Compliance with conditions u/s 72A is to be tested in relation to each amalgamating company

During the AY 2004-05, BTPU and BSPPL amalgamated with the taxpayer. The taxpayer claimed set-off of losses of BTPU under section 72A. The AO disallowed the set-off of loss brought forward on the basis that the taxpayer failed to:

• Hold three-fourth of the book value of fixed assets of amalgamating company for a continuous period of five years;

• Achieve the production of 50 percent of the installed capacity of the amalgamating company as per Rule 9C within a period of three years and nine months; and
• Furnish the certificate of particulars of production in the prescribed form under Rule 9C.

As regards the first objection of the AO, the Tribunal found that the AO computed the holding of fixed assets on the basis of aggregate fixed assets of both the amalgamating companies. It was held that if there are two or more amalgamations in a year, then the amalgamated company is required to prove satisfaction of these con­ditions in respect of such companies one by one as a prerequisite for availing benefit under Section 72A in respect of each such company separately. Since the taxpayer was claiming set-off for losses of BTPU only the assets of BTPU only should have been con­sidered.