| SooperKanoon Citation | sooperkanoon.com/70130 |
| Court | Income Tax Appellate Tribunal ITAT Kolkata |
| Decided On | Jun-09-1998 |
| Reported in | (1999)68ITD240(Kol.) |
| Appellant | J. K. Corporation Ltd. |
| Respondent | Assistant Commissioner of Income |
2. ITA No. 1650(Cal) of 1996 is an appeal by the assessee for the asst.
yr. 1992-93 and is directed against the order of CIT(A), Central-I, Calcutta, dt. 18th March, 1996. ITA No. 1755 (Cal) of 1996 is an appeal by the Department for the same assessment year and against the same impugned order of the learned CIT(A).
3. The facts, relevant for the disposal of these appeals, are that the assessee-company was formerly known as Straw Products Ltd. (in short, SPL). The assessee changed its former name to the present name being M/s. J. K. Corporation Ltd. w.e.f. 17th June, 1994. The assessee filed its return of income for asst. yr. 1992-93 on 31st December, 1992, declaring total income of Rs. 23.58 crores with the claim of carried forward unabsorbed investment allowance of Rs. 2,72 crores pertaining to earlier years. Notice under s. 143(2) dt. 26th November, 1993, was issued and the assessee later filed a revised return on 31st March, 1994, declaring total loss of Rs. 152.12 crores. This loss comprised of Rs. 17.97 crores pertaining to M/s. SPL and Rs. 134.15 crores pertaining to M/s. OSL (amalgamating company). The aforesaid loss of M/s. OSL included : (i) unabsorbed business loss for earlier years, (ii) current year's business loss from 1st February, 1992 to 31st March, 1992, (iii) unabsorbed depreciation allowance for earlier years, and (iv) unabsorbed investment allowance for earlier years. In this revised return the assessee claimed that M/s. OSL being a sick company amalgamated with the assessee w.e.f. 1st February, 1992, under the order dt. 25th January, 1994, passed by the Board for Industrial and Financial Reconstruction (in short BIFR) read with addendum order dt.
17th March, 1994 by BIFR and declaration by BIFR dt. 17th March, 1994, under s. 72A(1) of the IT Act, 1961. The assessee also filed on 8th August, 1994, a certificate dt. 15th June, 1994 issued by BIFR under s.
72A(2)(ii) of the IT Act along with its letter dt. 6th August, 1994.
The assessee filed a second revised return on 6th March, 1995, along with a copy of certificate dt. 15th June, 1994 under s. 72A(2)(ii) of the IT Act issued by the BIFR declaring total loss of Rs. 123.34 crores of the amalgamating company M/s. OSL. The AO however held that this second revised return was filed after the expiry of the statutory time limit and so ignored the same. The AO passed the assessment order under s. 143(3) wherein he disallowed the assessee's claim of loss and unabsorbed depreciation and unabsorbed investment allowance of M/s.
OSL. The AO disallowed the assessee's claim under s. 72A for set off as also for carry forward of the aforesaid loss and disallowances of the amalgamating company M/s. OSL. The AO also held that the first revised return filed on 31st March, 1994, was beyond the time stipulated under s. 139(1). Accordingly the AO disallowed the set off or carry forward in view of s. 80 r/w s. 139(3) of the IT Act. The AO also observed that there was no declaration by the Central Government under s. 72A(1). He also observed that the amalgamation cannot be made operative w.e.f. 1st February, 1992 in view of the order of BIFR fixing the aforesaid date having been passed on 25th January, 1994. He also observed that the consent of the Central Government had not been taken in accordance with Circular No. 683 dt. 8th June, 1994. The AO also observed that the conditions of s. 72A(2) were not complied with inasmuch as the business of amalgamating company M/s. OSL was not carried on by the assessee during the relevant previous year as the amalgamation order itself was passed by BIFR on 25th January, 1994, and so the certificate of BIFR under s. 72A(2) also could not be issued, and that the said certificate was not filed along with return as required under s. 72A(2)(ii). In the assessee's first appeal, the learned CIT(A) agreed with the finding of the AO to the effect that : (i) amalgamation could not be effective from 1st February, 1992, that is, during the previous year relevant to the asst. yr. 1992-93, (ii) that the benefit under s. 72A cannot be claimed as no notice was given to the Central Government or the Board, and that the Circular No. 683, dt. 8th June, 1994, was binding on AO (iii) that the requirement of s. 72A(2)(i) was not complied with inasmuch as the assessee, in fact, did not carry on the business of the amalgamating company (OSL) during the relevant previous year ended 31st March, 1992, since the order of BIFR was passed only on 25th January, 1994. The learned CIT(A) however disagreeing with the AO held that the revised return filed on 31st March, 1994, claiming the loss was valid and was not affected by the provisions of s. 139(3)/80 since the original return showing profit was filed within time. He also held that the relief under s. 72A could not be denied to the assessee on the ground that the certificate of BIFR under s. 72A(2)(ii) was not filed with the return, since the filing of the said certificate along with the assessee's letter dt. 6th August, 1994 was a valid compliance. He also held that declaration by BIFR is by the Central Government under s.72A(1) in view of s. 32(2) of Sick Industrial Company (Special Provisions) Act, 1985 (in short, SICA).
4. Similarly, the AO also disallowed consultancy charges amounting to Rs. 5,26,000 in respect of which the assessee had claimed deduction claiming that the same was spent for preparing techno-economic feasibility study and market survey in respect of new project. The AO disallowed the said claim and made addition in respect thereof on the ground that these expenses were not in connection with the assessee's existing business repelling the assessee's plea that the expenditure was incurred with a view to expand its existing business activity. On appeal, the learned CIT(A) confirmed the said disallowance.
5. The AO also disallowed, under the head 'transit house, expenses' a total sum of Rs. 4,61,599 comprising of (i) Rs. 1,35,360 as rent, (ii) Rs. 6,936 as rate and taxes, (iii) Rs. 93,063 as insurance charges and (iv) Rs. 2,26,240 as depreciation on fixed asset installed and used in guest houses, under s. 37(4) observing that s. 37(4) is an overriding section. As such the AO disallowed Rs. 4,61,599 in respect of guest houses under s. 37(4). On appeal, the learned CIT(A) confirmed the disallowances.
6. The AO disallowed the assessee's claim for deduction of Rs. 22.85 lacs in respect of premium on redemption of debentures. The assessee had claimed the said amount as deduction under s. 37(1) on account of premium on redemption of non-convertible debentures being in the nature of additional interest. The AO disallowed the assessee's said claim as not admissible till maturity of debentures. The assessee's case was that as per terms of debentures a premium @ 5% was payable to debenture-holder at the time of redemption of debentures apart from principal amount borrowed and interest payable on said debentures. The assessee, treating the said 5% premium as additional consideration/interest for the entire term of debentures, spread the same over the entire term of debentures in each previous year and made provision in its books of account for proportionate premium attributable to such previous year. For the asst. yr. 1992-93 the assessee provided a sum of Rs. 22.85 lacs in books of account and claimed as a deduction under s. 37(1) as being in the nature of additional interest. The AO observed that the premium of 5% was payable only on redemption or maturity of debentures after a specified period, that is, sometime in the years 1994, 1995 and 1997 and till that period it is merely a provision or a contingent liability. As such the AO disallowed the said premium on redemption of debentures as being contingent liability. On appeal, the learned CIT(A) confirmed the disallowance.
