M/s. HealthCare Global Enterprises Limited, Bangalore V. Joint Commissioner of Income Tax, Bangalore

ITA 1901/BANG/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 7110 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 1 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-12-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 11-11-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: B R RAMESH
• Assessee Lawyers: K P SRINIVAS
• Keywords: Depreciation; Carry forward of business losses; Scheme of amalgamation; Unabsorbed depreciation; Capital expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SHRI ARUN KUMAR GARODIA, ACCOUNTANT MEMBER A ND SHRI LALIT KUMAR, JUDICIAL MEMBER ITA NO S. 1900/BANG/2016 ASSESSMENT YEAR : 2009 - 10 M/S. HEALTHCARE GLOBAL ENTERPRISES LTD., HCG TOWER, NO. 8, KALINGA RAO ROAD, SAMPANGIRAM NAGAR, BANGALORE 560 027. PAN: AAACC8412H VS. THE JOINT COMMISSIONER OF INCOME TAX, RANGE 5, BANGALORE. APPELLANT RESPONDENT ASSESSEE BY : SHRI K.P. SRINIVAS, CA REVENUE BY : SHRI B.R. RAMESH, JCIT (DR) ITA NO. 1901/BANG/2016 ASSESSMENT YEAR : 2010 - 11 M/S. HEALTHCARE GLOBAL ENTERPRISES LTD., HCG TOWER, NO. 8, KALINGA RAO ROAD, SAMPANGIRAM NAGAR, BANGALORE 560 027. PAN: AAACC8412H VS. THE ADDITIONAL COMMISSIONER OF INCOME TAX, RANGE 5, BANGALORE. APPELLANT RESPONDENT ASSESSEE BY : SHRI TATA KRISHNA, ADVOCATE REVENUE BY : SHRI B.R. RAMESH, JCIT (DR) DATE OF HEARING : 17 .1 1 .2017 DATE OF PRONOUNCEMENT : 15 .12.2017 O R D E R PER SHRI A.K. GARODIA, ACCOUNTANT MEMBER; BOTH THESE APPEALS ARE FILED BY THE ASSESSEE WHICH ARE DIRECTED AGAINST TWO SEPARATE ORDERS OF LD. CIT (A)-3, BANGALORE BOTH DA TED 31.08.2016 FOR ASSESSMENT YEARS 2009-10 AND 2010-11. BOTH THE APP EALS WERE HEARD ITA NOS. 1900 & 1901/BANG/2016 PAGE 2 OF 12 TOGETHER ALTHOUGH ARGUED BY TWO DIFFERENT COUNSELS AND ARE BEING DISPOSED OF BY WAY OF THIS COMMON ORDER FOR THE SAKE OF CONVENI ENCE. 2. THE GROUNDS RAISED BY THE ASSESSEE IN BOTH YEARS ARE AS UNDER. GROUNDS RAISED FOR ASSESSMENT YEAR 2009-10 IN ITA N O. 1900/BANG/2016 1. THE LEARNED AO AND CIT(A) HAVE ERRED IN DISALLOW ING THE ENTIRE EXPENDITURE OF RS. 25,00,000/-TOWARDS DUE DILIGENCE AUDIT FOR EQUITY RELATED INVESTMENT TO BE MADE BY INVESTORS ON THE C ONTENTION THAT EXPENDITURE HAS NOT BEEN INCURRED BY YOUR APPELLANT , BY HOLDING THAT THE LIABILITY TO PAY THE SAID EXPENDITURE WAS NOT T HAT OF THE APPELLANT COMPANY AND ALSO CONCLUDING THAT THE SAME WAS CAPIT AL IN NATURE; 2. THE LEARNED AO AND CIT(A) GRIEVOUSLY ERRED IN DE NYING CARRY FORWARD OF BUSINESS LOSSES OF PREVIOUS YEARS OF RS. 2,00,60,988/- BY INVOKING THE PROVISIONS OF SECTION 79 OF THE INCOME TAX ACT, 1961, ON THE GROUND THAT 51% VOTING POWER IN THE APPELLANT C OMPANY AS AT 31 MARCH 2009 WAS NOT HELD BY PERSONS HOLDING 51% OF T HE VOTING POWER IN THE YEARS IN WHICH THE LOSSES WERE INCURRED; AND 3. FOR THESE AND OTHER GROUNDS THAT MAY BE ADDUCED AT THE TIME OF HEARING, THE ORDER OF THE JOINT COMMISSIONER OF INC OME TAX, TO THE EXTENT UPHELD BY THE CIT(A), MAY BE SET ASIDE AND T HIS APPEAL BE ALLOWED. GROUNDS RAISED FOR ASSESSMENT YEAR 2010-11 IN ITA N O. 1901/BANG/2016 1. THE LEARNED AO AND CIT(A) HAVE GRIEVOUSLY ERRED IN DENYING CARRY FORWARD OF UNABSORBED DEPRECIATION LOSS OF RS . 