Bayer Material Science P. Ltd. v. ACIT (2013)142 ITD 22/ 22 ITR 287 (Mum.) (Trib.)

S.72A: Carry forward and set off-Accumulated loss-Unabsorbed depreciation-Amalgamation:

Two separate companies, BTPU and another company, got amalgamated with the assessee-company in the previous year relevant to the assessment year 2004-05. The Assessing Officer denied set off of the brought forward loss of BTPU on the grounds that (i) 43.79 per cent. of assets of the amalgamating company had been disposed of by the assessee in the very first year of the amalgamation; (ii) the assessee-company was not able to substantiate that the scheme of amalgamation was with a view to revive the business of the amalgamating company and amalgamation was for a genuine business purposes; (iii) the assessee-company did not achieve the level of production of at least 50 per cent. of the installed capacity of the amalgamating company before the end of four years from the date of amalgamation and that it further failed to demonstrate that it continued to maintain the said minimum level of production till the end of five years from the date of amalgamation ; (iv) the assessee-company failed to furnish a certificate in the prescribed Form 62 duly verified by an accountant showing particulars of production, which was one of the pre-requisite conditions for availing of the allowance under section 72A, as laid down in rule 9C(b). The Commissioner (Appeals) affirmed this.

On appeal : Held, (i) that two companies, BTPU and BSPPL amalgamated with the assessee-company in the relevant previous year. The assessee claimed set off of brought forward loss of BTPU alone. In order to claim such benefit, it was incumbent upon the assessee not to dispose of more than 25 per cent. of the assets of BTPU alone. The disposal of assets by the assessee in all the three years combined was around 10 per cent. of the book value of total assets of BTPU. The Assessing Officer, while calculating the percentage of 43.79 per cent., erred in including the disposal of assets of BSPPL with the disposal of assets of BTPU. The objection of the Assessing Officer for not granting set off and carry forward of accumulated loss and unabsorbed depreciation of BTPU that the assessee disposed more than 25 per cent. of the assets of BTPU was, therefore not, sustainable.

(ii) That the amalgamation took place on April 1, 2003. The period of four years had not expired at the time of

completion of the assessment. The Assessing Officer was required to restrict himself to the year before him for

considering as to whether there was any violation of section 72A(2). As the previous year relevant to the assessment year under consideration was not the fourth year from the date of amalgamation, the Assessing Officer was not required to examine this aspect at that stage.

(iii) That it was pre-mature to require the material for demonstrating efforts taken by the amalgamated company for reviving the business of amalgamating company.

(iv) That as the assessee admittedly did not achieve the production at the desired level of the installed capacity and it was not the fourth year from the date of amalgamation, the requirement of furnishing certificate in Form 62 was premature.

(v) That, therefore, there was no failure on the part of the assessee to fulfill the requisite conditions for claiming set off of brought forward business losses and unabsorbed depreciation of BTPU in year under consideration. (A. Y.2003-2004, 2004-2005)