CIT Vs Tamil Nadu State Transport Corporation (Kum Div. I) Limited (Madras High Court)
Conclusion: Assessees were qualified as companies owning an industrial undertaking within the meaning of Section 72A. Accordingly, the carry forward and set-off of accumulated business losses and unabsorbed depreciation of the amalgamating transport corporations was allowable.
Held: Assessees, TNSTC Kumbakonam Limited and TNSTC Villupuram Limited, were formed pursuant to amalgamation of various divisions of Tamil Nadu State Transport Corporation. Post-amalgamation, assessees claimed carry forward and set-off of accumulated business losses and unabsorbed depreciation of the amalgamating entities for multiple assessment years. AO and CIT (Appeals) rejected the claim on the ground that assessees were primarily engaged in public passenger transport and did not qualify as an “industrial undertaking” under Section 72A, particularly as transport services were not enumerated in Section 72A(7)(aa). Tribunal, however, allowed the claim, holding that assessee qualified as an industrial undertaking, considering its manufacturing activities such as bus body building and allied operations. Revenue contended that assessees were transport corporations and not industrial undertakings as defined under Section 72A(7)(aa). Assessee contended that assessees owned and operated manufacturing units engaged in fabrication and assembly of bus bodies, which amounted to manufacture or processing of goods; section 72A(1) requires ownership of an industrial undertaking, not that manufacturing must be the predominant source of income; the restrictive definition relied upon by AO was drawn from the Finance Act, 1981 and was inapplicable to the assessment years in question. It was held that the expression “industrial undertaking” under Section 72A must be interpreted in accordance with the statutory definition in Section 72A(7)(aa) as applicable to the relevant assessment years. Manufacture of bus bodies by assembling chassis purchased from third parties constituted manufacture or processing of goods. Section 72A did not require that manufacturing be the main activity of the assessee for the relevant years. AO erred in importing the concept of “mainly engaged” from earlier legislative provisions no longer applicable. Assessees satisfied the statutory conditions under Section 72A(1) and (2), including continuity of business and filing of requisite certificates.
