DCIT, Jaipur V. M/S MODERN INSULATORS LTD., Jaipur

ITA 784/JPR/2011

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 5645 (ITAT-JAIPUR)
• Duration Of Justice: 5 year(s) 4 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-01-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 05-09-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: H V GURJAR
• Assessee Lawyers: VED JAIN SHRI HIMANSHU GOYAL
• Keywords: Depreciation; Double taxation relief; Retrospective amendment; Permanent establishment; Scheme of amalgamation; Revised return; Unabsorbed depreciation
• Section: 143(3); 115JB

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES , JAIPUR JH HKKXPUN] YS[KK LNL; ,O JH DQY HKKJR] U;KF;D L NL; DS LE{K BEFORE: SHRI BHAGCHAND, AM & SHRI KUL BHAR AT, JM VK;DJ VIHY LA-@ ITA NO. 784/JP/2011, 586/JP/2012 & 672/JP/2014 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2008-09, 2009-10 & 2010-11 THE DCIT CIRCLE- 6 JAIPUR CUKE VS. M/S. MODERN INSULATORS LTD. A-4, VIJAY PATH, TILAK NAGAR JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO .: AABCM 0860 G VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT JKTLO DH VKSJ LS@ REVENUE BY :SHRI H.V. GURJAR FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY: SHRI VED JAIN, ADVOCATE, SHRI HIMANSHU GOYAL CA AND SHRI PRAHLAD GUPTA, CA LQUOKBZ DH RKJH[K@ DATE OF HEARING : 28/12/2016 ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 30 /01/2017 VKNS'K@ ORDER PER BHAGCHAND, AM THESE APPEALS HAVE BEEN FILED BY THE REVENUE AGAIN ST THREE SEPARATE ORDERS OF THE LD. CIT(A)-II, JAIPUR DATED 27-06-2011, 20-03-2012 AND 24-07-2014 FOR THE ASSESSMENT YEARS 2008-09, 20 09-10 AND 2010-11 RESPECTIVELY RAISING THEREIN FOLLOWING GROUNDS OF A PPEAL. ITA NO. 784/JP/2011 THE DCIT, CIRCLE- 6, JAIPUR VS. M/S. MODERN INSULA TORS LTD., JAIPUR . 2 ITA NO. 784/JP/2011 A.Y. 2008-09 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) HAS ERRED IN:- (I) ALLOWING SET OFF CURRENT YEAR AND BROUGHT FORWA RD LOSSES AND UNABSORBED DEPRECIATION OF M/S. MODERN TERRY TOWELS LTD. AGAINST THE INCOME OF THE ASSESSEE COMPANY IN DIRECTING TO PASS PROTECTIVE ASSESSMENT ORDER IN CASE OF ASSESSE E COMPANY PRESUMING THAT NO AMALGAMATION HAS TAKEN PLACE FOLL OWING THE SCHEME DEVISED BY HON'BLE HON'BLE APEX COURT IN TH E CASE OF MARSHALL SONS AND CO. (INDIA) LTD. VS. ITO (223 ITR 809) IGNORING THE FACT THAT FACTS OF THAT CASE ARE DIFFERENT FROM THE PRESENT CASE AND APPROVAL OF BIFR IS NOT RECEIVED IN THE PRESENT CASE. (II) DELETING THE ADDITION OF RS. 4,14,78,795/- MAD E BY AO U/S 40A(IA) FOR NON DEDUCTION OF TDS ON PAYMENT MAD E TO FOREIGN PARTIES HOLDING THAT PAYMENT OF COMMISSION TO THESE PARTIES WAS IN LIEU OF SERVICES RENDERED BY THEM FOR THE BUSINESS PURPOSES OF THE ASSESSEE AND HOLDING THAT CIRCULAR NO. 7 OF 22-10-2 009 IT NOT CLARIFICATORY IN NATURE AND IS NOT APPLICABLE WITH RETROSPECTIVE