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TMI Blog2017 (4) TMI 449X X X X Extracts X X X X X X X X Extracts X X X X ..... moto disallowed an amount of Rs. 74,635/- while computing total income being 20% of cash payment of Rs. 3,73,173/- made in violation of provisions of section 40A(3) of the Act in the return of income. The ld AO without any discussion again disallowed an amount of Rs. 74,635/- in the assessment thereby resulting in double disallowance. The ld CIT(A) deleted the same in first appeal. Aggrieved, the revenue is in appeal before us on the following ground:- "1.That the Ld. CIT(Appeals)-I, Kolkata was not justified in deleting disallowance of Rs. 74,635/- made u/s 40A(3) of the Income Tax Act., 1961. 3.2. We have heard the rival submissions. We do not find any infirmity in the order of the ld CIT(A) deleting the double disallowance made by the ld AO. Hence the Ground No.1 raised by the revenue is dismissed. 4. The next issue to be decided in this appeal is as to whether the ld CIT(A) was justified in deleting the disallowance of property expenses amounting to Rs. 1,62,747/- in the facts and circumstances of the case. 4.1. The brief facts of this issue is that the assessee debited an amount of Rs. 1,62,747/- towards maintenance of property under the head 'Miscellaneous Expenses' . D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Specific Authority i.e. The Secretary, Department of Industrial Development, Government of India, Udyog Bhavan, New Delhi - 110011, for obtaining the certificate to the effect that adequate steps have been taken for the rehabilitation or revival of the business of the amalgamating company. In connection with the aforesaid application, the ld AO vide letter dated 25.3.1998 had raised certain queries. The assessee vide letter dated 22.6.1998 duly replied to the queries raised by the ld AO. Thereafter, no correspondence was received from the department and losses of Rs. 9,93,82,438/- of amalgamating company was claimed by the assessee company. The ld AO disallowed the claim of the assessee to carry forward the loss of the amalgamating company stating that no order to carry forward the losses etc. has been passed by the authority so far. 5.2. The ld CIT(A) deleted the disallowance made by the ld AO on the following contentions:- a) The unabsorbed losses of PSL was duly approved by the order of Hon'ble High Court of Calcutta dated 14.8.1996 to be carried forward in the hands of the assessee. b) The assessee has duly filed an application before the specified authority for obtaining ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mating company ; continue the business of the amalgamating company for a minimum period of five years ; and fulfill such other conditions as may be prescribed to ensure the revival of the business of the amalgamating company or to ensure that the amalgamation is for genuine business purpose. He further argued that section 72A(3) of the Act states that in case where any of the conditions stipulated in sub- section (2) of section 72A of the Act are not complied with, the set off of loss or allowance of depreciation made in any previous year in the hands of the amalgamated company shall be deemed to be the income of the amalgamated company, chargeable to tax for the year in which such conditions are not complied with. He argued that on bare reading of the amended provisions of section 72A(2) and 72A(3) of the Act, the same does not fall under the ambit of 'beneficial provision ' or an amendment which is 'procedural in nature' warranting retrospective application of the same. Hence the ld CIT(A) erred in treating the same as beneficial and procedural amendment thereby treating the amendment as retrospective in application and granted the benefit of set off of loss of amalgamating compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red by it shall for all purposes, be treated as the profits or losses undertakes not to utilize the profits, if any, for the purpose of declaring or paying any dividend in respect of the period falling on and after the appointed dated ......." 5.5.1. Hence it cannot be concluded that the order of Hon'ble High Court was only with respect to amalgamation and does not state about the carry forward of losses. We find that all the conditions of section 72A of the Act have been duly complied with. Hence the losses of amalgamating company should be allowed to be carry forward in the hands of the amalgamated company. We also find that the requirement of obtaining certificate from the Specified Authority with effect from 1.4.2000 has been done away with pursuant to the amendment in section 72A(2)(ii) of the Act. Even otherwise, we find that the assessee had taken enough steps for obtaining the certificate from the specified authority by preferring an application in the prescribed form which is part of the records. The ld AO had also acknowledged this fact by posing some queries on the said application and the assessee had duly replied to the said queries. All these are forming part of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... holding that the requirement of obtaining the prior approval of the central government under section 36(1)(viii) of the Act was not mandatory but only procedural and since the same was deleted subsequently the requirement of central government approval was not necessary for the current assessment year. b) Whether the Tribunal was correct in holding that the belated filing of the application for approval under section 36(1)(viii) should be deemed to have been granted as the same was not refused by the CBDT before passing of the assessment year ?" It was held as below:- 3. Section 36 of the Act deals with the deductions, which shall be allowed in respect of the matters dealt with therein, in computing the income referred to in section 28 of the Act. Section 36(1)(viii) deals with special reserve created and maintained by a financial corporation which is engaged in providing long term finance for industrial or agricultural development or development of infrastructure facility in India. However, prior to 01.04.2000 the proviso to the said provision provided that the corporation or, as the case may be, the company for the time being approved by the Central Government for the purpo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o curb this hardship, the sub-section 2 of section 72A of the Act was amended with effect from 1.4.2000 by removing the condition of obtaining a certificate from the Specified Authority with regard to the rehabilitation and revival of the business of the amalgamating company. The legislature also appreciated the concerns of the assessees involved in the said revival of business unit and had introduced this amendment in the procedure to be adopted for obtaining the benefit of carry forward of loss. We hold that though equity and taxation are often strangers , attempts should be made that these do not remain always so and if a construction results in equity rather than in injustice, then such construction should be preferred to the literal construction. It is only elementary that a statutory provision is to be interpreted ut res magis valeat quam pereat, i.e to make it workable rather than redundant. Hence it could be safely concluded that the amendment brought in the procedural law to cure unintended consequences is to be construed to have retrospective application. We would like to place reliance on the following decisions in this regard:- a) Hon'ble Apex Court in the case of CWT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his proviso the ambit of section 43B become unduly wide bringing within its scope those payments, which were not intended to be prohibited from the category of permissible deductions. 9. In the case of Goodyear India Ltd. v. State of Haryana (1991) 188 ITR 402, Supreme Court said that the rule of reasonable construction must be applied while construing a statute. Literal construction should be avoided if it defeats the manifest object and purpose of the Act. 11. ....................... As observed by G.P. Singh in his Principles of Statutory Interpretation, 4th Edn., Page 291, "It is well settled that if a statute is curative or merely declaratory of the previous law, retrospective operation is generally intended". In fact the amendment would not serve its object in such a situation, unless it is construed as retrospective. d) Hon'ble Calcutta High Court in the case of CIT v. Virgin Creations in ITAT No. 302 of 2011 in GA 3200/2011 dated 23.11.2011, held that the amendment to section 40(a)(ia of the Act by the Finance Act 2010 w.e.f. 1.4.2010 would have retrospective application. It was held as below:- "The supreme court in the case of Allied Motors P ltd and also in the c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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