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TMI Blog2017 (5) TMI 1212X X X X Extracts X X X X X X X X Extracts X X X X ..... circumstances of the case and in law, the Ld, CIT(A) erred in not appreciating that in respect of the demerger of the PCD division, the assessee company had the option to subscribe to the shares of the resulting company or to an immediate consideration in lieu there of and assessee opted for the latter and therefore, the condition of Section 2(19AA) stood fulfilled. 3) On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in holding that the assessee is eligible for set, off and carry forward of brought forward business losses without appreciating that the two divisions were demerged and therefore, as the relevant' business was no longer carried on by the assessee, it was not eligible for set off and carry forward of the business losses of the erstwhile undertakings as per Section 72A(4) of the Act. 4) On the facts and in the circumstances of the case and in law, the Ld, CIT(A) erred in allowing the assessee deduction for brought forward unabsorbed depreciation of its demerged undertaking, without appreciating that brought forward unabsorbed depreciation pertakes the character of current depreciation and therefore, since the concerned undertaki ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9-2000 to 2002-03 was allowed to be carried forward. Subsequently, the Assessing Officer issued a notice u/s 148 of the Act dated 30.3.2010 reopening the assessment on the ground that in the assessment finalised on 29.12.2006 assessee was allowed to carry forward the unabsorbed business loss and depreciation in contravention of the provisions of Sec. 72A(4) of the Act. In the ensuing assessment finalized under section 143(3)/147 of the Act dated 16/12/2010, the total income has been assessed at Rs. 49,03,01,730/-. In determining such income, the Assessing Officer denied the set off of brought forward business loss of Rs. 1234.83 lacs & 2969.61 lcas pertaining to assessment years 1999-2000 and 2000-01 respectively as also the unabsorbed depreciation of Rs. 1415.14 lacs pertaining to assessment year 1998-99. Apart therefrom, the Assessing Officer noted that a business loss of Rs. 5437.77 lacs pertaining to 1999-2000 to 2002-03 and the unabsorbed depreciation of Rs. 10645.39 lacs for such years was not allowed to be carried forward in terms of section 72A(4) of the Act. 5.1 Section 72A of the Act contains provisions relating to carry forward losses and set-off of accumulated losses a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated 08/06/2005 and appointed date was fixed, being 30/09/2003. In terms of the said arrangement, specified fixed assets and liabilities of PCD division were transferred to Relene Petrochemicals Pvt. Ltd., whereas the specified fixed assets of PPD division were transferred to NOCIL Petrochemicals Pvt. Ltd. Such movable and immovable properties and liabilities of the PCD and PPD divisions which were not transferred to Relene Petrochemicals Pvt. Ltd. and/or NOCIL Petrochemicals Pvt. Ltd. continued to belong and remain vested with the assessee company. In lieu of the said transfer of specified assets and liabilities of PCD and PPD division, assessee company received consideration from Relene Petrochemicals Pvt. Ltd..& NOCIL Petrochemicals Pvt. Ltd. in terms of the Scheme of arrangement. In the aforesaid background, the Assessing Officer has invoked the provisions of section 72A(4) of the Act on the ground that accumulated loss and unabsorbed depreciation pertaining to the PCD and PPD divisions could not be allowed to be carried forward and set-off in the hands of the assessee company. This has been effectuated by the Assessing Officer in the reassessment proceedings. The aforesaid was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... et off against its income." Against the aforesaid decision of the CIT(A), Revenue is in appeal before us. 6. On the other hand, Ld. Representative for the assessee has defended the finding of the CIT(A) by pointing out that, on facts, it was quite clear that the scheme approved by Hon'ble Bombay High Court did not constitute 'demerger' as defined under section 2(19AA) of the Act and, therefore, it would not attract the provisions of section 72A(4) of the Act. 7. We have carefully considered the rival submissions. A perusal of subsection( 4) of section 72A of the Act, which we have extracted earlier, brings out that the restriction contained therein with regard to the accumulated losses and unabsorbed depreciation gets triggered only when there is a scheme of demerger, which results in a 'demerged company' and a resulting company. Quite clearly, the 'demerger' in relation to a company envisages transfer pursuant to section 391 to 394 of the Companies Act, 1956 and has been defined in section 2(19AA) of the Act as under:- "2(19AA) "demerger", in relation to companies, means the transfer, pursuant to a scheme of arrangement under sections 391 to 39410 of the Companies Act, 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the meaning of the expression 'demerger', 'demerged company' and the 'resulting company' signifies the manner in which section 72A(4) of the Act is to be understood since the three expressions find a place therein. The scheme of arrangement is to be understood as 'demerger for the purposes of section 2(19AA) of the Act 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. Factually speaking, 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' ..... X X X X Extracts X X X X X X X X Extracts X X X X
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