DCIT 1(2), MUMBAI V. NOCIL LTD, MUMBAI

ITA 3529/MUM/2013

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 0561 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-05-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 10-02-2015
• Assessment Year: 2004-2005
• Appeal Filed On: 06-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: MRS ARTI VISSANJI
• Keywords: Business income; Depreciation; Wholly owned subsidiary; Unabsorbed depreciation; Reassessment proceedings
• Section: 143(3); 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH H, MUMBAI BEFORE SHRI G.S.PANNU, ACCOUNTANT MEMBER AND SHRI AMARJIT SINGH, JUDICIAL MEMBER ITA NO.3529/MUM/2013 (ASSESSMENT YEAR 2004-05) THE DCIT 1(2), ROOM NO.535, 5 TH FLOOR, AAYKAR BHAVAN,M.K.ROAD, MUMBAI 400 020 ...... APPELLANT VS. M/S. NOCIL LIMITED, MAFATLAL HOUSE, 3 RD FLOOR, HT PAREKH MARG, BACKBAY RECLAMATION, MUMBAI -400 020 .... RESPONDEN T C.O.NO.138/MUM/2014 (ARISING OUT OF ITA NO.3529/MUM/2013, A.Y.2004-05) M/S. NOCIL LIMITED, MAFATLAL HOUSE, 3 RD FLOOR, HT PAREKH MARG, BACKBAY RECLAMATION, MUMBAI -400 020 .... CROSS OBJECTOR VS. THE DCIT 1(2), ROOM NO.535, 5 TH FLOOR, AAYKAR BHAVAN,M.K.ROAD, MUMBAI 400 020 ..APPELLANT IN APPEAL REVENUE BY : SHRI RAHUL RAMAN ASSESSEE BY : MRS. ARTI VISSANJI DATE OF HEARING : 30/03/2017 DATE OF PRONOUNCEMENT : 24/05/2017 2 ITA NO.3529/MUM/2013 & CO 138/M/2014 (ASSESSMENT YEAR 2004-05) ORDER PER G.S.PANNU,A.M: THE CAPTIONED APPEAL FILED BY THE REVENUE AND CRO SS OBJECTION BY THE ASSESSEE PERTAINING TO ASSESSMENT YEAR 2004-05 ARE DIRECTED AGAINST AN ORDER PASSED BY CIT(A)-2, MUMBAI DATED 04/02/2013, WHICH IN TURN, ARISES OUT OF AN ORDER PASSED BY THE ASSESSING OFFICER UN DER SECTION 143(3) R.W.S. 147 OF THE INCOME TAX ACT, 1961 (IN SHORT THE A CT) DATED 16/12/2010. 2. GROUNDS OF APPEAL RAISED BY THE REVENUE IN ITS A PPEAL READ AS UNDER:- 1) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE IN LAW, THE L. CIT(A) ERRED IN ACCEPTING THE ASSESSEE'S PLEA THAT THERE WAS NO DEM ERGER OF ITS PPD AND PCD DIVISIONS WITHOUT APPRECIATING THAT UNDER THE RELEV ANT SCHEME APPROVED BY THE HON'BLE BOMBAY HIGH COURT, THE TRANSFER OF THE 11 T WO DIVISIONS HAS BEEN DEFINED AS DEMERGER. 2) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD, CIT(A) ERRED IN NOT APPRECIATING THAT IN RESPECT OF THE DEMERGER OF THE PCD DIVISION, THE ASSESSEE COMPANY HAD THE OPTION TO SUBSCRIBE TO THE SHARES O F THE RESULTING COMPANY OR TO AN IMMEDIATE CONSIDERATION IN LIEU THERE OF AND ASS ESSEE OPTED FOR THE LATTER AND THEREFORE, THE CONDITION OF SECTION 2(19AA) STOOD F ULFILLED. 3) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) ERRED IN HOLDING THAT THE ASSESSEE IS ELIGIBLE FOR SET, OFF AND CARRY FORWARD OF BROUGHT FORWARD BUSINESS LOSSES WITHOUT APPRECIATIN G THAT THE TWO DIVISIONS WERE DEMERGED AND THEREFORE, AS THE RELEVANT' BUSINESS W AS NO LONGER CARRIED ON BY THE ASSESSEE, IT WAS NOT ELIGIBLE FOR SET OFF AND C ARRY FORWARD OF THE BUSINESS LOSSES OF THE ERSTWHILE UNDERTAKINGS AS PER SECTION 72A(4) OF THE ACT. 4) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD, CIT(A) ERRED IN ALLOWING THE ASSESSEE DEDUCTION FOR BROUGHT FORW ARD UNABSORBED DEPRECIATION OF ITS DEMERGED UNDERTAKING, WITHOUT APPRECIATING THAT BROUGHT FORWARD UNABSORBED DEPRECIATION PERTAKES THE CHARACTER OF CURRENT DEPR ECIATION AND THEREFORE, SINCE THE CONCERNED UNDERTAKINGS HAVE BEEN DEMERGED, THE DEPR ECIATION WAS NOT ALLOWABLE TO THE ASSESSEE AS PER SECTION 72A(4) OF THE ACT. 5) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD, CIT(A) ERRED IN NOT APPRECIATING THAT THE HON'BLE BOMBAY HIGH CO URT'S ORDER DATED 08-06-2005, APPROVING THE SCHEME OF TRANSFER DENOTED AS 'DEMERG ER' REQUIRED THE ASSESSEE TO COMPANY WITH ALL THE CONDITIONS AS ENVISAGED IN THE SCHEME OF THE CONDITIONS 3 ITA NO.3529/MUM/2013 & CO 138/M/2014 (ASSESSMENT YEAR 2004-05) STIPULATED IN THE 'DEMERGER' HAVE BEEN DULY COMPLIE D WITH BY THE ASSESSEE COMPANY. 3. GROUNDS OF APPEAL RAISED BY THE ASSESSEE IN ITS CROSS OBJECTION READ AS UNDER:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE HELD THAT THE REASSESSMENT PROCEEDINGS INITIATED BY THE LD. ASSESSING OFFICER ARE IMPROPER AND BAD-IN-LAW AND ACCORDINGLY THE ORDER PASSED BY HIM DATED 16TH DECE MBER, 2010 UNDER SECTION 143(3) READ WITH SECTION 147 IS BAD-IN-LAW AND HAS TO BE QUASHED. 4. ALTHOUGH THE REVENUE HAS RAISED MULTIPLE GROUNDS OF APPEAL, BUT IN SUM AND SUBSTANCE, THE SINGULAR ISSUE RAISED BY THE REV ENUE IS AGAINST THE DECISION OF THE CIT(A) IN HOLDING THAT THE PROVISIO NS OF SEC. 72A(4) OF THE ACT ARE NOT ATTRACTED WITH REGARD TO THE RESTRUCTURING UNDERTAKEN IN TERMS OF THE SCHEME OF ARRANGEMENT/DEMERGER APPROVED BY THE HON' BLE BOMBAY HIGH COURT VIDE ORDER DATED 8.6.2005. 5. BRIEFLY PUT, THE RELEVANT FACTS ARE THAT THE ASS ESSEE IS A COMPANY INCORPORATED UNDER THE PROVISIONS OF THE COMPANIES ACT, 1956 IN WHICH PUBLIC ARE SUBSTANTIALLY INTERESTED AND IT IS, INTE R-ALIA, ENGAGED IN THE BUSINESS OF MANUFACTURE OF PAPER CHEMICALS, RUBBER CHEMICALS AND PLASTIC PRODUCTS. INITIALLY, THE ASSESSEE-COMPANY FILED ITS RETURN OF INCOME ON 1.11.2004 DECLARING TOTAL INCOME AT NIL, WHICH WAS SUBJECT TO A SCRUTINY ASSESSMENT U/S 143(3) OF THE ACT ON 29.12.2006 WHEREBY THE TOTAL I NCOME WAS ASSESSED