7. The AO disallowed a sum of Rs. 1,24,443, our of employees' welfare expenses. The AO observed that the said sum was spent by way of contribution to social organisations and clubs, etc. as detailed in para 5 on p. 11 of assessment order. The AO held that this was hit by s. 40A(9) and disallowed the same. On appeal, the learned CIT(A) confirmed the disallowance.
8. The AO disallowed a sum of Rs. 5.10 lacs under the head 'general charges'. The assessee had claimed deduction in respect of Rs. 5 lacs paid to PHD Chamber of Commerce and Industries for construction of Lakshmipat Singhania Auditorium in PHD House, New Delhi, and Rs. 10,000 paid for valuation of shares. The AO disallowed both the sums as being expenditure on capital account, and not directly connected with the assessee's business. On appeal, the learned CIT(A) confirmed the assessment order on this count.
9. The AO disallowed roll-over charges of Rs. 60,16,537. The assessee had purchased plant and machinery from foreign country for which it took foreign currency loan from Industrial Finance Corporation of India Ltd. (in short IFCI), the repayment of which along with interest thereon was to be made in instalments in foreign currency. Due to devaluation of Indian rupee in the year 1991, the assessee's liability on account of foreign currency loan is stated to have increased much.
So to circumvent increase in its liability for repayment of principal and interest in respect of such borrowings the assessee entered into forward exchange contracts with authorised dealers (Citibank, New Delhi) for purchase of foreign currency and thus to provide it with long-term forward cover on extension/roll-over basis for repayment of foreign currency loans taken from IFCI for purchase of machinery for its magnetic tape unit of which commercial production is stated to have started in February, 1989. Since all the instalments did not mature for payment during the previous year in order to keep the hedge (against any probable extra liability of assessee while paying loan instalment and/or interest due to adverse fluctuation in exchange rate) alive the assessee had to periodically carry over and renew such contracts by payment of amounts to authorised dealers. This charge for extension of contract with Citibank is termed as "Extension charge", or "Roll-over charge". During the previous year the assessee was liable to pay total roll-over charges of Rs. 60,16,537 for extension of contract to Citibank. Out of this, the assessee capitalised Rs. 48,25,453 in its books of account, since the same related to repayment of principal amount of the foreign currency loan and the balance amount of Rs. 11,91,084, being related to interest on the principal amount, was debited to P&L a/c, as revenue expenses under the head "Cost of borrowing". The assessee, however, claimed the entire sum of Rs. 60,16,537 as revenue expenditure in its return. The AO disallowed the assessee's claim for deduction of roll-over charges both in relation to the principal amount as also the interest, holding the same as capital expenditure for the reason that they related to acquisition of plant and machinery which were capital assets. He did not also allow the said sum to be added to the cost of plant and machinery for allowing depreciation. On appeal, the CIT(A) confirmed the assessment order on this count.
10. The AO disallowed a sum of Rs. 41,12,177 claimed as deduction for interest on borrowed fund for purchase of plant and machinery. The assessee had taken loans for installing balancing equipment in Lakshmi Cement Division and magnetic tape division which are stated to have started commercial production in October, 1982 & February, 1989 respectively. During the previous year, the assessee incurred a sum of Rs. 41,12,177 by way of interest on such borrowed funds. The said interest was in respect of the period prior to plant and machinery being installed and put to use. Though the assessee had capitalised the said amount in the books of account, but claimed the same as revenue deduction. The AO disallowed the assessee's claim for deduction of the said amount as revenue outgoing on the ground that the said interest was paid for acquiring capital asset and in view of Expln. 8 to s.
43(1) the interest for the period prior to the user of the plant and machinery could only be added to the actual cost and that the same could not be allowed as revenue expenditure.
On appeal, the learned CIT(A) confirmed the order of the AO on this count.
11. The AO disallowed a sum of Rs. 41,44,000 out of the interest paid on borrowings, being proportionate to the interest attributable to interest-free loans advanced by the assessee to its subsidiaries and associate companies. The assessee had advanced interest-free loans to its subsidiaries and associate companies where as it had paid interest on funds borrowed by it for the purpose of its business. On appeal the learned CIT(A) agreed with the findings of the AO on this issue and so he dismissed the assessee's ground raised before him in this regard.
12. The AO disallowed the assessee's claim for deduction of Rs. 5,24,487 under s. 80G. The assessee had paid a sum of Rs. 5 lacs to J.K. Trust. The assessee had also made contribution of Rs. 24,487 to the U.P. Chief Minister's Relief Fund for earthquake victims.
13. The assessee had also made a donation of Rs. 15 lacs to Lakshmipat Singhania Medical Foundation. The AO also disallowed the assessee's claim for deduction of the said amount of Rs. 15 lacs. On appeal the learned CIT(A) set aside the assessment in respect of donation of Rs. 15 lacs to Lakshmipat Singhania Medical Foundation and restored the same to AO to examine afresh with direction to allow the assessee to adduce evidence. However, regarding the remaining two amounts of Rs. 5 lacs and Rs. 24,487 the learned CIT(A) made no discussion/decision in his impugned order.
14. The assessee had, in its original return, claimed deduction under s. 80HH in respect of profits of its Lakshmi Cement Unit and J.K. Paper Mills PM-IV Unit set up in backward areas. In the revised return, as the "gross total income", after considering the huge loss or M/s. OSL, came to be negative, the deduction under s. 80HH, in respect of the above two units was not claimed. The AO rejected the revised return and considered the assessee's said claim and finding that there was non-fulfilment of the statutory obligations while computing the profit of the new industrial units as required under s. 80HH he disallowed the assessee's claim for deduction under s. 80HH in respect of both the units. The AO observed that the profits and gains derived from the new industrial undertaking within the meaning of s. 80HH meant the profit and gain computed in accordance with the provisions of the IT Act and forming part of the total income but the assessee computed the profit and gains of the new industrial undertaking without deducting therefrom the depreciation and investment allowance. On appeal, the learned CIT(A) confirmed the assessment.
15. The assessee had claimed Rs. 5,45,77,257 as deduction for investment allowance but the AO restricted the said deduction to Rs. 2,01,09,380. On appeal, the learned CIT(A) confirmed the assessment on this count.
16. The AO charged interest under ss. 234B and 234C of the IT Act. On appeal the learned CIT(A) did not accept the plea of the assessee.
17. In the above circumstances the assessee, feeling aggrieved by the order of the learned CIT(A), has come up in appeal before the Tribunal.
18. ITA No. 1753(Cal) of 1996 is the Departmental appeal. The AO had rejected the assessee's claim under s. 72A on several grounds. The learned CIT(A), though upheld the rejection of the assessee's claim yet, did not agree with the AO on the ground that the revised return filed on 31st March, 1994, was hit by s. 139(3) r/w s. 80 of the IT Act. The AO had also made an addition of Rs. 57,400 under s. 40A(3) of the Act on the ground that payments in excess of prescribed limit of Rs. 10,000 had been made in cash and not by account payee cheque or bank draft. On appeal the learned CIT(A) held that the payments were covered be exception referred to in r. 6DD(j). He accordingly deleted the aforesaid addition. It is in respect of the above two points that the Department has filed its appeal.