3,70,22,124/- UNDER SECTION 72A OF THE INCOME TAX ACT, 1961, ON T HE GROUND THAT THE AMALGAMATING COMPANY, M/S BANASHANKARI MEDICAL ONCO LOGY RESEARCH CENTRE LIMITED IS NOT AN 'INDUSTRIAL UNDER TAKING' AS PER THE PROVISIONS OF THE SAID SECTION. 2. FOR THESE AND OTHER GROUNDS THAT MAY BE ADDUCED AT THE TIME OF HEARING, THE ORDER OF THE ADDITIONAL COMMISSIONER OF INCOME TAX, RANGE 5, BANGALORE, TO THE EXTENT UPHELD BY THE CIT(A), MAY BE SET ASIDE AND THIS APPEAL BE ALLOWED. 3. REGARDING GROUND NO. 1 IN ASSESSMENT YEAR 2009-1 0, IT WAS SUBMITTED BY LD. AR OF ASSESSEE THAT THE DISALLOWANCE MADE IS NOT JU STIFIED. HE SUBMITTED THAT IN PARA NO. 4 OF THE ORDER OF CIT (A), HE HAS NOTED VARIOUS JUDGMENTS ON WHICH RELIANCE WAS PLACED BY ASSESSEE BEFORE THE CIT (A). IN ADDITION TO THOSE JUDGMENTS, HE PLACED RELIANCE ON A TRIBUNAL ORDER R ENDERED IN THE CASE OF ACIT VS. INTERCONTINENTAL HOTELS GROUP INDIA (P.) LTD. A S REPORTED IN 57 SOT 120 ITA NOS. 1900 & 1901/BANG/2016 PAGE 3 OF 12 (DELHI), COPY AVAILABLE ON PAGES 24 TO 27 OF THE PA PER BOOK. THE LD. DR OF REVENUE SUPPORTED THE ORDERS OF AUTHORITIES BELOW A ND RELIANCE WAS PLACED BY HIM ON THE JUDGMENT OF HONBLE APEX COURT RENDERED IN THE CASE OF BROOKE BOND INDIA LTD. VS. CIT AS REPORTED IN 225 ITR 798. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FI ND THAT IT IS NOTED BY CIT (A) IN PARA NO. 4.1 OF HIS ORDER THAT THE ASSESSEE COMP ANY HAD SOUGHT PRIVATE EQUITY INVESTMENT FROM DIFFERENT INVESTORS AND THE PROSPECTIVE INVESTORS HAD CONDUCTED VARIOUS AUDITS AND DUE DILIGENCE STUDY TO ENSURE THE VIABILITY OF SUCH INVESTMENT. IT IS ALSO NOTED BY CIT(A) THAT M/S. N APEAN TRADING AND INVESTMENT CO PVT. LTD. WAS ENGAGED BY THE PROSPECT IVE INVESTORS FOR MAKING SUCH DUE DILIGENCE STUDY AND THE ASSESSEE HAD APPAR ENTLY REIMBURSED THE EXPENSES INCURRED IN THIS REGARD TO THE INVESTORS. FROM THESE FACTS, IT COMES OUT THAT THE EXPENSES IN QUESTION ARE INCURRED IN R ESPECT OF INCREASE IN CAPITAL BASE OF THE ASSESSEE COMPANY. UNDER THESE FACTS, T HE JUDGMENT OF HONBLE APEX COURT RENDERED IN THE CASE OF BROOKE BOND INDI A LTD. VS. CIT (SUPRA) IS SQUARELY APPLICABLE AND AS PER THIS JUDGMENT, THE E XPENSES RELATABLE TO INCREASE IN SHARE CAPITAL ARE NOT ALLOWABLE AS REVE NUE EXPENDITURE BECAUSE THE SAME ARE CAPITAL EXPENDITURE. NOW, WE EXAMINE THE APPLICABILITY OF THE TRIBUNAL ORDER CITED BY LD. AR OF ASSESSEE HAVING B EEN RENDERED IN THE CASE OF ACIT VS. INTERCONTINENTAL HOTELS GROUP INDIA (P.) L TD. (SUPRA). IN THAT CASE, AS PER THE FACTS NOTED BY THE TRIBUNAL, IT IS NOTED TH AT THE ASSESSEES BUSINESS MODEL WAS TO PROVIDE VARIOUS SUPPORT SERVICES TO IT S PARENT COMPANY LOCATED IN USA AND THE CONCERNED SERVICES AGREEMENT CLEARLY PR OVIDES THAT THE ASSESSEE COMPANY WOULD BE REIMBURSING THE EXPENDITURE INCURR ED WITH A MARKUP OF 8%. IT IS ALSO NOTED THAT IN THE COURSE OF SERVICE PROV IDED TO THE PARENT COMPANY WHICH IS IN THE HOTEL BUSINESS, THE ASSESSEE HAS AV AILED THE SERVICES OF CONTROL RISK GROUP, SINGAPORE IN ORDER TO CARRY OUT THE DUE DILIGENCE AND RISK ANALYSIS OF THE TARGET HOTELS. UNDER THESE FACTS, IT WAS HE LD BY CIT (A) IN THAT CASE THAT THESE EXPENSES ARE INCURRED IN THE NORMAL COURSE OF BUSINESS AND ACCORDINGLY, ARE REVENUE IN NATURE. UNDER THESE FACTS THE TRIBU NAL CONFIRMED THE ORDER OF CIT (A) IN THAT CASE. IN THE PRESENT CASE, THE FAC TS ARE TOTALLY DIFFERENT. IN THE PRESENT CASE, DUE DILIGENCE WAS NOT CARRIED OUT IN REGULAR COURSE OF BUSINESS ITA NOS. 1900 & 1901/BANG/2016 PAGE 4 OF 12 BUT IT WAS CARRIED OUT FOR THE PURPOSE OF INVITING INVESTMENTS FROM PROSPECTIVE INVESTORS. HENCE IN THE PRESENT CASE, THIS TRIBUNA L ORDER IS NOT APPLICABLE. 