EFFECT. ITA NO. 586/JP/2012 A.Y. 2009-10 (I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) HAS ERRED IN ALLOWING SET OFF CURRENT YEAR AND BROUGHT FORWARD LOSSES AND UNABSORBED DEPRECIATION OF M/S. MODERN TERRY TOWELS LTD. AGAINST THE INCOME OF THE ASSESSEE COMPANY IN DIRECTING TO PASS PROTECTIVE ASSESSMENT ORDER IN CASE OF ASSESSEE COMPANY PRESUMING THAT NO AMALGAMATION HAS TAKEN PLACE FOLLOWING THE SCHEME DEVISED BY HON'BLE HON'BLE AP EX COURT IN THE CASE OF MARSHALL SONS AND CO. (INDIA) LTD. VS. ITO (223 ITR 809) IGNORING THE FACT THAT FACTS OF THAT CASE ARE DIFFERENT FROM THE PRESENT CASE AND APPROVAL OF BIFR IS NOT RECEIVED I N THE PRESENT CASE. (II) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW THE LD. CIT(A) HAS ERRED IN HOLDING THAT EFF ECT OF ITA NO. 784/JP/2011 THE DCIT, CIRCLE- 6, JAIPUR VS. M/S. MODERN INSULA TORS LTD., JAIPUR . 3 AMALGAMATION I.E. APPLICATION OF PROVISION OF SECTI ON 72A WILL NOT BE GIVEN IN PROTECTIVE ORDER BECAUSE IT WILL RESULT IN PROTECTIVE DEMAND WHICH CANNOT BE ENFORCED AND ASSESSEE WILL N EVER PAY DUE TAX EVEN ON DECLARED INCOME. ITA NO. 672/JP/2014 A.Y. 2010-11 (I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) HAS ERRED IN PRESUMI NG THE FUTURE ACTION OF THE ASSESSEE AND IGNORED THE FACTS IN EXISTENCE THAT PROPOSAL OF AMALGAMATION OF MODERN T ERRY TOWELS LTD. (MTT) WITH THE ASSESSEE COMPANY W.E.F. 01-01- 2008 HAS BEEN REJECTED AND REVISED DRS WAS REQUIRED TO BE SUBMITTED WITH CUTOFF DATED 31-03-2010. 2.1 FIRST OF ALL, WE TAKE UP THE GROUNDS OF APPEAL OF THE REVENUE IN ITA NO. 784/JP/2011 FOR THE ASSESSMENT YEAR 2008-09 FOR ADJUDICATION. 2.2 APROPOS GROUND NO. 1 OF THE REVENUE, THE FACTS AS EMERGES FROM THE ORDER OF THE LD. CIT(A) IS AS UNDER:- 4.1 I HAVE PERUSED THE COPY OF DRAFT RESOLUTION SCHEME DATED 28-07-2009. IN ANNEXURE -1, THE DATE OF AMALGAMATION HAS BEEN TAKEN ON 01-01-2008. SIMILARLY, AS PER PARA 4(III) OF ANNEXURE-1, ALL TH E PROFITS ACCRUING TO THE TRANSFEROR COMPANY OR LOSSES ARISIN G OR INCURRED (INCLUDING THE EFFECT OF TAXES, IF ANY, TH EREON) BY IT SHALL, FOR ALL PURPOSES, BE TREATED AS THE PROFITS OR LOSSES OF THE TRANSFEREE COMPANY AS THE CASE MAY BE. AS PER SECTION 18 OF THE SICK INDUSTRIAL COMPANIES SPECIAL PROVISIONS ACT, 1985 (SICA), ONE OF THE WA YS OF REVIVING A SICK INDUSTRIAL COMPANY IS BY ORDERING AMALGAMATION OF THE SICK INDUSTRIAL COMPANY WITH AN OTHER COMPANY. FURTHER, AMALGAMATIONS ARE SUBJECT TO AN O RDER ITA NO. 784/JP/2011 THE DCIT, CIRCLE- 6, JAIPUR VS. M/S. MODERN INSULA TORS LTD., JAIPUR . 