19. We have heard the arguments of both the sides and also perused the records including written submission of assessee's authorised representative.
20. First we take up the assessee's appeal being ITA No. 1650(Cal) of 1996. Ground No. 1 is general and so this calls for no specific decision on our part as has also been conceded by the learned Departmental Representative of the assessee. Ground No. 2 is as under : "2.0 For that the learned CIT(A) has erred in upholding the disallowance of appellant's claim for deduction of current and unabsorbed business loss, current and unabsorbed depreciation and unabsorbed investment allowance of Orissa Synthetics Ltd., which stood amalgamated with the appellant w.e.f. 1st February, 1992, pursuant to the scheme of amalgamation/merger sanctioned by BIFR. The claim of the appellant in this behalf was in accordance with law.
2.1 For that the learned CIT(A) had no authority and/or competence to question and/or ignore the scheme sanctioned by BIFR under the provisions of SICA. 2.2 For that the learned CIT(A) has erred in rejecting the amalgamation/merger of OSL with the appellant company on the following grounds : (i) The scheme sanctioned by BIFR could not be operative w.e.f. 1st February, 1992.
(ii) That seeking consent of the CBDT is a requirement statutorily laid down.
2.3 For that further in any event and without prejudice to the aforesaid, the CIT(A) should have directed the AO to compute the current year's loss of OSL for the period from 1st February, 1992, to 31st March, 1992, at Rs. 14,60,52,433 and to adjust and set off the same against current year's incomes. The said loss of Rs. 14,60,52,433 should have been adjusted against current year's other incomes and the balance loss should have been carried forward for set off in subsequent years." As different parts and sub-parts of ground No. 2 are inter-related and concern the disallowance of appellant's claim under s. 72A of the IT Act with respect to current and unabsorbed business loss, current and unabsorbed depreciation and also concern the unabsorbed investment allowance, all of M/s. OSL, so we are taking them up together.
Similarly as ground No. 1 in Departmental appeal being ITA No.1755(Cal) of 1996 is also related to the issue, comprised in the above-mentioned grounds raised in the assessee's appeal so we are taking up the said ground No. 1 of Departmental appeal also along with aforesaid grounds of the assessee's appeal. M/s. OSL being a sick company under s. 3(o) of SICA and a reference under s. 15 of SICA having been made by M/s. OSL to BIFR in August, 1990, the operative agency (IDBI), appointed by BIFR, prepared a draft scheme for the amalgamation/merger of M/s. OSL with the assessee (formerly known as SPL). The BIFR passed order under s. 18(4) of SICA on 25th January, 1994 sanctioning scheme for rehabilitation-cum-amalgamation/merger of M/s. OSL with the assessee. The said order of BIFR is placed on pp. 30 to 34 and the sanctioned scheme along with annexures is placed on pp.
35 to 67 of the assessee's paper-book-I. BIFR subsequently also passed an addendum dt. 17th March, 1994, whereby it added to further sub-cls.
(d) and (e) to cl. 4C on p. 11 of the scheme. This cl. 4C is mentioned on pp. 38 r/w 40 of assessee's paper-book I and the addendum is placed on pages 68 to 70 of the assessee's paper-book I. BIFR also issued a declaration under s. 72A(1) of the IT Act, 1961 on 17th March,1994 as placed on pages 71 to 74 of the paper-book I.21. The AO held in para (4) on page 7 of his order that in case of there being an amalgamation of a company the Central Government is required to make a declaration to that effect on the recommendation of the specified authority, that is, BIFR and that then only the benefit under s. 72A can be availed of by the amalgamated company. He also observed that there was no such declaration by the Central Government in this case. However the learned CIT(A) held in para 8.3 on pp. 15 and 16 of his impugned order that in view of Indian Shaving Products Ltd. vs. BIFR (1996) 218 ITR 140 (SC) that once the requirements of s. 72A of the IT Act are found to have been duly met, then BIFR is the authority to make the declaration under s. 72A of the IT Act in exercise of power conferred on it under s. 32(2) of SICA, and that the contention of the appellant cannot be rejected on the ground that the declaration by the Central Government under s. 72A(1) was missing in the case. The provisions of s. 32 of SICA may, with advantage, be quoted here, which are as under : 32. "(1) The provisions of the Act and of any rules or schemes made thereunder shall have effect notwithstanding anything inconsistent therewith contained in any other law except the provisions of the Foreign Exchange Regulation Act, 1973 (46 of 1973) and the Urban Land (Ceiling and Regulation) Act, 1976 (33 of 1976), for the time being in force or in the Memorandum or Articles of Association of an industrial company or any other instrument having effect by virtue of any law other than this Act.
(2) Where there has been under any scheme under this Act an amalgamation of a sick industrial company with another company, the provisions of s. 72A of the IT Act, 1961 (43 of 1961), shall, subject to the modifications that the power of the Central Government under that section may be exercised by the Board without any recommendation by the specified authority referred to in that section, apply in relation to such amalgamation as they apply in relation to the amalgamation of a company owning an industrial undertaking with another company.
The provisions of s. 72A(1), (2) of the IT Act may, for convenience sake, be also quoted here, which are as under : "72A.-(1) where there has been an amalgamation of a company owning an industrial undertaking or a ship with another company and the Central Government on the recommendation of the specified authority, is satisfied that the following conditions are fulfilled namely : (a) the amalgamating company was not immediately before such amalgamation, financially viable by reason of its liabilities, losses and other relevant factors; (c) such other conditions as the Central Government may, by notification in the Official Gazette, specify, to ensure that the benefit under this section is restricted to amalgamations which would facilitate the rehabilitation or revival of the business of the amalgamating company; then, the Central Government may make a declaration to that effect, and, thereupon, notwithstanding anything contained in any other provision of this Act, the accumulated loss and the unabsorbed depreciation of the amalgamating company shall be deemed to be the loss or, as the case may be, allowance for depreciation of the amalgamated company for the previous year in which the amalgamation was effected, and the other provisions of this Act relating to set off and carry forward of loss and allowance for depreciation shall apply accordingly.
(2) Notwithstanding anything contained in sub-s. (1), the accumulated loss shall not be set off or carried forward and the unabsorbed depreciation shall not be allowed in the assessment of the amalgamated company unless the following conditions are fulfilled, namely : (i) during the previous year relevant to the assessment year for which such set off or allowance is claimed, the business of the amalgamating company is carried on by the amalgamated company without any modification or reorganisation or with such modification or reorganisation as may be approved by the Central Government to enable the amalgamated company to carry on such business more economically or more efficiently; (ii) the amalgamated company furnishes, along with its return of income for the said assessment year, a certificate from the specified authority to the effect that adequate steps have been taken by that company for the rehabilitation or revival of the business of the amalgamating company," From the perusal of the above provisions it is clear that where a scheme of amalgamation has been made under SICA the provisions of s.
