1 IN HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS 18TH DAY OF SEPTEMBER 2020 PRESENT HON BLE MR. JUSTICE ALOK ARADHE AND HON BLE MR. JUSTICE H.T.NARENDRA PRASAD I.T.A. NO.431 OF 2012 BETWEEN: 1. COMMISSIONER OF INCOME TAX C.R. BUILDINGS, QUEENS ROAD BANGALORE. 2. DY. COMMISSIONER OF INCOME TAX CIRCLE-11(4), C.R. BUILDINGS QUEENS ROAD, BANGALORE. APPELLANTS (BY Mr. K.V. ARAVIND, ADV.,) AND: M/S. INDUS FILA LTD., NO.107, INDUSTRIAL SUBURB II STAGE, YESHWANTHPUR BANGALORE-560022. RESPONDENT (BY Mr. S. PARTHASARATHI, ADV., A/W Ms. JINEETHA CHATTERJEE, ADV.,) --- THIS ITA IS FILED UNDER SECTION 260-A OF I.T. ACT, 1961 ARISING OUT OF ORDER DATED 31.07.2012 PASSED IN ITA NO.1193/BANG/2011 FOR ASSESSMENT YEAR 2008-09, PRAYING THAT THIS HON BLE COURT MAY BE PLEASED TO: (I) FORMULATE SUBSTANTIAL QUESTIONS OF LAW STATED THEREIN. 2 (I) ALLOW APPEAL AND SET ASIDE ORDERS PASSED BY ITAT, BANGALORE IN ITA NO.1193/BANG/2011 DATED 31-07-2012 CONFIRMING ORDER OF APPELLATE COMMISSIONER AND CONFIRM ORDER PASSED BY ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-11(1), BANGALORE, IN INTEREST OF JUSTICE AND EQUITY. THIS ITA COMING ON FOR FINAL HEARING, THIS DAY, ALOK ARADHE J., DELIVERED FOLLOWING: JUDGMENT This appeal under Section 260A of Income Tax Act, 1961 (hereinafter referred to as Act for short) has been preferred by revenue. subject matter of appeal pertains to Assessment year 2008-09. appeal was admitted by bench of this Court vide order dated 19.02.2013 on following substantial question of law: (i) Whether Appellate Authorities were correct in allowing set off of losses of amalgamating company (M/s. Tulip Apparel) against profits of assessee amalgamated company amounting to Rs.31.26 crores when assessee has not substantiated genuineness business purpose of amalgamation when amalgamation was 3 approved by transferee company on 31-01-2009 and effect of amalgamation was from 31-03-2008 and recorded perverse finding? (ii) Whether Appellate Authorities were correct in holding that set off of losses is permissible when both companies have claimed set off of same losses in their respective returns amounting to double claim of set off of same loss contrary to provisions of Act, and recorded perverse finding?. (iii) Whether Appellate Authorities were correct in not examining fact that no return was revised after amalgamation by clubbing books of accounts, P & L account and financial statements and Form 62 was not filed as required u/s. 72A of Act, and recorded perverse finding?. 2. Facts leading to filing of appeal briefly stated are that assessee is in business of manufacturing ready made garments. assessee filed return of income on 31.03.2009 for Assessment Year 4 2008-09 declaring income as NIL after setting off, of loss of Rs.31,36,33,145/- in respect of M/s Tulip Apparels Private Limited, amalgamating company. Assessing Officer by order dated 21.12.2010 inter alia did not accept contention of assessee that effective date of amalgamation was 31.03.2008. It was further held that amalgamating company got merged with assessee only after 06.02.2010 i.e., date on which scheme of amalgamation was approved. Assessing Officer therefore, disallowed claim of set off of loss of M/s Tulip Apparel Private Limited under Section 72(A) of Act. assessee filed appeal before Commissioner of Income Tax (Appeals), who by order dated 21.12.2010 inter alia held that effective date of amalgamation is 31.03.2008 and addition made by Assessing Officer was deleted. appeal preferred by assessee was allowed. 5 3. revenue thereupon filed appeal before Income Tax Appellate Tribunal (hereinafter referred to as 'the Tribunal' for short). Tribunal by order dated 31.07.2012 inter alia held that amalgamation takes effect from appointed day as mentioned in scheme of amalgamation. It was further held that finding of Assessing Officer that scheme of amalgamation is device to avoid taxes is without any basis and is in realm of surmises and conjectures. It was held that amalgamation is deemed to have been effected on 31.03.2008 and therefore, claim of assessee for set off is required to be allowed. Accordingly, appeal preferred by revenue was dismissed. In aforesaid factual background, revenue has preferred this appeal. 4. Learned counsel for revenue submitted that in order to claim benefit of Section 72A of Act, conditions prescribed in Section 72A(2)(b)(iii) have to be complied with and in instant case, 6 assessee failed to comply with aforesaid conditions inasmuch as neither requirements contained in Rule 9C of Income Tax Rules were complied with nor Form No.62 was submitted. It is also urged that as consequence of amalgamation, revised return ought to have been filed and only object of amalgamation was to evade payment of tax. It is further submitted that amalgamation of companies was not for business purposes. It is also submitted that neither Commissioner of Income Tax (Appeals) nor Income Tax Appellate Tribunal has considered issue whether or not assessee had complied with requirements of Rule 9C of Rules, which is mandatory requirement. In support of aforesaid contention, learned counsel for revenue has placed reliance on division bench decision of this court in COMMISSIONER OF INCOME-TAX, BELGAUM VS. SADASHIVA SUGARS LTD. , (2017) 80 TAXMANN.COM 352 (KARNATAKA). 