TMI Blog1998 (3) TMI 97X X X X Extracts X X X X X X X X Extracts X X X X ..... l Government, directing them to issue a declaration forthwith or within such time, as the petitioner has satisfied all the pre-conditions required under section 72A(1)(a) and (b) of the Act ; (d) issue a writ in the nature of mandamus directing the specified authority to issue certificates forthwith or within such time as the petitioner has satisfied all the pre-conditions required under section 72A(2)(i) and (ii) of the Act ; (e) issue a writ in the nature of prohibition prohibiting O. P. Nos. 4 and 5 or their officers in any manner not to proceed with the assessment for the years 1980-81 to 1990-91 till the declaration in para (c) and certificate in para (d) are issued ; and (f) pass such other order or further orders, which it may deem fit and proper in the facts and circumstances of the case." In fact the petitioner-company challenges the order dated August 2, 1991, passed in File No. 43-SA-83-A and PAC-1 in the Ministry of Finance, Department of Revenue, Central Board of Direct Taxes of the Government of India, opposite parties Nos. 1 and 2 refusing to make a declaration under section 72A(1) of the Income-tax Act, 1961, ignoring the guidelines indicated by this court I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order to that effect was passed on December 31, 1981, and the matter was kept pending for almost two years and the petitioner continued to operate the business of Kalinga Tubes in its entirety by pumping in substantial funds which fact was always known to opposite parties Nos. 1 and 3. That after a long lapse of time, i.e., one year and four months, the specified authority made a non-recommendation on May 6/7, 1983, and the petitioner challenged the same before this court in O. J. C. No. 1412 of 1983 which was disposed of on May 7, 1984 (Indian Metals and Ferro Alloys Ltd. v. Specified Authority [1984] 149 ITR 418). This court was of the view that the reason for non-recommendation were not necessarily binding on the Central Government and the Central Government would be free to grant a declaration even in a situation of non-recommendation. The matter was thus remanded to the Central Government on May 7, 1984. The Central Government thereafter decided the matter, but for different reasons refused to make a declaration by its order dated July 4, 1984. Being aggrieved by the said order, the petitioner filed O. J. C. No. 2570 of 1984 in this court which was disposed of on December ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction of the interests of the workers employed by the amalgamating company ; registration under the MRTP Act ; the industrial policy in general and in particular to the category of industry to which the sick industry belongs ; the basic viability of the sick unit ; need of tax benefit for revival of the sick unit, the scope for revival of the amalgamating industrial undertaking by effective use of the resources generated through tax benefit under section 72A as supplemented by other resources that may be required ; quick and effective revival of the amalgamating company ; nature of the products manufactured by the sick unit ; employment given by the sick unit ; location of sick unit ; consequence of closure of the sick unit on the industrial ancillary unit having employment and identification of real cause of non-viability." It is alleged that without considering the relevant factors and taking irrelevant materials into consideration like diversification, non-provision of employment to the employees, and not using the machinery and equipment of the tube mill in the diversification, the Central Govern ment refused to make the declaration as per annexure-1 to the writ petition unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he doctrine of lifting the veil of incorporation has been used and extended to new areas of labour and tax laws therefore, manufacturing charge chrome in the same facilities by a subsidiary of the amalgamated company is nothing but the business of the amalgamated company and therefore that consideration is unjust, improper and is the result of a dogmatic approach and closed mind. (e) It is incorrect to say that immediately before the closure, the sick unit was employing 696 employees out of which only 73 employees were retained by the new company. This fact is distorted. The entire work force of Kalinga Tubes, i.e., 696 continued to be employed till 1983. Basing on the existing voluntary retirement scheme year to year employees took retirement and in 1983, 123 employees had taken voluntary retirement. The scheme of voluntary retirement was very lucrative to the employees and encouraging to take it and many of them have become self-employed." Detailing all the aforesaid facts and interpreting the scope of section 72A(1) and (3) of the Act, the petitioner-company has sought for the relief as indicated above. The writ petition is seriously opposed by filing a comprehensive count ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accepted in public interest and discussing the point, the said opposite parties could not come to an agreement with the petitioner's claim and concluded that since the sick company was closed during the revival period itself, it could not be said that the amalgamation of the company was in public interest. It is submitted that there was diversification of the new product line and the sick unit was completely closed down in the year 1982. Thus there was a new manufacturing charge chrome unit by way of modernisation. Out of the old employees of 196 number, 123 were said to have taken voluntary retirement and only 73 were retained in the new plant styled as "Indian Charge Chrome". According to the opposite parties, the interest of the workers had also not been protected. There was no revival in fact and a new unit had been set up. Thus, the purpose of amalgamation was absent and it had rather been frustrated. Neither the claim that the considerations made by opposite party No. 1 were based on irrelevant materials nor the order had been passed on unreasonable grounds is correct. It is also urged that the sick unit in the present case did not have any industrial licence for