72A of the IT Act shall apply in relation to such amalgamation with modification that the power of the Central Government under s. 72A of the IT Act may be exercised by the Board, that is by BIFR, without any recommendation by the specified authority referred to in s. 72A of the IT Act. As such in the case in hand the scheme for amalgamation of sick company M/s. OSL with M/s. SPL (subsequently named as J.K. Corporation Ltd., that is the assessee) having been made, the powers of the Central Government under s. 72A of the IT Act become exerciseable by BIFR and the same can be exercised without any recommendation by the specified authority. In that view of the matter the declaration made by BIFR under s. 72A(1) of IT Act r/w s. 32(2) of SICA on 17th March, 1994 placed on p. 71 to 74 of paper-book I) is the declaration made in accordance with law. After the aforesaid declaration no other declaration by the Central Government as such in needed under law.
22. The authorities below have held that BIFR's order sanctioning the scheme having been passed on 25th January,1994 could not be operative during the previous year relevant to the asst. yr. 1992-93 and that the amalgamation could not be operative w.e.f. 1st February, 1992. The learned Authorised Representative of the assessee has contended that 1st February, 1992, has been specified as effective date of amalgamation in the scheme that has been sanctioned by BIFR so the date specified in the sanctioned scheme is the effective date of amalgamation under law. In this regard he has drawn our attention to cl. A(v) on internal p. 15 of the scheme available on p. 44 of the paper-book I, wherein it has been mentioned that "transfer date" means the first date of February, 1992. He has also drawn our attention to the declaration made by BIFR under s. 72A(1) of the IT Act on 17th March, 1994, placed on pp. 71 and 72 of the paper-book I which, in the end specifically mentions that "the amalgamation is effective from 1st February, 1992". The learned Authorised Representative of the assessee has cited Marshall Sons & Co. (India) Ltd. vs. ITO (1997) 223 ITR 809 (SC) and has contended that it has been held therein that the transfer takes place and is effective from the date specified in the scheme of amalgamation. He has also contended that when BIFR sanctions the scheme it is obligatory on BIFR to make a declaration under s. 72A(1) of the IT Act as postulated in s. 32(2) of SICA for allowing benefit under s.
72A(1) of the IT Act to the amalgamated company. He has cited (1996) 218 ITR 140 (SC) (supra) in his support. He has contended that it cannot be a correct position that the amalgamation may be effective w.e.f. 1st February, 1992, for other purposes but not for the purpose of s. 72A. He has contended that the amalgamation has to be effective for all purposes including s. 72A. He has drawn our attention to cl.
3(b) of this scheme placed on p. 36 of paper-book I (internal p. 7), mentioning "Margin money" for working capital to be out of tax benefits under s. 72A of the IT Act. He has also drawn our attention to the last para of the said cl. 3 on p. 37 of paper-book I (internal p. 8) wherein it has been mentioned that "The scheme for merger/amalgamation of OSL for SPL shall be under s. 72A of the IT Act, 1961, and shall be effective from 1st February, 1992". The learned Authorised Representative has also contended that the amalgamation being effective from 1st February, 1992, has also been accepted by the Department in the case of amalgamating company M/s. OSL. He has contended that the assessment order of OSL for asst. yr. 1992-93 (pp. 123 to 129 of paper-book I) shows that the assessment under s. 143(3) was made only for the period up to 31st January, 1992 as will be evident from sl. No.9 of the first page of the assessment order on p. 123 of the paper-book I. He has further contended that the assessment proceedings of amalgamating company OSL for asst. yr. 1993-94 have been dropped vide order dt. 25th January, 1996, observing that the return of the amalgamating company (OSL) for the said assessment year was non est in view of the order of BIFR dt. 26th January, 1994, for amalgamation w.e.f. 1st February, 1992.
23. The learned Authorised Representative has also contended that from the date specified for transfer/amalgamation in this scheme, the amalgamating company is deemed to carry on business for and on behalf of the amalgamated company as a trustee of the amalgamated company. He has cited (1997) 223 ITR 809 (SC) (supra) wherein it has been held that "the business carried on by the transfereror company (subsidiary company) should be deemed to have been carried on for and on behalf of the transferee company. This is necessary and the logical consequence of the Court sanctioning scheme of amalgamation as presented to it".
24. As against this, the learned Departmental Representative of Revenue has contended that the order of BIFR sanctioning the scheme was passed on 25th January, 1994 and so the scheme cannot be operative for any period prior to 25th January, 1994 and as such the sanctioned scheme cannot be operative from 1st February, 1992. He has cited CIT vs. Kamla Town Trust (1996) 216 ITR 699 (SC) in his support. He has also contended that the fact that in view of s. 32(2) of SICA the powers of the Central Government may be exercised by BIFR under s. 72A of the IT Act does not, in any way, affect the overriding effect of s. 72A of the IT Act. He has contended that sub-s. (2) of s. 72A makes two conditions enumerated thereunder to be necessary pre-requisites for the benefit of set off and carrying forward of the loss and depreciation, provided under sub-s. (1) of s. 72A, to be available. He has contended that the condition provided in s. 72A(2)(i) is that the business of the amalgamating company must have been carried on by the amalgamated company during the previous year relevant to the assessment year for which set off or depreciation allowance is claimed. Accordingly he has contended that in the instant case benefit under s. 72A(1) is being claimed for asst. yr. 1992-93 and so the business of the amalgamating company (M/s. OSL) ought to have been carried on by the amalgamated company SPL, or for that matter the assessee, during the period 1st February, 1992, to 31st March, 1992, but in fact the assessee did not carry on the business of M/s. OSL during the aforesaid period. He has contended that thus the said condition having not been complied with the assessee is not entitled to the benefit under s. 72A(1) claimed by the assessee.
25. The learned Departmental Representative of the Revenue has also contended that the assessee did not comply with the other conditions as contained in cl. (ii) of sub-s. (2) of s. 72A of the IT Act regarding the filing of the certificate from the specified authority as the same was not filed along with the return. He has contended that the first return filed by the assessee does not speak of the sick company and the second return, stated to be the first revised return, filed on 31st March, 1994, did not have the said certificate attached therewith and also the certificate could not be attached therewith inasmuch as it was not there on that date as the same is dt. 15th June, 1994. He has contended that the said certificate was filed with the third return, stated to be second revised return, filed on 6th March, 1995, but that is not the return. He has also contended that in addition to the requirement of filing of the certificate along with return there is also further requirement that adequate steps need be taken for rehabilitation/revival of the business of the amalgamating company. He has contended that the question of taking steps by the assessee to rehabilitate/survive the business of the amalgamating company could not arise as business of amalgamating company (sick company OSL) was actually not carried on by the assessee, the amalgamated company. He has also contended that there is no evidence on record showing that the assessee had taken steps to rehabilitate/revive the business of the amalgamating company. The learned Departmental Representative has contended that (1997) 223 ITR 809 (SC) (supra) is not relevant/applicable in the case in hand as in the cited case the date had been given/specified by the Court. He has contended that the powers of Court cannot be conferred on other authorities, as the Courts possess certain extraordinary powers in exercise of which the Courts can direct the scheme to have retrospective effect, but same is not the position with other authorities. He has also contended that s. 32(2) of SICA says that s. 72A of the IT Act will prevail. In the said cited case as there is no discussion by the Hon'ble Supreme Court on s. 72A of the IT Act, so also the citation is not applicable in the matter under consideration.
26. The learned Departmental Representative has also contended that the amalgamation may be effective for other purposes but not for the purposes of s. 72A of the IT Act.