5. REGARDING VARIOUS OTHER JUDGMENTS ON WHICH RELIA NCE HAS BEEN PLACED BEFORE CIT (A) AS NOTED BY CIT (A) IN PARA NO. 4 OF ITS OR DER, IT IS SEEN THAT IN NONE OF THESE CASES, THE EXPENDITURE WAS IN RESPECT OF INVI TING INVESTMENT FROM PROSPECTIVE INVESTORS AND THEREFORE, THESE JUDGMENT S ARE NOT APPLICABLE IN THE PRESENT CASE. HENCE RESPECTFULLY FOLLOWING THIS JU DGMENT OF HONBLE APEX COURT RENDERED IN THE CASE OF BROOKE BOND INDIA LTD. VS. CIT (SUPRA), WE DECLINE TO INTERFERE IN THE ORDER OF CIT (A) ON THIS ISSUE. G ROUND NO. 1 OF THE ASSESSEES APPEAL FOR ASSESSMENT YEAR 2009-10 IS REJECTED. 6. REGARDING GROUND NO. 2 IN ASSESSMENT YEAR 2009-1 0, IT WAS SUBMITTED THAT THE FACTS ARE NOTED BY CIT(A) IN PARA NO. 6.1 OF HIS OR DER AS PER WHICH, THIS IS THE BASIS OF DECISION OF AUTHORITIES BELOW THAT THE ASS ESSING OFFICER HAS TAKEN INTO CONSIDERATION THE SHAREHOLDING PATTERN IN THE COMPA NY FOR ASSESSMENT YEARS 2008-09 AND 2009-10 AND HAD INFERRED THAT THE KEY S HAREHOLDERS WHO HELD AROUND 51.44% OF THE SHARES DURING THE ASSESSMENT Y EAR 2008-09 WERE HOLDING LESS THAN 50% OF THE SHARES DURING THE SUBS EQUENT YEAR. HE SUBMITTED THAT THE DETAILS OF SHAREHOLDERS AS ON 31.03.2008 I S AVAILABLE ON PAGES 28 AND 29 OF THE PAPER BOOK AND THE SAME FOR YEAR ENDING O N 31.03.2009 IS AVAILABLE ON PAGES 30 AND 31 OF PAPER BOOK. HE SUBMITTED THA T AS ON 31.03.2008, DR. BS AJAI KUMAR WAS HOLDING 38.81% AND INDIA DEVELOPM ENT FUND OF IDFC PE WAS HOLDING 29.41% OF THE SHARES TOTAL OF WHICH COM ES TO 68.22%. HE POINTED OUT THAT THE SHARE HOLDING OF THESE TWO PERSONS AS ON 31.03.2009 WAS 31.83% AND 24.07% RESPECTIVELY TOTAL OF WHICH COMES TO 55. 90%. HE SUBMITTED THAT AT LEAST TO THE EXTENT OF 55.90% OF THE TOTAL SHAREHOL DING, THE SHAREHOLDERS ARE COMMON. HE DRAWN OUR ATTENTION TO PROVISIONS OF SE CTION 79 OF THE IT ACT AS PER WHICH IF 51% OF SHAREHOLDERS IS SAME ON THE LAS T DAY OF THE YEAR IN WHICH LOSS WAS INCURRED AND ON THE LAST DAY OF YEAR IN WH ICH SET OFF OF LOSS IS BEING CLAIMED, SET OFF IS TO BE ALLOWED. HE SUBMITTED TH AT AS PER THE PROVISIONS OF SECTION 79 OF THE IT ACT AND IN THE FACTS OF THE PR ESENT CASE, SET OFF OF BROUGHT ITA NOS. 1900 & 1901/BANG/2016 PAGE 5 OF 12 FORWARD BUSINESS LOSS SHOULD BE ALLOWED. THE LD. D R OF REVENUE SUPPORTED THE ORDERS OF AUTHORITIES BELOW. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND GON E THROUGH THE ORDERS OF AUTHORITIES BELOW. WE FIND THAT THE AO HAS INVOKED THE PROVISIONS OF SECTION 79 OF THE IT ACT FOR THE PURPOSE OF DISALLOWING THE SE T OFF OF BROUGHT FORWARD BUSINESS LOSS AND DEPRECIATION. IN THE FACTS OF TH E PRESENT CASE AS NOTED ABOVE, WE FIND THAT MORE THAN 51% OF SHARES, IN FAC T, TO THE EXTENT OF 55.90% OF THE TOTAL SHARES, ONLY TWO PERSONS WERE HOLDING THO SE SHARES AS ON 31.03.2008 BEING THE YEAR IN WHICH LOSS WAS INCURRED AND AS ON 31.03.2009 BEING THE YEAR IN WHICH THE SET OFF OF BROUGHT FORWARD DEPRECIATIO N IS BEING CLAIMED AND HENCE, THE CLAIM OF THE ASSESSEE CANNOT BE DISALLOWED BY I NVOKING THE PROVISIONS OF SECTION 79 OF THE IT ACT. THEREFORE, ON THIS ISSUE , WE DECIDE THE ISSUE IN FAVOUR OF THE ASSESSEE. THIS GROUND OF THE ASSESSEE IS AL LOWED. 