producti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... losses and other relevant factors ; (b) the amalgamation was in the public interest ; and (c) such other conditions as the Central Government may, by notification in the Official Gazette, specify, to ensure that the benefit under the section is restricted to amalgamations which would facilitate the rehabilitation or revival of the business of the amalgamating company, then, the Central Government may make a declaration to that effect, and, thereupon, notwithstanding anything contained in any other provision of this Act, the accumulated loss and the unabsorbed depreciation of the amalgamating company shall be deemed to be the loss or, as the case may be, allowance for depreciation of the amalgamated company for the previous year in which the amalgamation was effected, and the other provisions of this Act relating to set off and carry forward of loss and allowance for depreciation shall apply accordingly. (2) Notwithstanding anything contained in sub-section (1), the accumulated loss shall not be set off or carried forward and the unabsorbed depreciation shall not be allowed in the assessment of the amalgamated company unless the following conditions are fulfilled, namely :-- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 SCC 324; Comptroller and Auditor-General of India v. Jagannathan (K. S.) [1987] AIR 1987 SC 537 ; [1986] 2 SCC 679 ; Jain Exports Pvt. Lid. v. Union of India [1988] 3 SCR 952 ; State of U. P. v. Renusagar Power Co. [1991] 70 Comp Cas 127 (SC) ; Premium Granites v. State of Tamil Nadu [1994] AIR 1994 SC 2233 ; [1994] 2 SCC 691 ; Assessing Authority-cum-Excise and Taxation Officer v. East India Cotton Manufacturers Co. Ltd. [1981] 48 STC 239 (SC) ; A. K. K. Nambiar v. Union of India [1970] AIR 1970 SC 652 Mohinder Singh Gill v. Chief Election Commissioner [1978] AIR 1978 SC 851 ; Ajay Hasia v. Khalid Mujib Sehravardi [1981] AIR 1981 SC 487 ; Padmabati Dash v. Rosik Lal Dhar [1910] ILR 37 Cal 259 ; Broonme v. Cassell and Co. Ltd. [1971] 2 All ER 187 (CA ) ; Black-Clawson International Ltd. v. Papierwerke Waldhof-Aschaffenburg AG [1975] 1 All ER 810 (HL). Mr. Indrajeet Mohanty, learned lawyer appearing for the opposite parties, has referred to certain relevant dates and has submitted that the impugned order as per annexure-1 is justifiable on the basis of the reasons contained therein and the Central Government has acted in terms of the directions of this court. The allegations of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... med by the amalgamating company considering the relevant factors regarding the amalgamating company and the amalgamated company. The Central Government has to consider ill the relevant aspects as envisaged under the statute and property interpreted by this court in the aforesaid earlier decision. The points of law in different reported decisions are not in doubt, dispute or conflict, but each case has to be decided on its peculiar facts and circumstances. In the instant case, the petitioner has asked for the relief of declaration as envisaged under section 72A of the Income-tax Act by quashing the impugned order of the Central Government as per annexure-1. If the impugned order annexure-1 is put to the acid test for judicial scrutiny as to whether it is consistent with the statutory provisions and the claim of the petitioner has been considered in the light of the observations and directions/guidelines given by this court, it would be found that the same does not suffer from any infirmity, irregularity or illegality. Although the matter has been delayed for quite a long time, yet it is obviously found that the amalgamating company manufacturing charge-chrome which seeks to obtain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Thereafter, the Central Government by order dated July 4, 1984, declined to make declaration under section 72A(1) of the Act holding that the condition laid down in the said provision had not been fulfilled. This gave rise to another course of litigation when the petitioner challenged the said order of the Central Government by filing a writ application (O. J. C. No. 2570 of 1984). This court by judgment dated December 19, 1990 (vide [1992] 195 ITR 539), remanded the matter to the Central Government for reconsideration keeping in view the observations and directions made therein. Pursuant to the said judgment, the Central Government held, as communicated at annexure-3, that it is not a fit case for issue of declaration under section 72A(1) of the Act. What does section 72A(1) of the Act provide ? It states that if the Central Government on the recommendation of the specified authority is satisfied that the following conditions are fulfilled in a given case of amalgamation then the Central Government may make a declaration to that effect. Those conditions are : (i) The amalgamating company was not immediately before amalgamation financially viable by reason of its liabilitie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... linga Tubes Ltd.) from 1979 to 1984 but in the year 1982 it was closed. This is a material change in the relevant facts and it being proximal to the date of amalgamation has to be taken into account while deciding the question of making declaration under section 72A(1) of the Act. (ii) The scheme approved by the specified authority envisaged an expenditure of Rs. 2.97 crores as modernisation programme during the year 1979-84 but the actual capital expenditure incurred during the years 1979-81 was Rs. 17 lakhs only and Kalinga Tubes Ltd. (sick unit) was ultimately closed down in the year 1982. (iii) The specified authority has held that the purpose of the revival of the sick unit has not been achieved since it was closed down during the revival period itself and, as such, the amalgamation was not in public interest. It may be stated that the aforesaid three findings reached by the Central Government cannot be said to be based on irrelevant or extraneous considerations. Kalinga Tubes Limited was engaged in manufacture of steel tubes. The plea of the petitioner before the Central Government was that although manufacture of steel tubes which was being done by the sick unit was ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