27. In rejoinder the contention of the learned Authorised Representative of assessee, as mentioned in written submission, is that in this case the date has been fixed not by the parties but by BIFR. He has contended that whether the date is fixed by parties, or by Court or by BIFR in the scheme is not material. The scheme becomes effective only on the order being passed by the authority competent to sanction amalgamation. He has contended that such competent authority, in the ordinary case is High Court, and in the case of a sick company is BIFR.Such authority, having power to sanction scheme, can either itself fix a date of transfer/amalgamation or accept the date so fixed by parties.
The date so specified in the order becomes the effective date of transfer. He has contended that in this case the date has been fixed by BIFR itself, which is the competent authority to order amalgamation. He has contended that the effective date of transfer was fixed by BIFR and the benefit of s. 72A of IT Act was taken into consideration as one of the means of finance for rehabilitation of sick company in the sanctioned scheme.
28. He has also contended regarding the Revenue's contention of non-compliance with the provisions of s. 72A(2) in respect of filing of certificate along with them, that the learned CIT(A) has held in assessee's favour in this regard, and the Department has not challenged the CIT(A)'s order in this count. In any event as soon as the certificate was obtained, the same was filed with the Department with a letter dt. 6th August, 1994, and to avoid any technical objection the assessee also filed a second revised return on 6th March, 1995, enclosing therewith the said certificate. He has also contended that to obviate any further technical objection by the Department, BIFR passed an order on 17th March, 1994, placed on p. 68 of paper-book I, to the effect that provisions of ss. 80 and 139 would not be applicable with reference to returns/revised returns filed by the assessee. He has also contended that provisions of requiring filing of the certificate under s. 72A(2)(ii) with the return are directory and such certificate even if filed before the assessment is made, has to be taken into consideration and relief cannot be denied on the ground that the same was not annexed with the return. He has cited CIT vs. Rai Bahadur Bissesswarlal Motilal Malwasie Trust (1992) 195 ITR 825 (Cal).Berger Paints vs. Dy. CIT (c) ITO vs. Mangal Metal Industries (1991) 39 TTJ (Ahd) 426 : (1991) 36 ITD 161 (Ahd); and (d) D. K. Jain vs. Dy. CIT (1994) 48 TTJ (Del) 675 : (1994) 49 ITD 269 (Del).
29. We have considered the rival contentions as also the materials placed on record together with Court decisions.
30. As regards the requirement regarding filing of certificate under s.
72A(2)(ii) of the IT Act along with return the learned CIT(A) has decided the issue in assessee's favour and there is no appeal by the Department on this count. Besides, apart from the fact that the said requirement appears to be directory in view of judicial pronouncements cited by the learned Authorised Representative, suffice it to say that in view of provisions of s. 32(1) of SICA the scheme made under SICA shall have effect notwithstanding anything inconsistent therewith contained in any other law including IT Act, and so sanctioned scheme will prevail and override the inconsistent provisions of IT Act. In the instant case BIFR has passed an order by way of addendum dt. 17th March, 1994, placed on p. 68 of paper-book I whereby sub-cls. (d) and (e) have been added in para 4C of the scheme, relating to reliefs and concessions from Central Government. In the aforesaid cls. 4C(d) exemption from the applicability of provisions of ss. 80 and 139 of the IT Act, 1961 for filing/revising the IT returns has been granted to the company. Besides, BIFR has also passed order dt. 28th August, 1995, as placed on p. 117 of paper-book I, to the effect that they have issued a certificate under s. 72A(2)(ii) of the IT Act for asst. yr. 1992-93 on 15th June, 1994 and that that certificate whether filed along with return of income or subsequently before the concerned IT authorities shall be deemed to be a due compliance of the provisions of s. 72A of the IT Act. In that view of the matter the second revised return filed on 6th March, 1995 shall be deemed to be a valid return and the said certificate under s. 72A(2)(ii) having been annexed thereto also fulfils the requirement in respect of filing of the said certificate along with return, though in view of BIFR's order dt. 28th August, 1995, this requirement stands fulfilled by filing of certificate on 8th August, 1994 along with letter dt. 6th August, 1994.
31. From the perusal of the provisions of s. 32(1) of SICA it is clear that on a scheme having been sanctioned under SICA the provisions of this scheme shall have overriding effect over any other law except FERA and ULCRA. From the perusal of the sanction scheme as placed on pp. 30 to 67 of paper-book I it is clear that 1st February, 1992, has been specified in the scheme as being the date of amalgamation. In the last para of cl. 3 on p. 8 of the sanctioned scheme as placed on p. 37 of the paper-book I it is clearly mentioned that the scheme for merger/amalgamation of OSL with SPL shall be effective from 1st February, 1992. Clause A(V) on p. 15 (Annexure A) placed on p. 44 of the paper-book I speaks of the amalgamation date before 1st February, 1992, by mentioning "transfer date" to mean 1st February, 1992.
Similarly the declaration under s. 72A(1) of the IT Act made by BIFR on 17th March, 1994 as placed on pp. 71 and 72 of paper-book I also specifically mentions at the end of the last para that the amalgamation is effective from 1st February, 1992. The distinction attempted to be drawn by the learned Departmental Representative of the Revenue in respect of (1997) 223 ITR 809 (SC) (supra) from the facts if the case in hand is not convincing and we find the ratio decidendi of the case to be squarely applicable in the case in hand. What has been decided in the cited case is that if the parties themselves decide a date as the transfer date or the date of amalgamation then authority empowered to sanction the scheme whether the High Court or BIFR may either modify that date or approve of the same date as being the date of transfer/amalgamation, or may itself specify before the date of amalgamation/transfer. In a situation when such competent authority specifies the date whether by modification of the date agreed upon between the parties or otherwise then that specified date will be the date of amalgamation. In case such competent authority does not prescribe any specific date but simply sanctions the scheme presented to it then the date of amalgamation/transfer will be the date as specified/proposed in the scheme itself. In that view of the matter in the present case BIFR, being the authority competent to sanction the scheme, having sanctioned the scheme and having prescribed a specific date, being 1st February, 1992, as the date of amalgamation then undeniably 1st February, 1992 has to be treated as the date of amalgamation/transfer. This position also stands supported by the fact that the return of income of amalgamating company OSL for asst. yr.
1993-94 has been treated as non est and assessment proceedings have been dropped vide order dt. 25th January, 1996, as placed on p. 131 of paper-book I, in view of BIFR's order dt. 25th January, 1994. (1996) 217 ITR 699 (SC) (supra) cited by the learned Departmental Representative is distinguishable on facts inasmuch as the same related to retrospective effect of rectification of a trust deed of a charitable trust and the assessee has conceded that the rectification could not take place retrospectively, and in that case the Hon'ble Supreme Court was not concerned with the question of amalgamation of two companies. Similarly as regards the carrying on of business of the amalgamating company (OSL) by the amalgamated company (SPL-assessee) during the period 1st February, 1992, to 31st March, 1992, it has been held in (1997) 223 ITR 809 (SC) (supra) that during the period the proceedings are pending before Court, both the transferer-company and transferee-company may carry on business. It has further been held that the business carried on by the transferrer-company should be deemed to have been carried on for and on behalf of the transferee-company. This is necessary and logical consequences of the Court sanctioning the scheme of amalgamation as presented to it. Accordingly in view of the aforesaid proposition of law laid down by the Hon'ble Supreme Court the business carried on by M/s. OSL during the period 1st February, 1992 to 31st March, 1992, being previous year relevant to asst. yr. 1992-93 shall be deemed to have been carried on by M/s. OSL on behalf of SPL (assessee) as trustee. In the situation the contention of the learned Departmental Representative that the business of amalgamating company (OSL) having actually not been carried on by the assessee, the condition laid down in s. 72A(2)(i) as being the prerequisite for the applicability of the provisions of sub-s. (1) to s. 72A regarding benefits of set off and carrying forward of accumulated loss and allowing of unabsorbed depreciation having not been fulfilled, is not tenable. We also do not find any force/substance in the Department's contention that amalgamation would be effective for other purposes but not for the purpose of s. 72A of the IT Act.
