TMI Blog2012 (8) TMI 237X X X X Extracts X X X X X X X X Extracts X X X X ..... recting the concession to be granted itself, rather than requiring the Income Tax Officer to examine this aspect of the concession - in favour of assessee. - W.P.(C) 4163/2012 - - - Dated:- 13-7-2012 - Sanjay Kishan Kaul And Vipin Sanghi, JJ. For Appellant : Mr. D.R. Jain, Senior Standing Counsel JUDGEMENT Per : Sanjay Kishan Kaul, J : 1. The respondent no.1 company went into financial difficulties and thus approached the BIFR under the Sick Industrial Companies (Special Provisions) Act, 1985 (hereinafter referred to as 'the said Act'). In the proceedings before the BIFR, a draft rehabilitation scheme was formulated and duly circulated. Undisputedly, the petitioner/income tax department did not file any objections to the draft scheme, by the time it came up for consideration before the BIFR for finalization on 15.10.2007, but were represented through counsel before the BIFR. 2. The proceedings of the BIFR dated 15.10.2007 show that the income tax department canvassed a proposition that the various concessions sought from the income tax department should be directed to be considered by the department, and should not be granted by the BIFR itself. One of the aspe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of Section 72A of the Income Tax Act as it existed prior to 01.04.2000, and as it exists now, after amendment since 01.04.2000. 8. Relevant portion of Section 72A of the Income Tax Act, as it stood before 01.04.2000 read: 72-A. Provisions relating to carry forward and set off of accumulated loss and unabsorbed depreciation allowance in amalgamation. - (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; (b) the amalgamation was in the public interest; and (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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cified authority, to avail of the benefit of Section 72A has been dispensed with. 11. The effect of the aforesaid amendment is that, while the earlier provision required the satisfaction of the Central Govt. to be declared on the recommendation of the specified authority for availing the benefit conferred by the said provision, that methodology has been done away with and the income tax officer will examine the merits of the case to determine, whether the benefit of Section 72A would be available to the assessee, on the strength of this provision. 12. Section 32(2) of the said Act which has remained on the statute book unamended from the time of enactment of the Act in the year 1985, reads as under: 32. Effect of the Act on other laws (1) . . . .. (2) Where there has been under any scheme under this Act an amalgamation of a sick industrial company with another company, the provisions of section 72A of the Income-tax 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the statute book. 18. In our view, the only manner of reading Section 32(2) in the context of the said Act and in the context of amended provision of Section 72A of the Income Tax Act is that the requirement of recommendation by the specified authority and the consequent satisfaction of and declaration by the Central Govt. would not arise, but that in no manner would take away the power of the BIFR to make the direction itself. Thus, it cannot be said that the BIFR fell into an error by directing this concession to be granted itself, rather than requiring the Income Tax Officer to examine this aspect of the concession. 19. The Supreme Court dealt with the aspect of grant of concession under Section 72 of the Income Tax Act in Indian Shaving Products Limited Vs. Board of Industrial and Financial Reconstruction and Another, (1996) 1 SCC 683 . In this case, the BIFR while sanctioning the scheme of amalgamation of a sick subsidiary, namely, Sharp Edge Limited with the parent company, namely, Indian Shaving Products Limited declined to make the declaration in terms of Section 72(A) as existed prior to 01.04.2000 in exercise of the power conferred under Section 32(2) of the Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ression "financial non-viability" has not been defined in the Act but the Finance Minister's speech, the Notes on Clauses of the Bill and the Memorandum explaining the provisions thereof make it clear that the financial non-viability of an undertaking has been equated with the 'sickness' of such undertaking and obviously in the context of its revival by a sound undertaking the sickness must be of a temporary character and not any basic or permanent sickness. An undertaking which is basically or potentially non-viable will ordinarily be incapable of revival and would face a closure; in other words, the financial non-viability spoken of by the section must refer to sickness brought about by temporary adverse financial circumstances that disables the unit to stand and work on its own. This is also made clear by the provision contained in Clause (a) of Sub-section (1) which states that the financial non-viability of the amalgamating company has to be judged by reference to "its liabilities, losses and other relevant facts. 20. The Supreme Court in Indian Shaving Products Limited (supra) thereafter observed as under: 10. Under Section 72 of the Income Tax Act, to give to the amal ..... X X X X Extracts X X X X X X X X Extracts X X X X
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