AT RS.7,47,48,963/-, BEING LONG TERM CAPITAL GAINS AND BUSINESS INCOME AT NIL. NOTABLY, IN THE ASSESSMENT SO FINALISED, SET-OFF WA S GIVEN FOR THE BROUGHT FORWARD BUSINESS LOSSES OF RS.1234.83 LACS AND RS.1 07.64 LACS PERTAINING TO ASSESSMENT YEARS 1999-00 AND 2000-01 RESPECTIVELY A ND ALSO UNABSORBED DEPRECIATION OF RS.141S.14 LACS PERTAINING TO ASS ESSMENT YEAR 1998-99, AND 4 ITA NO.3529/MUM/2013 & CO 138/M/2014 (ASSESSMENT YEAR 2004-05) THE BALANCE OF ACCUMULATED LOSS AND UNABSORBED DEPR ECIATION RELATING TO VARIOUS ASSESSMENT YEARS 1999-2000 TO 2002-03 WAS A LLOWED TO BE CARRIED FORWARD. SUBSEQUENTLY, THE ASSESSING OFFICER ISSUED A NOTICE U/S 148 OF THE ACT DATED 30.3.2010 REOPENING THE ASSESSMENT ON THE GROUND THAT IN THE ASSESSMENT FINALISED ON 29.12.2006 ASSESSEE WAS ALL OWED TO CARRY FORWARD THE UNABSORBED BUSINESS LOSS AND DEPRECIATION IN CO NTRAVENTION OF THE PROVISIONS OF SEC. 72A(4) OF THE ACT. IN THE ENSU ING ASSESSMENT FINALIZED UNDER SECTION 143(3)/147 OF THE ACT DATED 16/12/201 0, THE TOTAL INCOME HAS BEEN ASSESSED AT RS.49,03,01,730/-. IN DETERMINING SUCH INCOME, THE ASSESSING OFFICER DENIED THE SET OFF OF BROUGHT FOR WARD BUSINESS LOSS OF RS.1234.83 LACS & 2969.61 LCAS PERTAINING TO ASSESS MENT YEARS 1999-2000 AND 2000-01 RESPECTIVELY AS ALSO THE UNABSORBED DEP RECIATION OF RS.1415.14 LACS PERTAINING TO ASSESSMENT YEAR 1998-99. APA RT THEREFROM, THE ASSESSING OFFICER NOTED THAT A BUSINESS LOSS OF RS.5437.77 LA CS PERTAINING TO 1999-2000 TO 2002-03 AND THE UNABSORBED DEPRECIATION OF RS.10 645.39 LACS FOR SUCH YEARS WAS NOT ALLOWED TO BE CARRIED FORWARD IN TERM S OF SECTION 72A(4) OF THE ACT. 5.1 SECTION 72A OF THE ACT CONTAINS PROVISIONS RELA TING TO CARRY FORWARD LOSSES AND SET-OFF OF ACCUMULATED LOSSES AND UNABSO RBED DEPRECIATION IN CASES OF AMALGAMATION, DEMERGER, ETC. IN THE CASE BEFORE US, THE ISSUE RELATES TO THE INVOKING OF SECTION 72A(4) OF THE AC T, WHICH READS AS UNDER:- (4) NOTWITHSTANDING ANYTHING CONTAINED IN ANY OTHER PROVISIONS OF THIS ACT, IN THE CASE OF A DEMERGER, THE ACCUMULATED LOSS AND TH E ALLOWANCE FOR UNABSORBED DEPRECIATION OF THE DEMERGED COMPANY SHA LL: (A) WHERE SUCH LOSS OR UNABSORBED DEPRECIATION IS D IRECTLY RELATABLE TO THE UNDERTAKINGS TRANSFERRED TO THE RESULTING COMPANY, BE ALLOWED TO BE CARRIED FORWARD AND SET OFF IN THE HANDS OF THE RESULTING C OMPANY; 5 ITA NO.3529/MUM/2013 & CO 138/M/2014 (ASSESSMENT YEAR 2004-05) (B) WHERE SUCH LOSS OR UNABSORBED DEPRECIATION IS N OT DIRECTLY RELATABLE TO THE UNDERTAKINGS TRANSFERRED TO THE RESULTING COMPA NY, BE APPORTIONED BETWEEN THE DEMERGED COMPANY AND THE RESULTING COMP ANY IN THE SAME PROPORTION IN WHICH THE ASSETS OF THE UNDERTAKINGS HAVE BEEN RETAINED BY THE DEMERGED COMPANY AND TRANSFERRED TO THE RESULTI NG COMPANY, AND BE ALLOWED TO BE CARRIED FORWARD AND SET OFF IN THE HA NDS OF THE DEMERGED COMPANY OR THE RESULTING COMPANY, AS THE CASE MAY B E . 