TMI Blog2017 (8) TMI 538X X X X Extracts X X X X X X X X Extracts X X X X ..... nder Section 263 of the Act was not called for - Decided in favour of assessee. - INCOME TAX REFERENCE NO.39 OF 1998 - - - Dated:- 10-7-2017 - M.S.SANKLECHA MANISH PITALE, JJ. Mr. S. N. Bhattad, Advocate for the Applicant. Mr. K. P. Dewani, Advocate for the Respondent. ORDER ( M.S.Sanklecha, J) : 1. This reference under Section 256(1) of the Income Tax Act, 1961 (the Act) seeks our opinion on the following questions of law : 1)Whether in the facts and circumstances of the present case and in law the ITAT was justified in holding that the order u/s.263 of the Act was bad in law and on facts as well ? 2)Whether in the facts and circumstances of the present case and in law the ITAT was justified in law in holding that inclusion of unabsorbed depreciation in WCV of the assets of JG Glass Ltd. with within the purview of Explanation 2 and 3 to Section 43(6) of the I.T.Act ? 3)Whether in the facts and circumstances of the present case and in law the Tribunal was justified in holding that Section 72A is applicable only in a case of amalgamating of a sick Company and not otherwise ? 4)Whether in the facts and circumstances of the present case and in l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hese explanation (2) applies squarely to the case of the assessee as the year under consideration is the A.Y. 1989-90. Accordingly, the decision of the Bombay High Court reported in 187 ITR-1, was not held to be applicable to the facts of this case. (c). Aggrieved with the above order, the assessee preferred an appeal before the ITAT. The ITAT have held that the order of the CIT u/s.263 is bad in law and on facts as well. The ITAT have observed that the CIT was not justified in setting aside the assessment as erroneous and prejudicial to the interest of Revenue only because he disagreed with the A.O. The Tribunal held that the provisions of Section 32(2) of the I.T. Act r/w. Section 43(6) of the Act and read with the Bombay High Court decision in 187 ITR 1, clearly support the case of the assessee. The Tribunal further held that when the provisions of Section 72A which were specifically applicable to sick industrial undertakings were found not applicable to the assessee and the assessee realised this fact and changed his course of action and pursued the case in normal course, and also held that merely because the CIT did not agree with the conclusion of the A.O. in this case, re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rred capital assets in the hands of the amalgamaged/transferee Company would be the same as it would have been in the hands of the transferor/amalgamating company had that company continued to hold those assets for the purpose of the business. The Tribunal further held that the second part of Explanation 2 does not create any legal fiction. It provides that in the first instance what is required to be considered in the hands of the amalgamated/transferee company is the cost of the block of assets though such a cost is required to be computed artificially as prescribed therein without any legal fiction whatsoever. The Tribunal was, therefore, of the opinion that mere application for approval or sanction under Section 72A to the specified authority does not make any difference in the situation. The Tribunal was further of the opinion that there is no doubt that the computation of the cost of the capital assets in the hands of the amalgamated/transfer company does not go against the principles laid down by the Bombay High Court in 187 ITR 1. The only question to be settled is whether the unabsorbed depreciation of the merged company is or can be carried forward under section 32(2). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... our by the decision of this Court in the case of Commissioner of Income Tax .vs. Hindustan Petroleum Corporation Ltd., 187 ITR 1. Thus, a possible view being taken, it was submitted that notice under Section 263 of the Act is without jurisdiction. (d) However, by order dated 21 March, 1994 the Commissioner of Income Tax exercised his power u/s. 263 of the Act and held that the decision of this Court in Hindustan Petroleum Corporation Ltd. (supra) dealt with the provisions as existing prior to the subject Assessment Year. The Hindustan Petroleum Corporation Ltd. dealt with Explanation 2A and 3 to Section 43(6) of the Act while amended provisions effective from 1st April, 1988 were concerned with the new Explanation 2 which applies for the subject Assessment Year 1989-90. In the above view, the above issue was restored to the Assessing Officer to pass a fresh order after following the principles of natural justice keeping in view the existing Explanations 2 and 3 to Section 43 (6) of the Act dealing with the issue at hand. (e). Being aggrieved, the respondent/assessee carried the issue in appeal to the Tribunal. The Tribunal by it's order dated 29th March, 1996 allowed the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essing Officer erroneous. In fact, the Madras High Court in EID Parry (India) Ltd. vs Dy. CIT 2012 (209) Taxman 214 has, while dealing with amended provision viz. Explanation 2 to Section 43(6), observed at para 26 thereof as under :- As far as the present case is concerned, it is nodoubt true that Explanation 2 is not similarly worded as Explanation 2A, which was considered by the Bombay High Court. The provisions contained in Explanation 2, applicable to the present case, in fact, brings out the intention better and is crisp in its language is evident from reading of Explanation 2 . Therefore, reliance upon the decision of this Court in Hindustan Petroleum Corporation Ltd. (supra) cannot be said to be perverse and/or erroneous. Therefore, the exercise of jurisdiction under Section 263 of the Act was not called for. 9. Mr.Bhattad's attempt to suggest that the Assessing Officer did not examine the issue of the Assessee's claim while passing the Assessment Order, is a factual aspect. However, the same is not found in the Statement of case sent by the Tribunal. We have to respond/opine on the question referred to us in the context of facts set out in the Statement o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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