8. IN THE RESULT THE APPEAL OF THE ASSESSEE FOR ASS ESSMENT YEAR 2009-10 IS PARTLY ALLOWED. 9. NOW WE TAKE UP THE APPEAL OF THE ASSESSEE FOR AS SESSMENT YEAR 2010-11. THE ONLY ISSUE INVOLVED IN THIS YEAR IS REGARDING D ENIAL OF CARRY FORWARD OF UNABSORBED DEPRECIATION LOSS OF RS. 3,70,22,124/- U /S. 72A OF THE IT ACT ON THE GROUND THAT THE AMALGAMATING COMPANY, M/S. BANASHAN KARI MEDICAL ONCOLOGY RESEARCH CENTRE LIMITED (BMORCL) IS NOT AN INDUSTR IAL UNDERTAKING AS PER THE PROVISIONS OF THE SAID SECTION. REGARDING THIS ISS UE, IT WAS SUBMITTED BY LD. AR OF ASSESSEE THAT IN RESPECT OF THE PROVISIONS OF SE CTION 72A OF THE IT ACT, CLAUSE (AA) OF SUB SECTION 7 OF SECTION 72A IS RELEVANT WH ICH SAYS THAT THE COMPANY OWNING AN INDUSTRIAL UNDERTAKING OR A SHIP OR A HOT EL WITH ANOTHER COMPANY, THEN, NOTWITHSTANDING ANYTHING CONTAINED IN ANY OTH ER 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 C ASE MAY BE, ALLOWANCE FOR DEPRECIATION OF THE AMALGAMATED COMPANY FOR THE PRE VIOUS YEAR IN WHICH THE AMALGAMATION WAS EFFECTED. THEREAFTER HE SUBMITTED THAT THE TERM INDUSTRIAL UNDERTAKING IS DEFINED IN CLAUSE (AA) OF SUB SECTI ON 7 OF SECTION 72A AS PER ITA NOS. 1900 & 1901/BANG/2016 PAGE 6 OF 12 WHICH INDUSTRIAL UNDERTAKING MEANS ANY UNDERTAKING WHICH IS ENGAGED IN THE MANUFACTURE OR PROCESSING OF GOODS OR MANUFACTURE O F COMPUTER SOFTWARE OR OTHER ITEMS WHICH ARE NOT RELEVANT IN THE PRESENT C ASE. HE SUBMITTED THAT TO FIND OUT WHETHER THE ASSESSEE CAN BE ACCEPTED AS AN INDUSTRIAL UNDERTAKING OR NOT, IT HAS TO BE SEEN AS TO WHETHER THE ASSESSEE I S ENGAGED IN THE BUSINESS OF MANUFACTURE OR PROCESSING OF GOODS OR NOT. REGARDI NG THE DATE OF MERGER, HE SUBMITTED THAT AS PER THE JUDGMENT OF HON'BLE KARNA TAKA HIGH COURT SANCTIONING SCHEME OF AMALGAMATION AVAILABLE ON PAG ES 72 TO 86 OF PAPER BOOK, DATE OF MERGER IS 01.04.2009. RELIANCE WAS P LACED ON THE FOLLOWING JUDICIAL PRONOUNCEMENTS IN SUPPORT OF THIS CONTENTI ON THAT IN THE PRESENT CASE, THE ASSESSEE HAS TO BE ACCEPTED AS AN INDUSTRIAL UN DERTAKING A) ITO VS. ARIHANT TILES AND MARBLES P. LTD. 320 IT R 79 (SC) B) CIT V. DATACONS (P) LTD. 155 ITR 66 (KAR) C) CIT VS. COMMERCIAL LAWS OF INDIA (P.) LTD. 107 I TR 822 (MAD.) D) CIT VS. SURESH AMIN FAMILY TRUST 288 ITR 101 (GU JARAT) 10. AS AGAINST THIS, LD. DR OF REVENUE SUPPORTED TH E ORDERS OF AUTHORITIES BELOW. HE PLACED RELIANCE ON A JUDGMENT OF HONBLE MADRAS HIGH COURT RENDERED IN THE CASE OF ACIT VS. APOLLO HOSPITALS ENTERPRISES L TD. AS REPORTED IN 171 TAXMAN 397. 11. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. FIRS T OF ALL, WE REPRODUCE THE PROVISIONS OF SUB SECTION 1 AND 7 OF SECTION 72A OF THE IT ACT, 1961. THE SAME ARE AS UNDER. PROVISIONS RELATING TO CARRY FORWARD AND SET OFF OF ACCUMULATED LOSS AND UNABSORBED DEPRECIATION ALLOWANCE IN AMALGAMATI ON OR DEMERGER, ETC. 72A. (1) WHERE THERE HAS BEEN AN AMALGAMATION OF (A) A COMPANY OWNING AN INDUSTRIAL UNDERTAKING OR A SHIP OR A HOTEL WITH ANOTHER COMPANY; OR (B) A BANKING COMPANY REFERRED TO IN CLAUSE (C) OF SECTION 5 OF THE BANKING REGULATION ACT, 1949 (10 OF 1949) WITH A SP ECIFIED BANK; OR (C) ONE OR MORE PUBLIC SECTOR COMPANY OR COMPANIES ENGAGED IN THE BUSINESS OF OPERATION OF AIRCRAFT WITH ONE OR M ORE PUBLIC SECTOR COMPANY OR COMPANIES ENGAGED IN SIMILAR BUSI NESS,THEN, NOTWITHSTANDING ANYTHING CONTAINED IN ANY OTHER PRO VISION OF ITA NOS. 1900 & 1901/BANG/2016 PAGE 7 OF 12 THIS ACT, THE ACCUMULATED LOSS AND THE UNABSORBED D EPRECIATION OF THE AMALGAMATING COMPANY SHALL BE DEEMED TO BE T HE LOSS OR, AS THE CASE MAY BE, ALLOWANCE FOR UNABSORBED DEPREC IATION OF THE AMALGAMATED COMPANY FOR THE PREVIOUS YEAR IN WH ICH THE AMALGAMATION WAS EFFECTED, AND OTHER PROVISIONS OF THIS ACT RELATING TO SET OFF AND CARRY FORWARD OF LOSS AND A LLOWANCE FOR DEPRECIATION SHALL APPLY ACCORDINGLY. (7) FOR THE PURPOSES OF THIS SECTION, (A) 'ACCUMULATED LOSS' MEANS SO MUCH OF THE LOSS O F THE PREDECESSOR FIRM OR THE PROPRIETARY CONCERN OR THE PRIVATE COMPANY OR UNLISTED PUBLIC COMPANY BEFORE CONVERSIO N INTO LIMITED LIABILITY PARTNERSHIP OR THE AMALGAMATING C OMPANY OR THE DEMERGED COMPANY, AS THE CASE MAY BE, UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PROFESSION' (NOT BEING A LOSS SUSTAINED IN A SPECULATION BUSINESS) WHICH SUCH PRE DECESSOR FIRM OR THE PROPRIETARY CONCERN OR THE COMPANY OR AMALGAMATING COMPANY OR DEMERGED COMPANY, WOULD HAV E BEEN ENTITLED TO CARRY FORWARD AND SET OFF UNDER TH E PROVISIONS OF SECTION 72 IF THE REORGANISATION OF BUSINESS OR CONVERSION OR AMALGAMATION OR DEMERGER HAD NOT TAKEN PLACE; (AA) 'INDUSTRIAL UNDERTAKING' MEANS ANY UNDERTAKING WHICH IS ENGAGED IN (I) THE MANUFACTURE OR PROCESSING OF GOODS; OR (II) THE MANUFACTURE OF COMPUTER SOFTWARE; OR (III) THE BUSINESS OF GENERATION OR DISTRIBUTION O F ELECTRICITY OR ANY OTHER FORM OF POWER; OR (IIIA) THE BUSINESS OF PROVIDING TELECOMMUNICATION SERVICES, WHETHER BASIC OR CELLULAR, INCLUDING RADIO PAGING, DOMESTIC SATELLITE SERVICE, NETWORK OF TRUNKING, BROADBAND N ETWORK AND INTERNET SERVICES; OR (IV) MINING; OR (V) THE CONSTRUCTION OF SHIPS, AIRCRAFTS OR RAIL S YSTEMS; (B) 'UNABSORBED DEPRECIATION' MEANS SO MUCH OF THE ALLOWANCE FOR DEPRECIATION OF THE PREDECESSOR FIRM OR THE PRO PRIETARY CONCERN OR THE PRIVATE COMPANY OR UNLISTED PUBLIC C OMPANY BEFORE CONVERSION INTO LIMITED LIABILITY PARTNERSHI P OR THE AMALGAMATING COMPANY OR THE DEMERGED COMPANY, AS TH E CASE MAY BE, WHICH REMAINS TO BE ALLOWED AND WHICH WOULD HAVE BEEN ALLOWED TO THE PREDECESSOR FIRM OR THE PROPRIE TARY CONCERN OR THE COMPANY OR AMALGAMATING COMPANY OR DEMERGED COMPANY, AS THE CASE MAY BE, UNDER THE PROVISIONS O F THIS ACT, IF THE REORGANISATION OF BUSINESS OR CONVERSION OR AMA LGAMATION OR DEMERGER HAD NOT TAKEN PLACE; (C) 'SPECIFIED BANK' MEANS THE STATE BANK OF INDI A CONSTITUTED UNDER THE STATE BANK OF INDIA ACT, 1955 (23 OF 1955 ) OR A SUBSIDIARY BANK AS DEFINED IN THE STATE BANK OF IND IA ITA NOS. 1900 & 1901/BANG/2016 PAGE 8 OF 12 (SUBSIDIARY BANKS) ACT, 1959 (38 OF 1959) OR A CORR ESPONDING NEW BANK CONSTITUTED UNDER SECTION 3 OF THE BANKING COMPANIES (ACQUISITION AND TRANSFER OF UNDERTAKINGS) ACT, 197 0 (5 OF 1970) OR UNDER SECTION 3 OF THE BANKING COMPANIES ( ACQUISITION AND TRANSFER OF UNDERTAKINGS) ACT, 1980 (40 OF 1980 ). 