32. Now we come to the question as to whether return was filed beyond the time specified in s. 139(3) for claiming the loss. This issue is also involved in ground No. 1 in Departmental appeal. The learned CIT(A) did not agree with the AO regarding the rejection of assessee's claim under s. 72A in respect of losses, etc. of OSL on the ground that the revised return filed on 31st March, 1994, was hit by s. 139(3) r/w s. 80 of the IT Act, although the learned CIT(A) upheld the rejection of the assessee's said claim on other grounds as the AO had rejected the assessee's claim under s. 72A on other grounds.
33. The learned Departmental Representative of Revenue has contended that return of loss may be filed within time prescribed under s. 139(1) of IT Act, and if the same is filed beyond that time, then that is not a valid return of loss under s. 139(1), so there can be no carry forward of loss. He has contended that the provisions may not be construed with reference to their reasonableness unless they are ambiguous of capable of two interpretations, if they are clear and not admitting of two interpretations, then their plain meaning is to be given effect to. Referring to ss. 139(3) and 80 of IT Act, the learned Departmental Representative has contended that the only benefit denied is regarding carrying forward of loss, and the legislature has not prohibited set off of determination of correct income of the year.
Referring to s. 139(5) of the IT Act he has contended that the two returns filed in March, 1994, and March, 1995, are not revised returns under s. 139(5). He has contended that these two returns are neither under s. 139(3), nor under s. 139(5), nor under s. 139(1). As against this the learned Authorised Representative of the assessee has contended that if a section is to be construed, it is to be construed harmoniously, and as the section as a whole, and not its different parts or sub-sections separately/independently. So s. 139 is to be construed as a whole. He has contended that s. 139(1) comes into play when income exceeds particular amount, and so it does not operate here.
There is no statutory obligation under s. 139(1) to file return unless income exceeds maximum exempted limit. So when loss is there, s. 139(3) is in substitution of s. 139(1). He has contended that under s. 139(5) there is no limit for revenue, and the revenue may be either way i.e., from return of income to loss return or vice versa. He has contended that s. 139(3) per se will not apply in assessee's case as assessee's income does not exceed maximum amount, but original return having been filed in time, the revised return filed on 31st March, 1994, would relate back to the original return, and so there can be no question of non-compliance of s. 139(3), and the assessee's revised return (return of loss) filed on 31st March, 1994, is a valid return. The learned Authorised Representative of the assessee has also contended, in the alternative, that BIFR has, vide its order dt. 17th March, 1994 (placed on p. 68 of paper-book I) exempted assessee from the application of provisions of ss. 80 and 139 of IT Act, 1961, for filing/revising the IT returns, and so also the revised return of loss filed by assessee shall be treated as valid returns of loss irrespective of anything inconsistent therewith being therein s. 80 and ss. 139 of the IT Act.
34. We have considered the rival contentions as also the materials placed on record. In our considered opinion, the issue need not detain us for long for the reason that the scheme having been sanctioned, the same will have overriding effect as against other laws including IT Act, 1961, in view of the provisions of s. 32(2) of SICA, and so the assessee having been exempted from the application of provisions of ss.
80 and 139 of IT Act vide BIFR's order dt. 17th March, 1994, (p. 68 of paper-book I), the revised return of loss filed by the assessee shall be treated to be valid returns of loss duly filed. In the aforesaid situation we do not consider it necessary to delve deep further in the other alternative contention raised by the learned Authorised Representative on the issue. As such considering all the facts and circumstances of the case we find the view taken by learned CIT(A) in his impugned order as mentioned in para 7.1 on p. 12 of his order to be quite correct and justified in law. We, therefore, decline to interfere with the same.
35. The AO has referred to CBDT's Circular No. 683 dt. 8th June, 1994 in para (4) on p. 7 of assessment order and mentioned that the earlier circulars on this issue have been withdrawn thereby. In para (9) on p.
8 of assessment order, the AO has also mentioned that the assessee did not furnish any information regarding the date of consent by Central Government as required under s. 19(2) of SICA. The learned CIT(A) has discussed the issue in paras 8, 8.1 and 8.2 on pp. 12 to 15 of his order. He has referred in para 8 of his order, the objection raised in assessment to the effect that the assessee's claim under s. 72A of IT Act cannot be allowed on the basis of BIFR's order in the absence of any approval by the Central Government. In the para 8.2 on p. 15 of his order the learned CIT(A) has referred to cl. 40 (a),(b),(c) and gathering the indication ensuing therefrom he has held the condition regarding approval by Central Government to be against the appellant, thereby agreeing with the AO. The learned CIT(A) has also discussed the issue of "consent of CBDT" in para 12 to 12.6 on pp. 24 to 29 of his order. He has observed that the "consent of CBDT" is a statutory requirement under s. 19(2) of SICA. He has observed in para 12.3 of his order that though the AO and CIT(A) ordinarily do not have jurisdiction to question the validity or BIFR's final order but in view of instruction of CBDT in its Circular No. 683 dt. 8th June, 1994, providing for guidelines as to how the BIFR's order is to be dealt with the assessments of amalgamated companies is not to invoke s. 72A of IT Act unless he has satisfied himself that the "consent" of CBDT had been obtained under s. 19(2) of SICA before the scheme of amalgamation was sanctioned. Regarding the expression "already decided" in the context of 'such cases are not required to be reopened', used in the Circular No. 683 dt. 8th June, 1994 the learned CIT(A) has observed in para 12.4 on p. 28 of his order that this is to be taken as referring to decision in assessment and not any other decision by any other authority like BIFR. Accordingly the learned CIT(A) held that the order of BIFR in the instant case being dt. 25th January, 1994 that is prior to 8th June, 1994, is irrelevant to indicate scope and extent of applicability of the said circular. Referring to S.R.F. Ltd. vs. Garware Plastics & Polyesters Ltd. & Ors (1995) 214 ITR 678 (SC), the learned CIT(A) observed that the consent of CBDT was statutorily required, in para 12.6 on p. 29 of the office order. The learned CIT(A) held that the consent in terms of s. 19(2) of SICA was not taken and, therefore, he finds no infirmity in the inference of AO in taking cognizance of the deficiency. Accordingly the learned CIT(A) confirmed the rejection of the assessee's claim for grant of benefit under s. 72A of IT Act for asst. yr. 1992-93. The learned Authorised Representative of the assessee has challenged the above findings of the authorities below.