4 BEING PASSED BY THE HIGH COURT U/S 394 OF THE COMPA NIES ACT. HOWEVER, FOR SICK COMPANIES THIS POWER IS VEST ED WITH BIFR. SECTION 32(1)OF SICA STATES THAT PROVISIONS O F SICA AND SCHEME FRAMED THERE UNDER SHALL HAVE EFFECT NOT WITHSTANDING ANYTHING INCONSISTENT CONTAINED IN ANY OTHER LAW. FURTHER SECTION 32(2) OF SICA FURTHER PROVIDES THAT SECTION 72A OF THE INCOME TAX ACT (CARRY FORWARD AN D SET OFF OF LOSSES) WHERE THERE IS AN AMALGAMATION WILL APPLY TO AN AMALGAMATION. BOTH THE APPELLANT AND M/S. MODERN TERRY TOWELS LTD. HAVE APPLIED TO BIFR FOR SANCTIONING TH E SCHEME OF AMALGAMATION WITH EFFECT FROM 01-01-2008. THE DRAFTS SCHEME OF AMALGAMATION HAS BEEN CIRCULATED B Y THE BOARD AND FINAL ORDER OF AMALGAMATION IS EXPECTED T O BE RECEIVED SHORTLY. THE HON'BLE SUPREME COURT IN THE CASE OF MARSHALL SONS & CO. (INDIA) VS. ITO (223 ITR 809) H AS OBSERVED AS UNDER:- THE COUNSEL OF THE REVENUE CONTENDED THAT IF THE AFORESAID VIEW IS ADOPTED THEN SEVERAL COMPLICATION S WILL ENSUE IN CASE THE COURT REFUSES TO SANCTION THE SCH EME OF AMALGAMATION. WE DO NOT SEE ANY BASIS FOR THIS APPREHENSION. FIRSTLY, AN ASSESSMENT CAN ALWAYS BE MADE AND IS SUPPOSED TO BE MADE ON THE TRANSFEREE COMPAN Y TAKING INTO ACCOUNT THE INCOME OF BOTH THE TRANSFER OR AND TRANSFEREE COMPANIES. SECONDLY, AND PROBABLY THE MO RE ADVISABLE COURSE FROM THE POINT OF VIEW OF THE REVE NUE WOULD BE TO MAKE ONE ASSESSMENT ON THE TRANSFEREE C OMPANY TAKING INTO ACCOUNT THE INCOME OF BOTH THE TRANSFER OR OR TRANSFEREE COMPANIES AND ALSO TO MAKE SEPARATE PROT ECTIVE ASSESSMENTS ON BOTH THE TRANSFEROR AND TRANSFEREE C OMPANIES SEPARATELY. THERE MAY BE A CERTAIN PRACTICAL DIFFIC ULTY IN ADOPTING THIS COURSE INASMUCH AS SEPARATE BALANCE S HEETS MAY NOT BE AVAILABLE FOR THE TRANSFEROR AND TRANSFE REE COMPANIES. BUT THAT MAY NOT BE AN INSUPERABLE PROBL EM, INASMUCH AS ASSESSMENT CAN ALWAYS BE MADE, ON THE AVAILABLE MATERIAL, EVEN WITHOUT A BALANCE SHEET. I N CERTAIN CASES, BEST JUDGMENT ASSESSMENT MAY ALSO BE RESORTE D TO. ITA NO. 784/JP/2011 THE DCIT, CIRCLE- 6, JAIPUR VS. M/S. MODERN INSULA TORS LTD., JAIPUR . 5 THIS DECISION IS SQUARELY APPLICABLE TO THE FACTS O F THE CASE. ONCE THE SCHEME OF AMALGAMATION IS SANCTIONED BY THE APPROPRIATE AUTHORITY (HIGH COURT AND BIFR), IT IS OPERATIVE FROM THE DATE MENTIONED IN THE SCHEME AND NOT FROM THE DATE ON WHICH THE FORMAL ORDER WOULD BE PASSED BY THE SP ECIFIED. IN THE INSTANT CASE, THE SCHEME IS OPERATIVE FROM 01-01- 2008, THEREFORE, IT FOLLOWS THAT INCOME/LOSSES ARIS ING UPTO 31-12-2007 WILL BE ASSESSED SEPARATELY IN THE HANDS OF M/S. TERRY TOWELS LTD. AND THE APPELLANT. FROM 01-01-200 8, THE INCOME/LOSS OF BOTH THE ENTITIES WOULD BE ASSESSABL E IN THE HANDS OF THE APPELLANT. FURTHER AS PER THE PROVISIO NS OF SECTION 72A OF THE I.T. ACT, ON AMALGAMATION THE ACCUMULATED LOSSES AND THE ALLOWANCE AND ALLOWANCE FOR UNABSORBED DEPRECIATION OF M/S. TERRY TOWELS LTD. S HALL BE DEEMED TO BE LOSS OR ALLOWANCE FOR UNABSORBED DEPRE CIATION OF THE APPELLANT FOR THE PREVIOUS YEAR IN WHICH THE AMALGAMATION WOULD BE EFFECTIVELY NAMELY, IN THE PR ESENT CASE THE PREVIOUS YEAR 2007-08. THEREFORE, THE COND ITIONS SPECIFIED IN SECTION 72A(2) WILL HAVE TO BE COMPLIE D. THE PERTINENT