12. FROM THE ABOVE PROVISIONS, IT COMES OUT THAT IN ORDER TO HOLD THAT THE ACCUMULATED LOSS AND THE UNABSORBED DEPRECIATION OF THE AMALGAMATING COMPANY SHALL BE DEEMED TO BE THE LOSS OF THE AMALG AMATED COMPANY, IT HAS TO BE SEEN THAT IT IS THE CASE OF AMALGAMATION OF A COMPANY OWNING AN INDUSTRIAL UNDERTAKING AS HAS BEEN DEFINED AS PER C LAUSE (AA) OF SUB SECTION 7 OF SECTION 72A AS REPRODUCED ABOVE. AS PER THIS DE FINITION, IT HAS TO BE SEEN THAT THE UNDERTAKING SHOULD BE ENGAGED IN MANUFACTU RE OR PROCESSING OF GOODS. IN OUR CONSIDERED OPINION, AN UNDERTAKING TO BE CON SIDERED AS AN INDUSTRIAL UNDERTAKING, THE TOTAL ACTIVITIES OF THE UNDERTAKIN G SHOULD BE THAT OF MANUFACTURING OR PROCESSING OF GOODS AND EVEN IF TH E UNDERTAKING IS ENGAGED IN SOME OTHER ACTIVITIES ALSO, THE PRIMARY ACTIVITY OF THE SAID UNDERTAKING SHOULD BE THAT OF MANUFACTURING OR PROCESSING OF GOODS. AS PER THE JUDGMENT OF HON'BLE KARNATAKA HIGH COURT RENDERED IN RESPECT OF MERGER OF M/S. BANASHANKARI MEDICAL AND ONCOLOGY RESEARCH CENTRE P VT. LTD. WITH THE ASSESSEE COMPANY AVAILABLE ON PAGES 72 TO 86 OF PAP ER BOOK, IT IS NOTED IN PARA NO. 2 OF THE JUDGMENT THAT THIS COMPANY M/S. B ANASHANKARI MEDICAL AND ONCOLOGY RESEARCH CENTRE PVT. LTD. IS HAVING MAIN O BJECT TO CARRY ON THE BUSINESS OF ESTABLISHING DEVELOPING, LEASING, MANAG ING, OPERATING AND RUNNING OF MEDICAL SERVICE CENTERS SUCH AS NURSING CARE HOM ES, HOSPITALS, POLYCLINICS, HEALTH RESORTS, HEALTH CLUBS, IN-PATIENT AND OUT-PA TIENT WARDS, LABORATORIES, THERAPY UNITS, THEATERS AND ALLIED CONSULTATION CEN TERS ETC. AMONGST OTHERS. NOW IN THE LIGHT OF THESE FACTS, WE EXAMINE THE APP LICABILITY OF VARIOUS JUDGMENTS CITED BEFORE US BY LD. AR OF ASSESSEE. 13. THE FIRST JUDGMENT CITED BEFORE US IS JUDGMENT OF HONBLE APEX COURT RENDERED IN THE CASE OF ITO VS. ARIHANT TILES AND MARBLES P. LTD. (SUPRA). IN THAT CASE, THE ASSESSEE COMPANY WAS ENGAGED IN THE BUSINESS OF MANUFACTURE/ PRODUCTION OF POLISHED SLABS AND TILES WHICH THE AS SESSEE EXPORTED (PARTLY). THE QUESTION BEFORE HONBLE APEX COURT WAS THIS AS TO WHETHER THE ACTIVITIES ITA NOS. 1900 & 1901/BANG/2016 PAGE 9 OF 12 UNDERTAKEN BY THE ASSESSEE WOULD FALL WITHIN THE ME ANING OF THE WORDS MANUFACTURER OR PRODUCTION. IN THAT CASE, IT WAS HELD IN PARA NO. 19 OF THE JUDGMENT THAT BLOCKS CONVERTED INTO POLISHED SLABS AND TILES AFTER UNDERGOING THE PROCESS INDICATED EMERGENCE OF A NEW AND DISTIN CT COMMODITY. IN THE PRESENT CASE, THIS JUDGMENT IS NOT APPLICABLE BECAU SE NO SUCH THING OR ITEM IS PRODUCED IN THE PRESENT CASE AS PER THE MAIN OBJECT S OF THE AMALGAMATING COMPANY NOTED BY HON'BLE KARNATAKA HIGH COURT ON PA GE NO. 74 OF THE PAPER BOOK WHILE RENDERING THE JUDGMENT OF MERGER OF THAT COMPANY INTO THE ASSESSEE COMPANY. EVEN THE PRIMARY ACTIVITY IS NOT TO DO ANY MANUFACTURING OR PROCESSING. THE PRIMARY ACTIVITY IS TO CARRY ON THE BUSINESS OF ESTABLISHING DEVELOPING, LEASING, MANAGING, OPERATING AND RUNNIN G OF MEDICAL SERVICE CENTERS SUCH AS NURSING CARE HOMES, HOSPITALS, POLY CLINICS, HEALTH RESORTS, HEALTH CLUBS, IN-PATIENT AND OUT-PATIENT WARDS, LAB ORATORIES, THERAPY UNITS, THEATERS AND ALLIED CONSULTATION CENTERS ETC. AMONG ST OTHERS. AT THE BEST, ONE OF THESE ACTIVITIES I.E. LABORATORIES MAY INVOLVE S OME PROCESSING BUT THIS IS NOT A PRIMARY ACTIVITY. THEREFORE, THIS JUDGMENT IS NOT A PPLICABLE. 