The contention of the learned Authorities Representative as advanced orally as also in his written submission has been that as the said Circular No. 638 dt. 8th June, 1994, was issued after the scheme having been sanctioned on 25th January, 1994, the same cannot apply in the matter. He has also contended that the circular is contradictory in itself and has no application in the cases scheme sanctioned under SICA. He has contended that in para 1 of the said circular that it is mentioned that the earlier Circular Nos. 523 and 576 related to the procedure to be followed in respect of grant of consent by the Central Government in the cases involving financial assistance to be given under the direct tax laws which, in fact, is incorrect. He has contended that the two circulars being Nos. 523 and 576 merely explain the legal effect of the provisions of s. 32(1) of SICA and did not lay down any procedure at all and so the question of withdrawing these circulars does not and cannot arise. He has contended that what legal effect of the statutory provisions is, is to be determined upon examining such provisions and there cannot be any question of doing away with such legal effect by withdrawing the earlier circulars which correctly interpreted the provisions of s. 32(1) of SICA. As against this, the learned Departmental Representative of the Revenue has contended that the CBDT has withdrawn the earlier Circular Nos. 523 and 576 vide their letter dt. 30th December, 1993 and so the order of BIFR is dt. 25th January, 1994, on which date the power of BIFR as consenting party of behalf of the Central Government had already withdrawn.
36. We have considered the rival contentions as also the materials placed on record and the cited decisions. The earlier Circular Nos. 523 and 576 were withdrawn by CBDT's letter dt. 30th December, 1993. Copy of the said letter has not been furnished on record before us for perusal. We cannot, therefore, say as to what was mentioned in the said letter for withdrawing the said two circulars. However, the Circular No. 683, dt. 8th June, 1994, is available before us placed on pp. 122 and 122A of paper-book I. This circular no doubt contains a narration that the earlier two Circulars Nos. 523 and 576 were issued in connection with the procedure to be followed in respect of grant of "consent" by the Central Government in cases involving financial assistance to be given under direct tax laws which, as contended by the learned Authorised Representative, is not correct. Assuming that the earlier two circulars were withdrawn with mentioning of this incorrect narration still we cannot uphold the learned Authorised Representative's contention that the said two earlier circulars could not be withdrawn by the Board as we do not find material on record sufficient enough to depict such a wrong exercise of jurisdiction by the Board in the matter of withdrawal of the said circulars as to entail material prejudice to the assessees. The mentioning of a mere incorrect narration, as referred to above, does not by itself invalidate the withdrawal. Besides, as has been put by the learned Authorised Representative himself those two earlier circulars merely explain legal effect of the provisions of s. 32(1) of SICA and that what the legal effect of this statutory provision is, is to be determined by examining the provisions themselves, so the withdrawal of the said two circulars cannot be said to cause any material prejudice to the assessee inasmuch as the legal effect of the said statutory provision can still be examined/explained whether there be circular or no circular.
37. As regards the consent of the Central Government the learned Authorised Representative of the assessee has contended that the question of the said consent does not arise in this case. He has contended that the only issue involved in the instant case is regarding the grant of relief under s. 72A of the IT Act in view of amalgamation provided for by BIFR under sanctioned scheme. He has contended that under s. 32(2) of SICA power of Central Government to make declaration under s. 72A is conferred on BIFR and so the power of the Central Government being exercised by BIFR the question of seeking any consent does not arise. He has also contended that such power under s. 72A of IT Act to make declaration is to be exercised by BIFR without any recommendation of the specified authority, and the specified authority appointed for the purpose is the committee which consists also of the chairman of CBDT. He has also contended that since no such recommendation is necessary for BIFR to make the declaration the question of any reference to or consent of CBDT also does not arise. He has referred to (1996) 218 ITR 140 (SC) (supra). He has also contended that the Department's contention is that Central Government is to approve the merger w.e.f. 1st February, 1992, and give benefit under s.
72A (p. 40 of paper-book I) and that it was with reference to the said provisions in the scheme that Central Government's consent was required. It is contended in the written submission of the assessee that the scheme to which reference has been made was prepared by operating agency (IDBI) and not by BIFR, the sanctioning authority. The operating agency, at the time of preparation of the scheme had to specify, in the scheme, about such approval and benefits to be given by the Central Government. It is further contended in the assessee's written submission that (1995) 214 ITR 678 (SC) (supra) referred to by the CIT(A) to support that consent of Central Government or CBDT was necessary has not application in the instant case as in the said case the assessee had not claimed any benefit under s. 72A of the IT Act. In that case, without considering the provisions of s. 32(2) of SICA, it was conceded on behalf of the assessee before the Court that notice to the Central Government or CBDT was necessary. It is further contended in the written submission that the Hon'ble Supreme Court observed in that case that since the Central Government was required to pass an order under s. 72A of the IT Act it was entitled to be heard. It is contended that the provisions of s. 32(2) of SICA were not brought to the notice of the Hon'ble Supreme Court which provided for the exercise of power of the Central Government to make declaration under s. 72A by BIFR. It is contended that the said provisions of s. 32(2) of SICA were noticed by the hon'ble Supreme Court in its later decision in (1996) 218 ITR 140 (SC) (supra). It is further contended that the decision in (1995) 214 ITR 678 (SC) (supra) is not to be considered as a precedent in view of the later decision of the Hon'ble Supreme Court in (1996) 218 ITR 140 (SC) (supra). He has referred to State of U.P. vs.
Synthetics & Chemicals Ltd. 38. As against this the learned Departmental Representative of the Revenue has contended that the power given to BIFR to consent on behalf of the Central Government had already been withdrawn by withdrawal of the earlier two circulars. He has contended that the Central Government had not abdicated its power to sanction/consent the scheme. He has referred to cl. 40(a),(b),(c) on p. 11 of the scheme placed on p. 40 of paper-book I and contended that from the perusal of the scheme also it would appear that the Central Government is to approve the merger w.e.f. 1st February, 1992, but in the instant case the required sanction of the Central Government is not there. He has contended that in (1996) 218 ITR 140 (SC) (supra) referred to by the learned Authorised Representative, the benefit of s. 72A of IT Act was not given. In case, however, the benefit under s. 72A is to be given then the notice to the Central Government/CBDT is necessary.
39. We have considered the rival contentions as also the materials placed on record and have gone through the cited decisions. Clause 4C(a) on p. 11 of the scheme, p. 40 of the paper-book I, is a term/condition contained in the scheme itself, and so the contention of the learned Authorised Representative that the scheme was prepared by operating agency who mentioned all these is of no availed to the assessee. Whatsoever might have been proposed by the operating agency in the draft scheme, the BIFR, while sanctioning the scheme, ought to have amended/corrected the draft so as to depict the final scheme as sanctioned by the BIFR. Now the aforesaid cl. 4C(a) is a part of the scheme sanctioned by BIFR which speaks of the requirement of approval of the merger w.e.f. 1st February, 1992, by the Central Government.
