Case Law Details
Embio Limited Vs ACIT (ITAT Mumbai)
A perusal of sub-section(2) of section 72A of the Act r.w.r. 9C of the Rules, which we have extracted earlier, bring out that the one of the condition to be fulfilled by the assessee in order to claim benefit of carry forward and set-off of accumulated losses and unabsorbed depreciation of the amalgamating company is that the amalgamated company, owning an industrial undertaking of the amalgamating company by way of amalgamation, shall achieve the level of production of at least fifty per cent of the installed capacity of the said undertaking before the end of four years from the date of amalgamation; and, continue to maintain the said minimum level of production till the end of five years from the date of amalgamation. Further, in a case where any of the conditions laid down in section 72A r.w.r. 9Cof the Rules is not complied with, the set off of loss or allowance of depreciation made in any previous year in the hands of the amalgamated company shall be deemed to be the income of the amalgamated company chargeable to tax for the year in which such conditions are not complied with. In the instant case, the year under consideration is the second year of amalgamation and due to labour disputes the production level was below fifty percent of the installed capacity. In this factual background, the Assessing Officer denied set off of accumulated losses of the amalgamating company in the hands of the assessee as level of production during the year under consideration was below fifty-percent and also denied the benefit of set off of losses already granted to the assessee in Assessment Year 2009-10. The CIT(A) has upheld the action of the Assessing Officer. The moot point is as to whether in the year under consideration, being the second year of amalgamation, was the Assessing Officer justified in invoking provisions of section 72A r.w.r. 9C of Rules to hold that assessee has not met the conditions stipulated therein, and thereby disallow the set-off of accumulated losses and unabsorbed depreciation of the amalgamating company. The appellant has assailed the aforesaid, based on the provisions of section 72A of the Act, and also the decision of our co-ordinate bench in the case of Bayer Material Science P. Ltd (Supra). The relevant provisions provide for a period of four years from the date of amalgamation for achieving the fifty-percent level of production. The present year is the second year of amalgamation and thus, condition of desired level of production is irrelevant for the year under consideration.
In the present case, the amalgamation took place w.e.f. 01/04/2008. The year under consideration, being Assessment Year 2010-11, is the second year of amalgamation. The assessee claimed set–off of losses u/s 72A of the Act in its return of income for Assessment Year 2009-10 and Assessment Year 2010-11. It achieved more than 50% of production in the first year. However, it failed to achieve more than 50% of the production in the second year i.e. under year consideration due to labour disputes.
The other conditions of section 72A r.w.r. 9C of the Act with respect to holding three-fourth of the book value of the assets of the amalgamating company, furnishing of certificate of an Accountant in Form 62 showing level of production, etc. were complied with. Further, at the time of completion of assessment the period of four years had not expired from the date of amalgamation. As such, the facts of the present case are identical to the facts in the case of Bayer Material Science P. Ltd (Supra). Thus, case of the assessee is squarely covered by the decision of this Tribunal in the case of Bayer Material Science P. Ltd (Supra).
In the above background, we hold that the provisions of section 72A of the Act r.w.r. 9C of the Rules are not attracted to the year under consideration. Notably, the points raised by the assessee are based on the applicable legal position and, therefore, we do not find any justification to uphold the decision of the CIT(A). In this view of the matter, the decision of the CIT(A), in holding that the accumulated loss and unabsorbed depreciation relating to the amalgamating company has to be denied to the assessee company for set-off and carry forward for set-off and that of already set-offed in Assessment Year 2009-10 be treated as income of the current year, is hereby set-aside. We may hasten to add here that the view expressed by us, as above, is only with respect to the set-off of accumulated losses in the year under consideration and not for other years.
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