5.2 SUB-SECTION(4) OF SECTION 72A IS IN RESPECT OF A CASE OF DEMERGER AND PRESCRIBES THAT THE ACCUMULATED LOSSES AND UNABSORB ED DEPRECIATION OF THE DEMERGED COMPANY SHALL BE ALLOWED TO CARRY FORWARD IN THE HANDS OF THE RESULTING COMPANY ONLY IN CASE SUCH LOSSES OR UNABS ORBED DEPRECIATION IS RELATABLE TO THE UNDERTAKING TRANSFERRED TO THE RES ULTING COMPANY. IN A CASE WHERE THE LOSS OR UNABSORBED DEPRECIATION IS NOT DI RECTLY RELATABLE TO THE UNDERTAKING TRANSFERRED TO THE RESULTING COMPANY, T HE SAME SHALL BE APPORTIONED BETWEEN THE DEMERGED COMPANY AND THE RE SULTING COMPANY IN THE SAME PROPORTION IN WHICH ASSETS OF THE UNDERTAK ING HAS BEEN RETAINED BY THE DEMERGED COMPANY AND TRANSFERRED TO THE RESULTI NG COMPANY AND SHALL BE ALLOWED TO BE CARRIED FORWARD AND SET-OFF IN THE HANDS OF THE DEMERGED COMPANY OR RESULTING COMPANY, AS THE CASE MAY BE. THE BACKGROUND AND THE REASON FOR WHICH THE ASSESSING OFFICER HAS INVOKED SECTION 72A(4) OF THE ACT CAN BE UNDERSTOOD AS FOLLOWS. THE RESPONDENT ASSES SEE HAD THREE DIVISIONS NAMELY, PETRO CHEMICAL DIVISION INCLUSIVE OF POLYME R (PCD), RUBBER CHEMICAL DIVISION (RCD); AND, THE PLASTIC PRODUCT DIVISION ( PPD). IN TERMS OF SECTIONS 391TO 394 OF THE COMPANIES ACT, 1956 A SCHEME OF D EMERGER WAS PROPOSED, WHICH WAS APPROVED BY THE HON'BLE BOMBAY HIGH COURT VIDE ORDER DATED 08/06/2005 AND APPOINTED DATE WAS FIXED, BEING 30/0 9/2003. IN TERMS OF THE SAID ARRANGEMENT, SPECIFIED FIXED ASSETS AND LIABIL ITIES OF PCD DIVISION WERE TRANSFERRED TO RELENE PETROCHEMICALS PVT. LTD., WHE REAS THE SPECIFIED FIXED ASSETS OF PPD DIVISION WERE TRANSFERRED TO NOCIL PE TROCHEMICALS PVT. LTD. 6 ITA NO.3529/MUM/2013 & CO 138/M/2014 (ASSESSMENT YEAR 2004-05) SUCH MOVABLE AND IMMOVABLE PROPERTIES AND LIABILITI ES OF THE PCD AND PPD DIVISIONS WHICH WERE NOT TRANSFERRED TO RELENE PETR OCHEMICALS PVT. LTD. AND/OR NOCIL PETROCHEMICALS PVT. LTD. CONTINUED TO BELONG AND REMAIN VESTED WITH THE ASSESSEE COMPANY. IN LIEU OF THE S AID TRANSFER OF SPECIFIED ASSETS AND LIABILITIES OF PCD AND PPD DIVISION, ASS ESSEE COMPANY RECEIVED CONSIDERATION FROM RELENE PETROCHEMICALS PVT. LTD. .