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TMI Blog2012 (8) TMI 237X X X X Extracts X X X X X X X X Extracts X X X X ..... e granted by the BIFR itself. One of the aspects of concession was the benefit under Section 72A of the Income Tax Act, 1961 from the date of the sanction of the scheme. This plea was opposed by the respondent company. The BIFR accepted the plea of the respondent company that the aspect of relief flowing from Section 72A of the Income Tax Act should be granted by the BIFR itself, and should not be asked to be considered by the department. However, simultaneously, the BIFR directed modification of the other paragraphs of the draft scheme relating to the concession sought from the income tax department, whereby the department was asked to consider the grant of the various concessions. 3. The income tax department, aggrieved with the aforesaid aspect, preferred an appeal before the AAIFR which was dismissed on 23.06.2011, and is now sought to be assailed in the present writ petition under Article 226 of the Constitution of India. 4. We may, at the threshold, note that the writ petition has been filed only on 17.05.2012, after almost 11 months of the passing of the order of the AAIFR. The petition is completely silent on the aspect of the inordinate period of delay in challenging the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. ....................................................................." 9. The relevant extract of the provision, as on date, reads as follows: "72-A. Provisions relating to carry forward and set off of accumulated loss and unabsorbed depreciation allowance in amalgamation or demerger, etc.- [(1) Where there has been an amalgamation of- (a) a company owning an industrial undertaking or a ship or a hotel with another company; or (b) a banking company referred to in clause (c) of Section 5 of the Banking Regulation Act, 1949 (10 of 1949) with a specified bank; or (c) one or more public sector company or companies engaged in the business of operation of aircraft with one or more pub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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". 13. A reading of the aforesaid provision shows that in case of amalgamation of a sick industrial company with another company, the provisions of Section 72A of the Income Tax Act would apply in relation to such amalgamation, with the modification that the power of Central Govt. under that section may be exercised by the Board, without any recommendation by the specified authority referred to in that section. 14. It is the say of the learned counsel for the petitioner that Section 32(2) of the said Act has become redundant and even qua the concession envisaged under the said provision, the BIFR, while framing the sanction scheme, should have only called upon the income tax department to consider whether Section 72A should be made applicable or not. 15. To buttress the said submission, learned counsel for the petitioner seeks to draw strength from the fact that in the budget speech delivered at the time of presentation of the Finance Bill, 1999 on 27.02.1999 b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 01.04.2000 in exercise of the power conferred under Section 32(2) of the Act. The said decision was upheld in appeal by the Appellate Authority for Industrial and Financial Reconstruction (AAIFR). The matter travelled to the Supreme Court. The Supreme Court referred to its earlier decision in Commissioner of Income-Tax, Bombay and Others Vs. Mahindra and Mahindra Ltd. and Others, (1983) 144 ITR 225 (SC). The Supreme Court in Mahindra and Mahindra Ltd. (supra) observed that the object with which Section 72(A) was introduced in the Act would need to be examined, so as to understand the mischief or situation that was intended to be remedied by its introduction. It was observed that from the Budget Speech of the Finance Minister the notes on clauses of the Finance (2) Bill of 1997, and the memorandum explaining the provisions of the said Bill, it appeared "that sickness among industrial undertakings was regarded as a mailer of grave national concern inasmuch, as, closure of any sizable manufacturing unit in any industry entailed social costs in terms of loss, of production and unemployment as also waste of valuable capital assets, and experience had shown that taking over of such sick ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under: "10. Under Section 72 of the Income Tax Act, to give to the amalgamated company the benefit of the loss or, as the case may be, allowance for depreciation of the amalgamating company for the previous year in which the amalgamation was effected for the purposes of the Income Tax Act, the Central Government must, upon the recommendation of the specified authority, be satisfied that the amalgamating company was not, immediately before the amalgamation, financially viable by reason of its liabilities, losses and other relevant factors, and that the amalgamation was in the public interest. By reason of Section 32(2) of the said Act, where there has been under any scheme thereunder an amalgamation of a sick industrial company with another company, the provisions of Section 72A of the Income Tax Act shall apply in relation to such amalgamation, subject to this modification that the power of the Central Government is to be exercised by the BIFR without the necessity of a recommendation by the specified authority mentioned in Section 72A of the Income Tax Act. This is because, for the purposes of according sanction to a scheme of amalgamation of a sick industrial undertaking with a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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