TMI Blog1983 (3) TMI 43X X X X Extracts X X X X X X X X Extracts X X X X ..... ustries, had sent a memo to the petitioner stating that the specified authority was unable to recommend to the Central Govt. the aforesaid scheme of amalgamation of National Tobacco Co. of India Ltd. with the petitioner-company for the purposes of s. 72A of the I.T. Act, 1961. Thereupon, the petitioner-company obtained the present rule, inter alia, praying that the said decision of the specified authority dated 10th November, 1978, be quashed and the respondents be commanded not to give effect to the said decision. The petitioner also prayed for a writ of mandamus to direct the respondents to act according to law and to make necessary recommendations and grant the petitioner declaration that the accumulated loss and unabsorbed depreciation of the National Tobacco Co. of India Ltd. shall be deemed to be the loss and allowance for depreciation of the petitioner for the previous year in which the amalgamation of the petitioner was effected and for further declaring the said provisions relating to set-off and carry forward of loss and allowance for depreciation shall apply to the petitioner. The petitioner also prayed for an injunction to restrain respondent No. 8 from taking any act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Atlas Cycle Industries Ltd. v. Union of India (C.R. Petn. No. 754 of 1979 disposed of on 13th March, 1980-since reported in [1983] 141 ITR 168 (Delhi)). The Division Bench of the Delhi High Court had allowed the said writ petition and had quashed the decision of the specified authority which had refused to recommend the case of the petitioner company to the Central Govt. under s. 72A(1) of the I.T. Act, 1961. According to the learned judges, the reasons for rejection were not contemplated either by s. 72A or by the guidelines framed by the Central Govt. The ratio of the said Division Bench decision of the Delhi High Court is that in making or refusing recommendation the specified authority is bound to consider the matters which are relevant under s. 72A read with the guidelines framed by the Govt. of India and in case the specified authority takes into account extraneous matters, the writ court may command the specified authority to again consider the matter. The Deputy Secretary in his memo dated 16th November, 1978, did not set the reasons why the specified authority had declined to recommend to the Central Govt. the aforesaid scheme of amalgamation. Accordingly, Mr. Bajoria, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o carry forward and set off accumulated loss, etc., of the amalgamating company. Therefore, this writ petition is maintainable. First, I propose to set out some of the salient facts appearing from the materials produced before me. On 22nd April, 1978, the petitioner's application under s. 72A of the I.T. Act was placed before a meeting of the specified authority held on 22nd April, 1978. The minutes of the said meeting dated 22nd April, 1978, recorded that the details regarding retrenchment of workers of the amalgamated company had not been indicated in the application filed by the petitioner. It was not clear as to whether as a result of the proposed amalgamation the retrenched labour would be absorbed. The minutes further recorded that it was necessary to verify whether the proposed amalgamation would result in the economies of scale. The authority felt that such economies of scale could not be expected for the reasons recorded. The specified authority was also not inclined to accept the claim that fall in demand was one of the causes of the sickness of the amalgamated company. Cigarettes could not be considered as an essential mass consumption item and, hence, it was felt that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rejected subject to the confirmation in the next meeting of the members of the specified authority when other members of the authority would also be present. On 4th November, 1978, the specified authority confirmed the decision to reject the petitioner's application. Having perused the extracts from the aforesaid minutes of the specified authority, I am unable to accept Mr. Bajoria's submission that there were substantial and material divergences between the facts set out in the counter-affidavit affirmed by Mr. S.C.S. Marathe, the chairman of the specified authority, and the said recorded minutes. The specified authority had given opportunity to the petitioner-company to clarify the points indicated in the minutes of the specified authority held on 22nd April, 1978. The petitioner had made written representation and on 24th June, 1978, the petitioner's representative had attended and discussed with the members of the specified authority the points raised by the said authority. After further consideration the specified authority had refused to recommend the petitioner's application under s. 72A of the I.T. Act, 1961. The deponent, S.C.S. Marathe, in paras. (8) to (12) of his co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion under s. 72A of the I.T. Act, 1961, ought to be made, the specified authority was entitled to consider whether the goods produced by the amalgamating company was an essential mass consumption item. In view of the clear language of s. 72A of the I.T. Act, 1961, I am not in a position to accept Mr. Bajoria's extreme contention that in every case of amalgamation of a company, which is not economically viable, the amalgamated company would be entitled to the benefit of carrying forward and set-off of the accumulated loss and unabsorbed depreciation of the amalgamating company. Mr. Bajoria has drawn my attention to paras. 48 and 49 of the memorandum explaining the provisions of the Finance (No. 2) Bill, 1977, by which s. 72A was inserted in the I.T. Act, 1961. Both the said memorandum and also the clear language used in s.72A of the I.T. Act show that the said provisions relating to carry forward and set-off would be available in certain and not in all cases of amalgamation of a sick industrial unit with sound ones. In order to qualify for the benefits under s. 72A of the Act, the conditions set out in cls. (a), (b) and (c) of s. 72A must be fulfilled. We have already pointed out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gains from industrial units producing articles or things not being any article or thing specified in the 11th Schedule, etc. Mr. Bajoria has also referred to the proviso to s. 80J of the I.T. Act which contains provision for deduction in respect of profits and gains from newly established undertakings in certain cases. The scope of s. 72A of the I.T. Act, 1961, ought not to be decided in the light of the language used in the aforesaid ss. 35E, 80-I, 80J, etc., of the I.T. Act. No doubt, unlike the aforesaid sections of the I.T. Act, s. 72A of the said Act does not expressly lay down that the relief under the said provision would be limited to specific kinds of industrial units with reference to the nature of the goods produced, the number of workmen employed or their location. In the case of merger of a sick unit with another, the amalgamating company may, under s. 72A of the Act, claim for carrying forward the accumulated loss, depreciation losses of the amalgamating company, when the conditions laid down by the said s. 72A(1) are satisfied. I find no substance in the contention of Mr. Bajoria that in case relief under s. 72A is refused on the ground that the test of public int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A relating to carry forward of losses, etc., of the amalgamating company. Further, the said guidelines, which are in the nature of aids for adjudging whether a scheme of amalgamation was in public interest, do not exhaustively enumerate what would be in public interest. The impugned decision of the specified authority was also not contrary to the said guidelines. I have already observed that the legality of the said decision ought to be judged with reference to the minutes of all the meetings of the specified authority held to consider the petitioner's application. The specified authority did not raise the question about the size of the amalgamating company with reference to the number of workers employed or the fair market value of its fixed assets (excluding land). Therefore, para. 4 of the guidelines was not relevant. But the specified authority acted substantially in terms of para. 5 of the guidelines by calling upon the petitioner to clarify how far the interests of the workers employed in the amalgamating company had been protected by giving re-employment to the retrenched workers. At its meeting held on 22nd April, 1978, the specified authority had raised the question of m ..... X X X X Extracts X X X X X X X X Extracts X X X X
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