& NOCIL PETROCHEMICALS PVT. LTD. IN TERMS OF THE SCHEME OF ARRANGEMENT. IN THE AFORESAID BACKGROUND, THE ASSESSING OFFICER HAS INVOKED THE P ROVISIONS OF SECTION 72A(4) OF THE ACT ON THE GROUND THAT ACCUMULATED LO SS AND UNABSORBED DEPRECIATION PERTAINING TO THE PCD AND PPD DIVISION S COULD NOT BE ALLOWED TO BE CARRIED FORWARD AND SET-OFF IN THE HANDS OF THE ASSESSEE COMPANY. THIS HAS BEEN EFFECTUATED BY THE ASSESSING OFFICER IN TH E REASSESSMENT PROCEEDINGS. THE AFORESAID WAS CHALLENGED IN APPE AL BEFORE THE CIT(A), WHO HAS SINCE SET-ASIDE THE ACTION OF THE ASSESSING OFF ICER. THE PERTINENT PLEA OF THE ASSESSEE BEFORE THE CIT(A) WAS THAT THE PROVIS IONS OF SECTION 72A(4) OF THE ACT COULD NOT BE INVOKED WITH RESPECT TO THE SC HEME OF ARRANGEMENT IN QUESTION, WHICH HAS BEEN APPROVED BY THE HON'BLE BO MBAY HIGH COURT VIDE ORDER DATED 8/6/2005. ACCORDING TO THE ASSESSEE P ROVISIONS OF SECTION 72A(4) OF THE ACT COULD NOT BE INVOKED IN THIS CA SE, BECAUSE THE SCHEME OF ARRANGEMENT DOES NOT RESULT IN A DEMERGER AS UNDE RSTOOD FOR THE PURPOSES OF SECTION 72A(4) R.W.S. 2(19AA) OF THE ACT. T HE CIT(A) TOOK NOTE OF THE AFORESAID PLEA OF THE ASSESSEE AND HELD THAT THE T RANSFER OF DIVISIONS IN TERMS OF THE SCHEME APPROVED BY THE HON'BLE BOMBAY HIGH C OURT DOES NOT CONSTITUTE A DEMERGER AS DEFINED IN SECTION 2(19A A) OF THE ACT AND HENCE THE PROVISIONS OF SECTION 72A(4) WERE NOT ATTRACTED IN THE PRESENT CASE. THE 7 ITA NO.3529/MUM/2013 & CO 138/M/2014 (ASSESSMENT YEAR 2004-05) RELEVANT FINDING OF THE CIT(A) IN THIS REGARD CAN BE APPRECIATED ON GOING THROUGH THE FOLLOWING DISCUSSION:- 5.19. I AGREE WITH THE APPELLANT COMPANY THAT- (I) THE TRANSFER OF DIVISIONS UNDER THE SCHEME, DUL Y APPROVED BY THE BOMBAY HIGH COURT VIDE ITS ORDER DATED 8TH JUNE, 2005 DOES NOT CONSTITUTE 'DEMERGER' AS DEFINED IN SECTION 2(19AA) OF THE ACT. HENCE, THE-A PPELLANT IS NOT A 'DEMERGED COMPANY' AS DEFINED IN SECTION 2(19AAA) AND THE TRA NSFEREE COMPANIES CANNOT BE CONSIDERED AS A 'RESULTING COMPANY' AS DEFINED IN S ECTION 2(41A) OF THE ACT BECAUSE OF THE FOLLOWING REASONS: A) IN THIS CASE ALL THE PROPERTY OF THE UNDERTAKING HAVE NOT BECOME THE PROPERTY OF THE COMPANY TO WHICH THE SPECIFIED AS SETS AND LIABILITIES OF THE UNDERTAKING ARE TRANSFERRED. B) SIMILARLY, ALL THE LIABILITIES OF THE UNDERTAKIN G HAVE NOT BECOME THE LIABILITIES OF THE COMPANY TO WHICH THE SPECIFIED A SSETS AND LIABILITIES OF THE UNDERTAKING ARE TRANSFERRED. C) THE COMPANY WHICH TOOK OVER THE SPECIFIED ASSETS AND THE LIABILITIES OF THE UNDERTAKING HAS NOT ISSUED SHARES TO THE SHARE HOLD ERS OF THE APPELLANT COMPANY. D) SECTION 19AA(B) IS ALSO NOT SATISFIED. (III) HENCE, THE PROVISIONS OF SUB-SECTION (4) OF S ECTION 72A OF THE ACT ARE NOT ATTRACTED IN RELATION TO THE SAID TRANSFER UNDER TH E SCHEME. THAT BEING SO, THE ACCUMULATED BUSINESS LOSSES AND UNABSORBED DEPRECIA TION