent years. (e) To ex....
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....n respect of the unabsorbed losses, the AO was of the opinion that it includes 'lapsed losses" of AY 2000-01 and 2001-02 of Rs. 48.74 crores and the same cannot be considered as per the provisions of Act beyond eight years. The carry forward of unabsorbed losses as noted above, is governed by the special provision i.e. section 72A of the Act. So, when a special provision relating to carry forward and set off of accumulated loss on amalgamation is stipulated in section 72A of the Act, it will override the general provisions in respect of carry forward of losses given in section 72 of the Act. As per section 72A of the Act relevant to the present case, the law is that where there has been amalgamation of a company owning an industrial undertaking (M/s MSL) with another company (the assessee M/s. HEIL) then notwithstanding anything contained in any other provisions of this Act, the accumulated loss and the unabsorbed depreciation of the amalgamating company (M/s. MSL) shall be deemed to be the loss of the amalgamated company (the assessee M/s. HEIL) for the previous year in which the amalgamation was affected and other provisions of this Act relating to set off of carry forward loss s....
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....amalgamating company's accumulated loss which is entitled to carry forward and set off as per the provision of Sec.72 of the Act, sub clause (3) of section 72 of the Act prescribes a cap of eight assessment years immediately succeeding assessment year for which the loss was first computed. The AO while giving effect to the BIFR order did not understand the binding nature of the CBDT circular and has not given effect to the sub-clause (a) of 15.8 wherein para (a) the BIFR has asked CBDT to consider exempt/grant relief to the company from the provisions of section---------'-------- ---'-----------'-----------'72A(2), 72(3), 79, 80 read with sec. 139 etc. Since the department's view has been considered by the BIFR before passing the sanctioned scheme as per CBDT circular, the AO was duty bound to give effect to the recommendation made by the BIFR. So, when the BIFR schemes consider, relief u/s. 72(3), means the limitation period prescribed u/s. 72(3) of the Act i.e. 8 years has to be lifted and AO has to give effect to it and carry forward of loss has to be given more than 8 years. Moreover, we note that clause (b) para 15.8 of the BIFR Scheme recommends CBDT to exempt the company fro....
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....ect to by the AO, since circular of CBDT is binding on him. We note that as per the sanctioned scheme sub para (a) of para 15.8, the BIFR has recommended CBDT to exempt/give relief of u/s. 72A(2) of the Act. Since the CBDT's objections were considered by the BIFR, before passing the sanctioned scheme, the recommendation/for consideration to CBDT has to be treated as mandatory by the AO and has to be given effect. Resultantly, the sub para (a) to (h) has to be given effect it includes to exempt/grant relief u/s 72A(2) of the Act, which implies, the pre-conditions stipulated in section 72A(2) of the Act for invoking section 72A(1) of the Act, needs to be exempted and becomes in-operative and necessarily has to be overlooked and so, in effect the AO has to give effect to Sec. 72A(1) without looking into the conditions laid in sec. 72A(2) of the Act. 75 In arriving at the above conclusion, we derive support from the decision of Coordinate Bench of Tribunal in ITA No. 1335/Ahd/2011 for AY 2007-08dated 8.12.2015 in the case of ITO v. The Ahmedabad Advance Mills Ltd. where too BIFR by an order dated 21.8.2006 provided interalia as under: "7.6 Income Tax-The Chairman, Central Board of D....
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....ns in the immediate preceding year, I do not understand the change in his stand this year. In view of the clear order of BIFR which has become final, appellant is entitled to set off capital gains against accumulated losses even beyond 8 years. Assessing Officer is therefore directed to allow such set off." 77 The aforesaid decision was affirmed by the Coordinate Bench of ITAT by holding that BIFR direction binds the revenue authorities. Also Hon'ble Madras High Court in the case of CIT v. M/s Tube Investments of India Ltd. in Tax Case (Appeal) Nos 519 to 521 of 2005 dated 4.1.2012 in almost identical circumstances upheld the order of Tribunal holding that the BIFR's recommendation to the department to consider granting exemption from the provisions of section 43B should be treated as a mandate. It was held as under: "12. It is also contended that even assuming that the Scheme had no overriding effect on the provisions of the Income Tax Act, a reading of the scheme does not show that it directed the allowing of the deduction under section 43B, except observing that the income tax authorities may consider allowing such deduction. The scheme should be read keeping in kind the obj....