14. THE SECOND JUDGMENT CITED BEFORE US IS THE JUDG MENT OF HON'BLE KARNATAKA HIGH COURT RENDERED IN THE CASE OF CIT V. DATACONS (P) LTD. (SUPRA). IN THAT CASE, THE ISSUE WAS THIS AS TO WHETHER PROCESSING O F BASIC DATA FOR CUSTOMERS ON COMPUTER MACHINES AMOUNTS TO PROCESSING OF GOOD S AND COMPANY ENGAGED IN THIS ACTIVITY IS AN INDUSTRIAL COMPANY. UNDER THESE FACTS, IT WAS HELD THAT THE COMPANY IS AN INDUSTRIAL COMPANY AND SUCH ACTIVITY AMOUNTS TO PROCESSING OF GOODS. IN THE PRESENT CASE, AS PER T HE MAIN OBJECTS OF THE AMALGAMATING COMPANY NOTED BY HON'BLE KARNATAKA HIG H COURT IN ITS JUDGMENT IN RESPECT OF MERGER OF THAT COMPANY WITH THE ASSES SEE COMPANY, COPY AVAILABLE ON PAGE NO. 74 OF THE PAPER BOOK, THE AS SESSEE HAS NOT CARRIED OUT ANY SUCH ACTIVITY AND THE ONLY ACTIVITY WHICH CAN B E SAID TO BE NEAR TO THIS ACTIVITY IS THE ACTIVITY OF LABORATORIES WHERE FOR THE PURPOSE OF CARRYING OUT CERTAIN DIAGNOSTIC TESTS, IT CAN BE SAID THAT SOME PROCESSING IS INVOLVED BUT THIS IS NOT A PRIMARY ACTIVITY. THEREFORE, THIS JUDGMENT ALSO IS NOT APPLICABLE. ITA NOS. 1900 & 1901/BANG/2016 PAGE 10 OF 12 15. THE NEXT JUDGMENT CITED BEFORE US IS A JUDGMENT OF HONBLE MADRAS HIGH COURT RENDERED IN THE CASE OF CIT VS. COMMERCIAL LAWS OF INDIA (P.) LTD. (SUPRA). IN THAT CASE, THE ASSESSEE COMPANY WAS PUBLISHER OF FO RTNIGHTLY JOURNAL AND ACTUAL PRINTING WAS DONE BY A DIFFERENT CONCERN AND ASSESS EE WAS ENGAGED IN FOLDING AND STITCHING OF PRINTED SHEETS SO AS TO BE USED AS PARTS OF JOURNAL WHICH WERE LATER ON DISPATCHED TO SUBSCRIBERS. UNDER THESE FA CTS, IT WAS HELD THAT THE ASSESSEE WAS ENGAGED IN PROCESSING OF GOODS. WE HA VE ALREADY SEEN THAT THE ONLY ACTIVITY OF THE AMALGAMATING COMPANY WHICH CAN BE EQUATED WITH PROCESSING OF GOODS IS REGARDING ITS ACTIVITY OF LA BORATORY BUT THIS IS NOT A PRIMARY ACTIVITY OF THE AMALGAMATING COMPANY. THERE FORE IT CANNOT BE SAID THAT THE AMALGAMATING COMPANY IS AN INDUSTRIAL UNDERTAKI NG. 16. THE NEXT JUDGMENT CITED BEFORE US IS JUDGMENT O F HONBLE GUJARAT HIGH COURT RENDERED IN THE CASE OF CIT VS. SURESH AMIN FAMILY TRUST (SUPRA). IN THAT CASE, THE ASSESSEE WAS ENGAGED IN A PROFESSION OF P ATHOLOGICAL LABORATORY AND UNDER THESE FACTS, IT WAS HELD THAT THE ASSESSEE WA S CARRYING ON A BUSINESS AS AN INDUSTRIAL UNDERTAKING, WHICH PRODUCED AN ARTICL E OR THING AND WAS THUS ENTITLED TO INVESTMENT ALLOWANCE U/S. 32A OF THE AC T ON THE NEW MACHINERY INSTALLED IN THE CLINIC. HENCE IT IS SEEN THAT IN THAT CASE, THE ENTIRE ACTIVITY OF THE ASSESSEE WAS PATHOLOGICAL LABORATORY AND NOT A SMAL L PORTION OF THE TOTAL ACTIVITIES WAS LABORATORY AS IN THE PRESENT CASE AN D THEREFORE, FOR THE SAME REASONS THAT LABORATORY IN THE PRESENT CASE IS NOT A PRIMARY ACTIVITY OF THE AMALGAMATING COMPANY, THIS JUDGMENT IS ALSO NOT HEL PING THE ASSESSEE IN THE PRESENT CASE. 17. THE LD. AR OF ASSESSEE HAS FURNISHED CERTAIN AD DITIONAL EVIDENCES BEING COPY OF ORDER DATED 30.09.2015 PASSED BY THE COMMISSIONE R OF CENTRAL EXCISE WHICH IS AVAILABLE ON PAGES 232 TO 285 OF PAPER BOO K. IT WAS SUBMITTED BY LD. AR OF ASSESSEE THAT AS PER THIS ORDER, IT WAS HELD BY COMMISSIONER OF CENTRAL EXCISE THAT IN RESPECT OF FDG CLEARED BY THE ASSESS EE COMPANY, EXCISE DUTY IS PAYABLE. HE SUBMITTED THAT EVEN EXCISE DUTY IS PAY ABLE ON SOME PRODUCTS BEING SOLD BY THE ASSESSEE AND THEREFORE, IT HAS TO BE ACCEPTED THAT THE ASSESSEE IS ENGAGED IN MANUFACTURE OF GOODS OR PROC ESSING OF GOODS. IT WAS ITA NOS. 1900 & 1901/BANG/2016 PAGE 11 OF 12 POINTED OUT THAT AS PER PAPER BOOK PAGE NO. 274 DUR ING FINANCIAL YEAR 2009- 10, THE TURNOVER WAS RS. 131.75 LAKHS DURING 01.11. 2009 TO 26.02.2010 AND RS. 49.46 LAKHS DURING 27.02.2010 TO 31.03.2010 AND SIM ILARLY FOR FINANCIAL YEAR 2010-11, THE TURNOVER WAS NOTED WAS AT RS. 140.87 L AKHS. FOR THE PERIOD FROM 01.04.2009 TO 31.10.2009, IT WAS HELD THAT THE ASSE SSEE IS NOT LIABLE TO PAY EXCISE DUTY BECAUSE OF SSI EXEMPTION. 18. REGARDING THIS CONTENTION, WE FIND THAT EVEN IF IT IS HELD THAT THE ASSESSEE IS ENGAGED IN SMALL ACTIVITY OF SOME MANUFACTURING ALS O, IT CANNOT BE SAID THAT THE ASSESSEE IS AN INDUSTRIAL UNDERTAKING BECAUSE IN OU R CONSIDERED OPINION, AS PER THE DEFINITION OF TERM INDUSTRIAL UNDERTAKING AS PE R CLAUSE (AA) OF SUB SECTION 7 OF SECTION 72A, THE PRIMARY ACTIVITY OF THE ASSESSE E UNDERTAKING SHOULD BE OF MANUFACTURE AND PROCESSING OF GOODS AND MERELY BECA USE A SUPPORTING OR ANCILLARY ACTIVITY IS SUCH, IT CANNOT BE SAID THAT IT IS AN INDUSTRIAL UNDERTAKING. HENCE, EVEN AFTER CONSIDERING THE ADDITIONAL EVIDEN CE, THE ASSESSEE DOES NOT GET ANY HELP. 19. NOW WE CONSIDER THE APPLICABILITY OF THE JUDGME NT CITED BY LD. DR OF REVENUE RENDERED IN THE CASE OF ACIT VS. APOLLO HOSPITALS E NTERPRISES LTD. (SUPRA). IN THIS CASE, THE ISSUE BEFORE HONBLE MADRAS HIGH COU RT WAS THE SAME AS IN THE PRESENT CASE AS TO WHETHER THE HOSPITAL CAN BE CONS IDERED AS AN INDUSTRIAL UNDERTAKING UNDER CLAUSE (AA) OF SUB SECTION 7 OF S ECTION 72A OF THE IT ACT. IN THAT CASE, A SCHEME WAS APPROVED TO AMALGAMATE M/S. DECCAN HOSPITAL CORPORATION LIMITED (IN SHORT DHCL), RUNNING A HO SPITAL AT JUBILEE HILLS, HYDERABAD WITH THE ASSESSEE COMPANY I.E. APOLLO HOS PITALS ENTERPRISES LTD. OF CHENNAI AND THE ISSUE IN DISPUTE WAS REGARDING THE SET OFF OF UNABSORBED DEPRECIATION OF RS. 11.60 CRORES ON ACCOUNT OF AMAL GAMATION OF DHCL WITH APOLLO HOSPITALS ENTERPRISES LTD. AND IT WAS HELD B Y HONBLE MADRAS HIGH COURT THAT NEITHER APOLLO HOSPITALS ENTERPRISES LTD. NOR DHCL ARE INDUSTRIAL UNDERTAKING WITHIN THE MEANING OF SECTION 72A OF TH E IT ACT AND THEREFORE, THE SET OFF OF UNABSORBED DEPRECIATION IS NOT ALLOWABLE . RESPECTFULLY FOLLOWING THIS JUDGMENT OF HONBLE MADRAS HIGH COURT, WE DECLINE T O INTERFERE IN THE ORDER OF CIT (A). ACCORDINGLY THIS GROUND IS REJECTED. ITA NOS. 1900 & 1901/BANG/2016 PAGE 12 OF 12 20. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE FOR ASSESSMENT YEAR 2010-11 IS DISMISSED. 21. IN THE COMBINED RESULT, THE ASSESSEES APPEAL F OR ASSESSMENT YEAR 2009-10 IS PARTLY ALLOWED WHEREAS THE APPEAL FOR ASSESSMENT YE AR 2010-11 IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE MENT IONED ON THE CAPTION PAGE. SD/- SD/- (LALIT KUMAR) (ARUN KUMAR GARODIA) JUDICIAL MEMBER ACCOUNTANT MEMBER BANGALORE, DATED, THE 15 TH DECEMBER, 2017. /MS/ COPY TO: 1. APP ELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER SENIOR PRIVATE SECRETARY, INCOME TAX APPELLATE TRIBUNAL, BANGALORE.