However, in view of the fact that the power of Central Government with respect to declaration under s. 72A(1) of the IT Act stands conferred on BIFR under s. 32(2) of SICA, the declaration under s. 72A(1) can obviously be made by BIFR regarding the benefits under s. 72A in respect of accumulated loss and unabsorbed depreciation to be available to the amalgamated company. The approval by the Central Government can be said to be no more necessary under cl. 4C(a) on p. 11 of the scheme in respect of financial assistance by way of benefits under s. 72A of the IT Act. The issue however is not disposed of yet and still obstinately persists to pose itself for our consideration. The matter would have ended if the benefit under s. 72A of the IT Act alone was involved but as is evident from cl. 4C(b) and (c) apart from Central Government providing from the benefits under s. 72A of IT Act, the Central Government is also required to provide benefits under ss. 32A, 41 and 43B of the IT Act, and to grant exemption from the applicability of s. 372 of the Companies Act, 1956, to permit J.K. Industries to issue shares and holdings of shares by J.K. Industries, etc. in exchange of OSL shares and loans. We may note that the declaration made by BIFR on 17th March, 1994, placed on pp. 71 and 72 of paper-book I is not limited to loss and depreciation which are mentioned under s. 72A of the IT Act but it also covers 'unabsorbed investment allowance' of OSL which is a benefit not under s. 72A but under s. 32A of the IT Act.
In that view of the matter we are of the view that despite the conferment of powers of Central Government on BIFR under s. 32(2) of SICA in respect of s. 72A of IT Act the approval/consent of the Central Government/CBDT still remains necessary in view of s. 19(2) of SICA inasmuch as the benefits under ss. 32A, 41 and 43B of the IT Act, 1961 constitute financial assistance by way of reliefs, concessions or sacrifices from the Central Government. In this regard the assessee does not get adequate advantage from (1996) 218 ITR 140 (SC) (supra) inasmuch as the said decision speaks only regarding the requirements of s. 72A of IT Act to be taken as fulfilled on sanction of scheme of amalgamation.
So far as the principles of "judgment per incuriam" or "judgment sub-silentio" as enunciated in (1991) 4 SCC 139 (supra) are concerned, the same are quite correct in themselves as being exceptions carved out of the doctrine of precedent as embodied in Art. 141 of the Constitution of India. There is no denying the legal proposition that the "quotable in law" is avoided and ignored if it is rendered 'in ignoratium of a statute or other binding authority', and that a conclusion of law which was neither raised nor preceded by any consideration cannot be considered as declaration of law. A decision passes sub silentio, in the technical sense, when particular point of law involved in the decision is not perceived by the Court or present to its mind. The precedents sub silentio without argument are of no moment, no doubt, but the main question is as to whether, in the instant case, the facts admit of the application of the said principle In our opinion they do not. In (1995) 214 ITR 678 (SC) (supra) the provisions of s. 22(2) of SICA have not been considered but that case deals with the tax concessions and sacrifices enunciated in ss. 70, 71 and 72 of IT Act on the part of the Central Government, and considering the requirement of passing an order under s. 72A of IT Act, the Central Government and CBDT were treated as necessary and proper parties before BIFR and thus entitled to notice and be heard by BIFR. If the issue involved in the instant case was limited to be benefits under s. 72A of IT Act, the contentions of the learned Authorised Representative might have tilted the balance in assessee's favour on the strength of the aforesaid legal principles, by way of exceptions to the doctrine of precedent under Art. 141 of the Constitution of India, but in the instant case, as noticed earlier above, with reference to cl. (b) on p.
11 of the scheme, to which sub-cls. (d) and (e) of addendum dt. 17th March, 1994, may further be added, the issue involved in the matter is not limited to the benefits under s. 72A of IT Act alone, but has a wider embracement, as for example, the investment allowance under s.
32A of IT Act is also involved. Sec. 32(2) of SICA provides no contextual remedial assistance to the assessee, so as to make the decision of (1996) 218 ITR 140 (SC) (supra) take away within its sweep, all the hurdles by way of requirement of consent of the Central Government.
40. However the assessee may, for its advantage, take resort to the deeming provision of s. 18(7) of SICA. We need, therefore, to examine the issue with reference to the provisions of s. 18(7) of SICA. The relevant portion of the provision is extracted as under : Sec. 18(7). "The sanction accorded by the Board under sub-s. (4) shall be conclusive evidence that all the requirements of this scheme relating to the reconstruction or amalgamation or any other measure specified therein have been complied with ......." The consent of the Central Government or CBDT is nothing but a requirement relating to the amalgamation. On the scheme having been sanctioned under s. 18(4) of SICA, the sanctioned scheme shall be the conclusive evidence of the said requirement regarding consent of Central Government/CBDT having been complied with. As such, in the fact of the sanctioned scheme, the said requirement shall be deemed to have been complied with.
41. This brings us to the question as to whether the AO and CIT(A) can challenge the validity/legality of the scheme in assessment proceedings in view of non-fulfilment of some of the conditions/requirements prescribed as pre-requisites for passing an order of sanctioning the scheme under SICA. The learned Authorised Representative of assessee has contended that the requirement of giving notice to the Central Government/CBDT and taking their consent, even if not complied with, at the most makes the scheme voidable and not void. He has contended that if the scheme were voidable, it still remains binding till it is got so declared and quashed or set aside by competent authority through appropriate proceedings. He has cited State of Punjab vs. Gurdev Singh & Ashok Kumar AIR 1992 SC 111 in his support. He has contended that the Central Government or CBDT did not take steps for getting the scheme reviewed under s. 18(5) of SICA on that ground, nor did they file any appeal to the appellate authority under s. 25 of SICA against the BIFR's order of sanction dt. 25th January, 1994, passed under s. 18(4) of SICA. He has contended that nor even any objection or suggestion was made by them despite the scheme having been duly advertised as required under s. 18(3) of SICA. The learned Authorised Representative has also contended that the scheme is sanctioned by BIFR which is composed of such high persons as qualified to be High Court Judges. He has contended that it is for the above reason that even the recommendation of 'specified authority' has been dispensed with and that the chairman, CBDT, happens to be a member of 'specified authority'. In our opinion the fact that chairman, CBDT, happens to be a member of the 'specified authority' does not make any material difference inasmuch as the chairman, CBDT, while acting as a member of the specified authority does not act as CBDT's chairman as such, but acts simply as a member of the specified authority, which, in law, is an entity, quite distinct from CBDT. However, the learned Authorised Representative's contention regarding the scheme to remain valid and effective and as such binding on AO and CIT(A) in assessment proceedings till it is got declared invalid and quashed/set aside by competent Court/Authority is quite weighty and finds support from AIR 1922 SC 111 (supra). In the cited case the Hon'ble Supreme Court while dealing with a dismissal order alleged to be void, inoperative and ultra vires, has laid down : "But nonetheless the impugned dismissal order has at least a de facto operation unless and until it is declared to be void or nullity by a competent body or Court." It was further held that "the party aggrieved by the invalidity of the order has to approach the Court for relief of declaration that the order against him is inoperative and not binding upon him." In that view of the matter considering the facts and circumstances of the case, together with the provisions of s. 26 of SICA regarding bar of jurisdiction, and the legal proposition as propounded by the Hon'ble Supreme Court, we are of the opinion that unless and until the scheme is get declared invalid/inoperative and/or quashed/set aside by competent authority by due process of law, the scheme shall remain effective and capable of legal consequences, hypothetically it may be voidable or a nullity though.
42. In view of the discussions/conclusions made above we hold that the Department having not yet sought the remedy in the proper forum under SICA, the scheme sanctioned under s. 18(4) is effective and the benefit accorded thereunder to the assessee cannot be denied. We order accordingly.