TMI Blog2017 (9) TMI 490X X X X Extracts X X X X X X X X Extracts X X X X ..... tad, Advocate for Respondent. Judgment (Per R.K. Deshpande, J.) : 1. One Modern Stramit (I) Ltd., a sick company, was closed down by the end of the year 1986. It was referred to the Board for Industrial and Financial Reconstruction (BIFR) on 30 9 1989 under Section 15 of the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA). A scheme for rehabilitation in respect of it, was prepared under Section 19 of SICA and a proposal for its amalgamation in the assessee M/s. Ballarpur Industries Ltd. (BILT) was accepted and accordingly, the amalgamation took place with effect from 1 4 .1.991. 2. The statement of unabsorbed business loss, depreciation, etc., as on 31. 3 .1991 of the erstwhile Modern Stramit (I) Ltd. (amalgamating company) prepared was as under : Asstt. Year Business Loss Depreciation Total 1985-86 18,79,504 16,39,602 35,19,106 1986-87 22,53,705 14,09,485 36.63,190 1987-88 - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... framed by this Court on 18 6 2007 : IV) Whether Income Tax Appellate Tribunal erred in confirming the disallowance of depreciation amounting to ₹ 27,09,294/ in respect of assets of M/s Modern Stramit (I) Limited, a company amalgamated with the appellant company in terms of the order of BIFR ? V) Whether the Income tax Appellate Tribunal erred in confirming the disallowance of depreciation on the value of assets of the amalgamating company not actually allowed under Section 32 read with Section 43(6) and Section 72A of the Income tax Act, 1961 ? VI) Without prejudice to ground no. (iv) and (v) above whether the Tribunal erred in not allowing the benefit of unabsorbed depreciation despite the fact that provision of section 72A of the Income tax Act, 1061 read with Sections 18 and 32(2) of the Sick Industrial Companies (Special Provision) act, 1985 have been complied with ? 4. The denial of benefit of depreciation of ₹ 27,09,294/ is on the basis of the order dated 6 5 1992 passed by BIFR in exercise of its jurisdiction under Section 32(2) of SICA read with Section 72A(2)(ii) of the Income Tax Act, 1961, as it existed on that date. The relevant portion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion and as per the phraseology used in the said Section, this provision has overriding effect on any other provisions of the Act. The Tribunal holds that the maxim generalia specialibus non derogant is applicable and the said provision under Section 72A of the Income Tax Act shall override the provisions of Sections 32(2) and 43(6) of the said Act. 7. In para 51 of the judgment, the Tribunal holds as under : 51. Nevertheless, even with the limitation of ₹ 75.00 lakhs in terms of tax relief, the Assessee company could have absorbed the entire unabsorbed depreciation of amalgamating company amounting to ₹ 1,23,55,847/ by giving preference to it over the unabsorbed business loss. However, it chose to exhaust the business loss first which resulted in a portion of the unabsorbed depreciation to the extent of ₹ 1,20,03,557/ , remaining inadmissible. In these facts and circumstances, it cannot be said that the Assessee Company was otherwise entitled for more benefits without the application of Section 72A and that the benefits allowed to the Assessee Company as per the BIFR order issued in accordance with the provisions of Section 72A has a result of taking ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts business in the following year or years. This Court has held that for the Assessment Year 1975 76, the unabsorbed depreciation could not, under Section 32(2), be treated and/or allowed as the depreciation of the current year of the non existent amalgamating company, and that is why the depreciation on these assets is claimed by and is allowable in the hands of the assessee only. 12. In our view, the Tribunal and the authorities below have rightly held that the decision of this Court in Hindustan Petroleum Corporation Ltd., cited supra, is not applicable in the present case, for the reason that the said decision was not dealing with the impact of Section 72A of the Income Tax Act on the provision of Section 32(2) or 43(6) of the said Act. The requirements of Section 32(2) read with Section 43(6) of the Income Tax Act, which permit the amalgamating Company to claim its unabsorbed depreciation, get eclipsed by the provision of Section 72(A)(1)(c) of the said Act, which has been given overriding effect and the power to put such restrictions is conferred upon BIFR under Section 32(2) of SICA. In the present case, this power has been exercised by BIFR, putting a cap of ₹ 75,0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng availed of. We, therefore, feel that an application under s. 72A should be considered most sympathetically from a businessman's point of view. If a company has become commercially insolvent or is likely to become commercially insolvent, then every effort should be made to prevent such a situation from arising and if an amalgamation takes place and conditions under sub s. (1) of s. 72A are satisfied, then we see no reason as to why a declaration should not be accorded. 14. The Division Bench of Delhi High Court has held in the aforesaid decision that once the declaration is granted under Section 72A of the Income Tax Act, the amalgamated company thus received the benefit inasmuch as it is able to take advantage of the unabsorbed depreciation and accumulated losses. Upon fulfillment of the conditions specified in sub section (2) of Section 72A, it holds that the benefit of Section 72A will not be obtained if the sole idea of amalgamating was not the revival of the amalgamating company but was only to take benefit of the carry forward losses and unabsorbed depreciation. This decision supports the view which we have taken. 15. We put a specific question to Shri Bhattad, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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