RELATING TO THE TRANSFERRED DIVISIONS HAVE TO BE REMAIN WITH THE AP PELLANT FOR SET OFF AGAINST ITS INCOME. AGAINST THE AFORESAID DECISION OF THE CIT(A), REVEN UE IS IN APPEAL BEFORE US. 6. ON THE OTHER HAND, LD. REPRESENTATIVE FOR THE AS SESSEE HAS DEFENDED THE FINDING OF THE CIT(A) BY POINTING OUT THAT, ON FACTS, IT WAS QUITE CLEAR THAT THE SCHEME APPROVED BY HON'BLE BOMBAY HIGH COURT DI D NOT CONSTITUTE DEMERGER AS DEFINED UNDER SECTION 2(19AA) OF THE ACT AND, THEREFORE, IT WOULD NOT ATTRACT THE PROVISIONS OF SECTION 72A(4) OF THE ACT. 7. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS. A PERUSAL OF SUB- SECTION(4) OF SECTION 72A OF THE ACT, WHICH WE HAVE EXTRACTED EARLIER, BRINGS 8 ITA NO.3529/MUM/2013 & CO 138/M/2014 (ASSESSMENT YEAR 2004-05) OUT THAT THE RESTRICTION CONTAINED THEREIN WITH REG ARD TO THE ACCUMULATED LOSSES AND UNABSORBED DEPRECIATION GETS TRIGGERED O NLY WHEN THERE IS A SCHEME OF DEMERGER, WHICH RESULTS IN A DEMERGED C OMPANY AND A RESULTING COMPANY. QUITE CLEARLY, THE DEMERGER IN RELATION TO A COMPANY ENVISAGES TRANSFER PURSUANT TO SECTION 391 TO 394 OF THE COMP ANIES ACT, 1956 AND HAS BEEN DEFINED IN SECTION 2(19AA) OF THE ACT AS UNDER :- 2 (19AA) 'DEMERGER', IN RELATION TO COMPANIES, MEANS THE TRANSFER, PURSUANT TO A SCHEME OF ARRANGEMENT UNDER SECTIONS 391 TO 394 10 OF THE COMPANIES ACT, 1956 (1 OF 1956), BY A DEMERGED COMPANY OF ITS ONE OR MORE UNDERTAKINGS TO ANY RESULTING COMPANY IN SUCH A MANNER THAT (I) ALL THE PROPERTY OF THE UNDERTAKING, BEING TRAN SFERRED BY THE DEMERGED COMPANY, IMMEDIATELY BEFORE THE DEMERGER, BECOMES T HE PROPERTY OF THE RESULTING COMPANY BY VIRTUE OF THE DEMERGER; (II) ALL THE LIABILITIES RELATABLE TO THE UNDERTAKI NG, BEING TRANSFERRED BY THE DEMERGED COMPANY, IMMEDIATELY BEFORE THE DEMERGER, BECOME THE LIABILITIES OF THE RESULTING COMPANY BY VIRTUE OF T HE DEMERGER; (III) THE PROPERTY AND THE LIABILITIES OF THE UNDER TAKING OR UNDERTAKINGS BEING TRANSFERRED BY THE DEMERGED COMPANY ARE TRANSFERRED AT VALUES APPEARING IN ITS BOOKS OF ACCOUNT IMMEDIATELY BEFORE THE DEME RGER; (IV) THE RESULTING COMPANY ISSUES, IN CONSIDERATION OF THE DEMERGER, ITS SHARES TO THE SHAREHOLDERS OF THE DEMERGED COMPANY ON A PR OPORTIONATE BASIS EXCEPT WHERE THE RESULTING COMPANY ITSELF IS A SHAR EHOLDER OF THE DEMERGED COMPANY; (V) THE SHAREHOLDERS HOLDING NOT LESS THAN THREE-FO URTHS IN VALUE OF THE SHARES IN THE DEMERGED COMPANY (OTHER THAN SHARES ALREADY HELD THEREIN IMMEDIATELY BEFORE THE DEMERGER, OR BY A NOMINEE FO R, THE RESULTING COMPANY OR, ITS SUBSIDIARY) BECOME SHAREHOLDERS OF THE RESULTING COMPANY OR COMPANIES BY VIRTUE OF THE DEMERGER, OTHERWISE THAN AS A RESULT OF THE ACQUISITION OF TH E PROPERTY OR ASSETS OF THE DEMERGED COMPANY OR ANY UNDERTAKING THEREOF BY THE RESULTING COMPANY; (VI) THE TRANSFER OF THE UNDERTAKING IS ON A GOING CONCERN BASIS; (VII) THE DEMERGER IS IN ACCORDANCE WITH THE CONDIT IONS, IF ANY, NOTIFIED UNDER SUB-SECTION (5) OF SECTION 72A BY THE CENTRAL GOVERNMENT IN THIS BEHALF. 