Aspinwall And Co. Ltd Vs Inspecting Assistant Commissioner (Supreme Court of India)
The Supreme Court decided a batch of five appeals involving a common issue relating to the eligibility of an amalgamated company to claim set-off of accumulated losses of an amalgamating company under the Kerala Agricultural Income Tax Act, 1991.
The facts were taken primarily from one appeal. A company was amalgamated with the appellant pursuant to a scheme sanctioned in November 2006, with effect from 01.01.2006. The amalgamating company had accumulated losses, and the appellant sought to set off those losses against its own income.
The appellant contended that under Section 54 of the Kerala Act, which deals with succession of business, the amalgamated company, as successor, was entitled to carry forward and set off the losses of the amalgamating company. It also relied on Clause 14.2 of the scheme of amalgamation, which provided that profits, income, expenditure, and losses of the amalgamating company would be treated as those of the amalgamated company. Further reliance was placed on a Supreme Court decision where approved amalgamation schemes were held binding when no objections were raised.
The respondent opposed this, arguing that Section 12 of the Kerala Act allows carry forward and set-off of losses only by the same assessee who incurred the losses. Since the amalgamated company had not suffered those losses, it could not claim the benefit. It was also argued that the amalgamating company ceased to exist after amalgamation and thus could not claim any set-off. Additionally, it was submitted that provisions of the Income Tax Act, 1961, such as Section 72A, which specifically allow such set-off in amalgamation cases, were materially different and not applicable to the Kerala Act.
