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2017 (5) TMI 1212 - AT - Income TaxCarry forward and set-off of losses - demerger - Applicability of provisions of Sec. 72A(4) with regard to the restructuring undertaken in terms of the scheme of arrangement/demerger approved by HC - Held that:- Scheme of arrangement is to be understood as ‘demerger for the purposes of section 2(19AA) only if the conditions prescribed therein are satisfied. One of the conditions prescribed is that all the properties and the liabilities relatable to the undertaking should be transferred by the demerged company to the resulting company by virtue of the demerger. In the present case, there is no dispute to the fact that the scheme of restructuring approved by the Hon'ble Bombay High Court involved transfer of only the specified assets and liabilities of the PCD and PPD divisions to the Relene Petrochemicals Pvt. Ltd, and NOCIL Petrochemicals Ltd. respectively. The aforesaid fact was very much before the Assessing Officer and has been eloquently brought out by the CIT(A) in his order, to which there is no dispute. Therefore, on this aspect itself one can conclude that the scheme of arrangement in question does not qualify to be a ‘demerger’ in terms of section 2(19AA) of the Act. In the present scheme of arrangement, the consideration in lieu of the transfer of specified assets and liabilities of the two divisions is received by the assessee company, whereas in order to qualify to be a ‘demerger’ in terms of section 2(19AA) of the Act, the consideration to be paid by the resulting company is by way of issuance of shares to the shareholders of the demerged company. In the above background, the provisions of sub-section(4) of section 72A of the Act are not attracted in relation to the instant scheme of arrangement. Decision of the CIT(A) in holding that the accumulated loss and unabsorbed depreciation relating to the transferred divisions have to remain with the assessee company for set-off and carry forward for set-off in future years, deserves to be affirmed. - Decided against revenue
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