9 ITA NO.3529/MUM/2013 & CO 138/M/2014 (ASSESSMENT YEAR 2004-05) 7.1 SIMILARLY, A DEMERGED COMPANY IS DEFINED AS P ER SECTION 2(19AAA) OF THE ACT TO MEAN THAT COMPANY WHOSE UNDERTAKING IS T RANSFERRED PURSUANT TO DEMERGER TO A RESULTING COMPANY. THE EXPRESSION R ESULTING COMPANY HAS ALSO BEEN DEFINED IN SECTION 2(41A) OF THE ACT ME ANING ONE OR MORE COMPANIES( INCLUDING A WHOLLY OWNED SUBSIDIARY THE REOF) TO WHICH THE UNDERTAKING OF THE DEMERGED COMPANY IS TRANSFERRED IN A SCHEME OF DEMERGER AND THE RESULTING COMPANY IN CONSIDERATION OF SUCH TRANSFER OF UNDERTAKING, ISSUES SHARES TO THE SHAREHOLDERS OF THE DEMERGED COMPANY AND INCLUDES ANY AUTHORITY OR BODY OR LOCAL AUTHORI TY OR PUBLIC SECTOR COMPANY OR A COMPANY ESTABLISHED, CONSTITUTED OR FO RMED AS A RESULT OF DEMERGER . A CONJOINT READING OF THE MEANING OF T HE EXPRESSION DEMERGER, DEMERGED COMPANY AND THE RESULTING COMPANY SIGN IFIES THE MANNER IN WHICH SECTION 72A(4) OF THE ACT IS TO BE UNDERSTOOD SINCE THE THREE EXPRESSIONS FIND A PLACE THEREIN. THE SCHEME OF AR RANGEMENT IS TO BE UNDERSTOOD AS DEMERGER FOR THE PURPOSES OF SECTION 2(19AA) OF THE ACT ONLY IF THE CONDITIONS PRESCRIBED THEREIN ARE SATISFIED. ONE OF THE CONDITIONS PRESCRIBED IS THAT ALL THE PROPERTIES AND THE LIABI LITIES RELATABLE TO THE UNDERTAKING SHOULD BE TRANSFERRED BY THE DEMERGED C OMPANY TO THE RESULTING COMPANY BY VIRTUE OF THE DEMERGER. FACTUALLY SPEAK ING, IN THE PRESENT CASE, THERE IS NO DISPUTE TO THE FACT THAT THE SCHEME OF RESTRUCTURING APPROVED BY THE HON'BLE BOMBAY HIGH COURT INVOLVED TRANSFER OF ONLY THE SPECIFIED ASSETS AND LIABILITIES OF THE PCD AND PPD DIVISIONS TO THE RELENE PETROCHEMICALS PVT. LTD, AND NOCIL PETROCHEMICALS LTD. RESPECTIVELY. T HE AFORESAID FACT WAS VERY MUCH BEFORE THE ASSESSING OFFICER AND HAS BEEN ELO QUENTLY BROUGHT OUT BY THE CIT(A) IN HIS ORDER, TO WHICH THERE IS NO DISPU TE. THEREFORE, ON THIS ASPECT ITSELF ONE CAN CONCLUDE THAT THE SCHEME OF ARRANGEM ENT IN QUESTION DOES NOT 10 ITA NO.3529/MUM/2013 & CO 138/M/2014 (ASSESSMENT YEAR 2004-05) QUALIFY TO BE A DEMERGER IN TERMS OF SECTION 2(19 AA) OF THE ACT. ANOTHER FACTUAL ASPECT WHICH HAS BEEN NOTED BY THE CIT(A) I S TO THE EFFECT THAT IN THE PRESENT SCHEME OF ARRANGEMENT, THE CONSIDERATION IN LIEU OF