7 5. On other hand, learned counsel for assessee submitted that Commissioner of Income Tax (Appeals) as well as Tribunal have concurrently held that date of amalgamation is 31.03.2008. Attention of this court has also been invited to minutes of meeting of Board of Directors dated 11.03.2008. It is also pointed out that information with regard to amalgamation was given to Bombay Stock Exchange Limited as well as National Stock Exchange Limited on 12.03.2008. It is also pointed out that scheme approved by this court mentions appointed date as 31.03.2008, which has to be accepted as date of amalgamation. Learned counsel for assessee has also referred to Section 230(5) of Companies Act. It is also argued that there is no non compliance with provisions of Section 72A(2)(b)(iii) of Act. In support of aforesaid submissions, reliance has been placed on decisions in ENGINEERING INDS. LTD. VS. DEPUTY COMMISSIONER OF INCOME TAX , (2013) 218 8 TAXMAN 0259 (KARNATAKA), MARSHALL SONS & CO. (INDIA) LTD. VS INCOME TAX OFFICER , (1997) 223 ITR 0809, ORISSA MINING CORPORATION LTD. VS. COMMISSIONER OF INCOME TAX , (2007) 293 ITR 0502. 6. We have considered submissions made by learned counsel for parties and have perused record. Before proceeding further, it is apposite to take note of relevant extract of provisions viz., Section 72A(1)(2) & (3), which read as under: Provisions relating to carry forward and set off of accumulated loss and unabsorbed depreciation allowance in amalgamation or demerger, etc. 72A. (1) Where there has been amalgamation of (a ) company owning industrial undertaking or ship or hotel with another company; or (b ) banking company referred to in clause (c ) of section 5 of Banking 9 Regulation Act, 1949 (10 of 1949) 45 with specified bank; or (c ) one or more public sector company or companies engaged in business of operation of aircraft with one or more public sector company or companies engaged in similar business, then, notwithstanding anything contained in any other provision of this Act, accumulated loss and unabsorbed depreciation of amalgamating company shall be deemed to be loss or, as case may be, allowance for unabsorbed depreciation of amalgamated company for previous year in which amalgamation was effected, and 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-section (1), accumulated loss shall not be set off or carried forward and unabsorbed depreciation shall not be allowed in assessment of amalgamated company 10 unless (a ) amalgamating company (i) has been engaged in business, in which accumulated loss occurred or depreciation remains unabsorbed, for three or more years; (ii) has held continuously as on date of amalgamation at least three- fourths of book value of fixed assets held by it two years prior to date of amalgamation; (b ) amalgamated company (i) holds continuously for minimum period of five years from date of amalgamation at least three-fourths of book value of fixed assets of amalgamating company acquired in scheme of amalgamation; (ii) continues business of amalgamating company for minimum period of five years from date of amalgamation; (iii) fulfils such other conditions as may be prescribed 47 to ensure revival of business of amalgamating 11 company or to ensure that amalgamation is for genuine business purpose. (3) In case where any of conditions laid down in sub-section (2) are not complied with, set off of loss or allowance of depreciation made in any previous year in hands of amalgamated company shall be deemed to be income of amalgamated company chargeable to tax for year in which such conditions are not complied with. 7. Thus, from perusal of aforesaid provision, it is axiomatic that in order to claim benefit of set off, of accumulated loss, amalgamated company has to satisfy conditions laid down in 71A(2)(a)(b) and (c). It is pertinent to note that Sub-Section (2) starts with non obstante clause. In other words, it shall have effect notwithstanding other provisions of Act. Thus, compliance with conditions prescribed in Section 71A(2) of Act is mandatory. However, it is pertinent 12 to mention here that Tribunal has not adverted to aforesaid aspect of issue and has not satisfied itself whether assessee has complied with conditions laid down in Section 71A(2) of Act is sine qua non, to enable assessee to claim benefit of set off under Section 71A of Act. Since, aforesaid aspect requires factual adjudication, therefore, we deem it appropriate to remit matter to Tribunal afresh for adjudication. In view of preceding analysis, it is not necessary to answer substantial questions of law framed by this court. In result, order passed by Income Tax Appellate Tribunal is hereby quashed and matter is remitted to Tribunal to decide issue afresh in light of observations made in this order. 13 In result, appeal is disposed of. Sd/- JUDGE Sd/- JUDGE ss Commissioner of Income-tax, Bangalore / Dy. Commissioner of Income-tax Circle-11(4), Bangalore v. Indus Fila Ltd