TaxTMI 
TaxTMI 
1984 (7) TMI 64
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....all good and readily realisable assets. So far as " advances considered as not readily realisable and/or bad or doubtful of recovery ", the transferee-bank was authorised to take steps to recover the same in terms of the scheme of amalgamation as notified. The value of such assets was found to be Rs. 7,72,439.70. As per the scheme, if any amounts are to be realised by the transferee, the same were to be distributed to the shareholders of the assessee-bank. During the previous year ending December 31, 1970, the year of assessment being 1971-72, the assessee-bank had realised a sum of Rs. 44,714.68 as interest on moneys deposited for short periods. The moneys in such short-term deposits represented the amounts realised by the transferee bank from those assets which were not readily realisable. In the return for the relevant year, the assessee had shown a loss of Rs. 23,098 and in doing so it had claimed a sum of Rs. 58,560 representing bad debts, as deduction. The assessing authority accepted the return and completed the assessment on January 7, 1972, determining the loss at Rs. 23,098. The assessment was reopened on the basis of an audit note which had pointed out that inasmuc....
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.... right perspective, he submitted, would establish that the order of the Tribunal is erroneous. We propose to deal with them. Shri Rama Shenoi did concede that after the amalgamation, the assessee-bank was not carrying on the banking business as defined in s. 5(b) of the Banking Regulation Act. However, according to him, the assessee-bank, with reference to the " advances considered not readily realisable and/or bad or doubtful of recovery " must be held to be carrying on the banking business as envisaged under s. 6(1)(1) of the Banking Regulation Act, 1949. Section 6(1)(1) reads: " (1) In addition to the business of banking, a banking company may engage in any one or more of the following forms of business, namely: (1) selling, improving, managing, developing, exchanging, leasing, mortgaging, disposing of or turning to account or otherwise dealing with all or any part of the property and rights of the company. With regard to the assets aforesaid, the counsel submitted that the assessee-bank had taken steps, through the agency of the Lord Krishna Bank Ltd., for recovery of them and " turning them to account ". The assessee-bank was thus carrying on the business falling unde....
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....n other words, if the liquidator considers it necessary for a proper and effective realisation of the company's assets to continue the business of the company, the business of the company must be treated, although in a limited sense, as being carried on. But, if all that the liquidator does is to realise the assets, there is no carrying on of the company's business. " We are of the view that this decision has no application here. In the Gujarat High Court decision, the question considered was whether after the suspension of the licence, a banking company can be said to carry on any business activity within the meaning of s. 6 of the Banking Regulation Act, when admittedly it was not carrying on the banking business as defined under s. 5(b) of the Act. The Gujarat High Court held (p. 572): " We are afraid we cannot accede to this broad submission. There appears to us an apparent fallacy in this argument. No company can carry on banking business without licence issued by the Reserve Bank of India save as otherwise provided in s. 22 of the Banking Regulation Act, 1949, and it is only such banking company which can carry on additional business as specified in s. 6 of the aforesai....
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....reafter be necessary for the board of directors of the transferor bank to meet as required by s. 285 of that Act." Here we may also refer to the provisions contained in sub-ss. (8), (9) and (14) of s. 45 of the Banking Regulation Act. Sub-s. (8) of s. 45 provides that the scheme of amalgamation shall be binding not only on the transferee and the transferor banks but also on all the members, depositors and other creditors and employees of each of the banking companies and on any other person having any right or liability in relation to any of the transferor and the transferee banks. Sub-s. (9) of s. 45 provides that on and from such date as may be specified by the Central Government in this behalf, the properties and assets of the banking company shall, by virtue of and to the extent provided in the scheme, stand transferred to, and vest in, and the liabilities of the transferor-bank shall, by virtue of and to the extent provided in the scheme, stand transferred to, and become the liabilities of, the transferee-bank. Section 45(14) provides that the provisions of this section and of any scheme made under it shall have effect notwithstanding anything to the contrary contained in a....