THE TRANSFER OF SPECIFIED ASSETS AND LIABILITIES OF THE TWO DIVISIO NS IS RECEIVED BY THE ASSESSEE COMPANY, WHEREAS IN ORDER TO QUALIFY TO BE A DEMER GER IN TERMS OF SECTION 2(19AA) OF THE ACT, THE CONSIDERATION TO BE PAID BY THE RESULTING COMPANY IS BY WAY OF ISSUANCE OF SHARES TO THE SHAREHOLDERS OF THE DEMERGED COMPANY. ON THESE FACTUAL FINDINGS OF THE CIT(A), THERE IS N O NEGATION BY THE REVENUE. BE THAT AS IT MAY, IT IS QUITE CLEAR THAT THE FACTU AL MATRIX CLEARLY POINTS OUT THAT THE INSTANT SCHEME OF ARRANGEMENT IS NOT A DE MERGER AS DEFINED IN SECTION 2(19AA) OF THE ACT; THUS, ASSESSEE ALSO DO ES NOT QUALIFY TO BE A DEMERGED COMPANY AS SPECIFIED IN SECTION 2(19AAA) OF THE ACT AND RELENE PETROCHEMICALS PVT. LTD, AND NOCIL PETROCHEMICALS L TD. ALSO DO NOT QUALIFY TO BE RESULTING COMPANIES WITHIN THE MEANING OF SEC TION 2(41A) OF THE ACT. IN THE ABOVE BACKGROUND, THE PROVISIONS OF SUB- SECTION(4) OF SECTION 72A OF THE ACT ARE NOT ATTRACTED IN RELATION TO THE INSTANT SCHEME OF ARRANGEMENT. 7.3 NOTABLY, THE POINTS RAISED BY THE REVENUE BEFOR E US DO NOT MEET WITH ANY OF THE FINDINGS RECORDED BY THE CIT(A), WHICH A RE BASED ON THE APPLICABLE LEGAL POSITION AND, THEREFORE, WE DO NOT FIND ANY JUSTIFICATION TO INTERFERE WITH THE ULTIMATE DECISION OF THE CIT(A). IN THIS VIEW OF THE MATTER, THE DECISION OF THE CIT(A) IN HOLDING THAT THE ACCUMUL ATED LOSS AND UNABSORBED DEPRECIATION RELATING TO THE TRANSFERRED DIVISIONS HAVE TO REMAIN WITH THE ASSESSEE COMPANY FOR SET-OFF AND CARRY FORWARD FOR SET-OFF IN FUTURE YEARS, DESERVES TO BE AFFIRMED. WE HOLD SO. 11 ITA NO.3529/MUM/2013 & CO 138/M/2014 (ASSESSMENT YEAR 2004-05) 8. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. 9. IN SO FAR AS THE CROSS OBJECTION FILED BY THE AS SESSEE IS CONCERNED, THE SAME RELATES TO THE VALIDITY OF THE PROCEEDINGS IN ITIATED BY THE ASSESSING OFFICER BY ISSUANCE OF NOTICE UNDER SECTION 147/148 OF THE ACT, WHICH IS RENDERED ACADEMIC SINCE THE APPEAL OF THE REVENUE H AS BEEN DISMISSED. THEREFORE, THE ISSUE RAISED BY THE ASSESSEE IS NOT ADJUDICATED IN THE PRESENT AND IS KEPT OPEN. THUS, THE GROUND RAISED BY THE A SSESSEE IS RENDERED INFRUCTUOUS. 10. IN THE RESULT, WHEREAS THE APPEAL OF THE REVENU E IS DISMISSED, THE CROSS OBJECTION FILED BY THE ASSESSEE IS TREATED AS DISMI SSED FOR STATISTICAL PURPOSES ONLY. ORDER PRONOUNCED IN THE OPEN COURT ON 24/05/2017 SD/- SD/- (AMARJIT SINGH) (G.S. PANNU) JUDICIAL MEMBER ACCOCUNTANT MEMBER MUMBAI, DATED 24/05/2017 VM , SR. PS COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT , 2. THE RESPONDENT. 3. THE CIT(A)- 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI