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TMI Blog2002 (9) TMI 49X X X X Extracts X X X X X X X X Extracts X X X X ..... asthan had major shareholding in the aforesaid co-operative societies. The Registrar, Cooperative Societies, Jaipur, made an order under section 17 of the Rajasthan Co-operative Societies Act, 1965, read with rule 13 of the Rajasthan Co-operative Societies Rules, 1966, for merger of the aforesaid four co-operative societies with all their assets and liabilities into Rajasthan Rajya Sahkari Spinning and Ginning Mills Federation Ltd., Jaipur. Consequent to the above statutory order, all the assets and liabilities, plant and machinery, debtors, creditors, transactions, staff and employees as existing prior to the merger and at book value were incorporated and recorded in the books of the appellant co-operative society with effect from April 1, 1993. Though the business of all these four aforesaid co-operative societies continued it continued in the new name, i.e., Rajasthan Rajya Sahkari Spinning and Ginning Mills Federation Ltd., Jaipur. In terms of section 18(2) of the Rajasthan Co-operative Societies Act, 1965, the registrations of the merged societies stood cancelled on the registration of the assessee-society and the said societies ceased to exist as corporate bodies. The regis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (SC) and (7) CIT v. Shaan Finance (P.) Ltd. [1998) 231 ITR 308 (SC). On the other hand, learned counsel for the Revenue, submits that as the provisions of section 72 provide that where the assessee suffers the loss, if that cannot be set off against the income of that year so much of the loss as has not been so set off against the income of that year, that loss shall, subject to the other provisions, be carried forward to the following assessment year and that be set off against the income of the following year. The provision of section 72A relates to the carry forward and set off of accumulated loss and unabsorbed depreciation allowance in amalgamation or merger of the company owning an industrial undertaking or a ship with another company. As in the case in hand, four co-operative societies are merged and this assessee on merger of those four co-operative societies came into existence with effect from April 1, 1993, there was no merger or amalgamation of companies, the benefit of section 72A is not available to the assessee. Sub-section (2) of section 78 provides for carry forward and set off of losses in case of change in constitution of firm or on succession. Whether the l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her the firm succeeded in the business of the sole proprietor, the assessee is entitled to carry forward loss of sole proprietor and to set off against the income of the firm. The Gujarat High Court has taken the view as under: "(i) that the presence of the three factors found by the Income-tax Officer was not necessarily destructive of the integrity or identity of the business so as to negative the idea of succession; (ii) that the facts showed that M had died intestate. Under section 8 of the Hindu Succession Act his property would devolve, firstly, upon the heirs being relatives specified in Class I of the Schedule. Son, daughter and widow are included in Class I. There was a clear recital in the partnership deed that the partners as heirs succeeded to the business of the deceased. The business of the deceased had been carried on even prior to the execution of the partnership deed and the partnership was brought into existence within a very short period after M's death. Having regard to all the circumstances there was succession by inheritance in this case. Merely because, M's legal heirs brought into existence a firm and decided to carry on the same business under the firm nam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee should be treated as the profit or loss from a 'business carried on by him' for the purpose of carrying forward and set off of such loss under section 24(2) of the Act." In K.P. Varghese v. ITO [1981] 131 ITR 597 (SC), their Lordships emphasised that a statutory provision must be so construed, if possible, that absurdity and mischief may be avoided. At page 604, their Lordships observed as under: "The primary objection against the literal construction of section 52, sub-section (2), is that it leads to manifestly unreasonable and absurd consequences. It is true that the consequences of a suggested construction cannot alter the meaning of a statutory provision but it can certainly help to fix its meaning. It is a well recognised rule of construction that a statutory provision must be so construed, if possible, that absurdity and mischief may be avoided." In Tirath Singh v. Bachittar Singh, AIR 1955 SC 830, their Lordships, at page 833, observed as under: "Where the language of a statute, in its ordinary meaning and grammatical construction, leads to a manifest contradiction of the apparent purpose of the enactment, or to some inconvenience or absurdity, hardship or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty. Execution of documents transferring title necessarily follows if the schedule of payment is observed by the allottee. If only the allottee may default the property may revert back to the board. That is a matter only between the Housing Board and the allottee. No third person intervenes. The part-payments made by the allottee are with the intention of acquiring title. The delivery of possession by the Housing Board to the allottee is also a step towards conferring ownership. Documentation is delayed only with the idea of compelling the allottee to observe the schedule of payment." In Bajaj Tempo Ltd. v. CIT [1992] 196 ITR 188 (SC), again their Lordships have emphasised on interpretation of the taxing statute so as to give effect to the object of the provision and the statute has to be interpreted liberally so as to advance the object of the provision and not frustrate it and their Lordships, at page 197, observed as under: "But, for purposes of construing the proviso in section 15C, it is not necessary to go that far as there can be no doubt that a literal construction of clause (i) of sub-section (2) was amenable to denial of benefit to the assessee even in genuine cases. For ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re, the pertinent question is whether the four societies which were no more in existence from April 1, 1993, can their loss be carried forward and set off against the income of the assessee-federation. Can those four societies and the assessee-federation be treated one and the same assessee. If we go by the plain language, our answer will be in the negative. The four separate societies which have their own identity and independence in earlier year, they have their own profits and losses, they cannot be treated one and the same assessee as that of the assessee-federation in the year under consideration. When the four societies and this assessee-federation cannot be treated as one and the same assessee, in our view, the losses suffered by those four societies cannot be set off against the income of this assessee-federation in the year under consideration. The provisions of section 72A provide for carry forward and set off of accumulated loss and unabsorbed depreciation allowance in the amalgamation or demerger, etc. It is true that in the case of merger of companies, the losses suffered by a company before amalgamation that can be carried forward and can be set off after amalgamatio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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