QUESTION IS WHAT WOULD BE THE PROCEDURE F OLLOWED WHEN THE FORMALITIES FOR EFFECTING AND AMALGAMATION HAVE BEEN CARRIED OUT BUT THE FINAL ORDER SANCTIONING TH E AMALGAMATION HAS NOT BEEN RECEIVED. IN THE CASE OF CIT VS. J.K. CORPORATION LTD. (331 ITR 303), THE AMALGAMATI ON TOOK PLACE IN JAN. 1994 HOWEVER THE SCHEME WAS SANCTIONE D BY BIFR WITH RETROSPECTIVE EFFECT FROM 01-02-1992. TH E ASSESSEE FILED REVISED RETURNS OF INCOME ON 31-03-1 993 CLAIMING UNABSORBED LOSSES OF SICK COMPANY. THE AO DISALLOWED THE CLAIM OF THE ASSESSEE U/S 72A FOR SE T OFF AND CARRY FORWARD OF UNABSORBED BUSINESS LOSSES AND DEPRECIATION. IT WAS HELD THAT HAVING REGARD TO THE LANGUAGE USED IN SECTION 26 OF THE SICA 1985 ACT NEITHER THE CIVIL COURT NOR ANY OTHER AUTHORITY INCLUDING THE QUASI J UDICIAL AUTHORITY COULD PASS AN ORDER WHICH WOULD IMPEDE TH E ITA NO. 784/JP/2011 THE DCIT, CIRCLE- 6, JAIPUR VS. M/S. MODERN INSULA TORS LTD., JAIPUR . 6 OPERATION OF THE SCHEME. IN VIEW OF PROVISIONS OF 1 985 ACT WHICH IS A SPECIAL ONE, THE INCOME TAX AUTHORITY WA S HELD TO HAVE NO JURISDICTION TO RENDER THE OPERATION OF SCH EME NUGATORY. FURTHER THE SANCTION OF A SCHEME OF AMALG AMATION U/S 18 OF SICA NECESSARILY IMPLIES THAT THE REQUIRE MENTS OF SECTION 72A OF THE INCOME TAX ACT HAVE BEEN MET. THEREFORE, BIFR CANNOT SANCTION ANY SCHEME WITHOUT DECLARING THAT CARRY FORWARD OF LOOSES IS ALLOWABLE . (INDIAN SHAVING PRODUCTS LTD. VS. BIFR 218 ITR 140). IN THE CASE OF BECK INDIA LTD. VS. DCIT (319 ITR AT 253), THE ASSE SSING OFFICER HELD THAT THERE WAS NO EXPRESS PROVISION IN THE STAUTE TO DEBIT ANY BROUGHT FORWARD LOSS OF AMALGAMATING C OMPANY AGAINST THE BOOK PROFIT OF THE AMALGAMATED COMPANY AND COMPLETED THE ASSESSMENT BASED ON THE ORIGINAL COMP UTATION SUBMITTED BY THE ASSESSEE. ON APPEAL, IT WAS HELD T HAT ON ACCOUNT OF RETROSPECTIVE OPERATION OF THE COURTS DECISION APPROVING THE SCHEME OF AMALGAMATION, BOOK LOSSES O F THE AMALGAMATING COMPANY ALSO BECAME THE LOSS OF THE CO MPANY AS ON JANUARY 1,2001, AND HENCE, SUCH LOSSES HAD TO BE CONSIDERED WHILE COMPUTING THE BOOK PROFIT UNDER SE CTION 115JB OF THE ACT. MOREOVER, IN VIEW OF THE DECISIO N OF HON'BLE SUPREME COURT IN THE CASE OF MARSHALL SON S & CO. (INDIA) LTD., IT IS OBVIOUS THAT THE AO HAS TO MAKE SUBSTANTIVE ASSESSMENT ORDER IN THE CASE OF APPELLA NT TAKING INTO ACCOUNT THE INCOME OF BOTH THE TRANSFEROR AND TRANSFEREE COMPANIES. THE SCHEME OF AMALGAMATION SPECIFIES THE DATE OF AMALGAMATION AS 01-01-2008. THEREFORE, PRIOR TO DATE OF SANCTION BY BIFR AND HIGHER COURTS, THERE IS PROVIS ION IN THE SCHEME THAT BUSINESS DONE BY MODERN TERRY TOWELS LT D. SHALL BE ON BEHALF OF THE APPELLANT COMPANY. THE IM PORTANCE OF THE REGISTRATION OF REFERENCE CANNOT BE UNDERMIN ED AS ONCE A REFERENCE IS REGISTERED, THE PROVISIONS OF SICA G ET TRIGGERED. THERE CAN HARDLY BE AND DOUBT THAT ONCE A SCHEME IS FORMULATED AFTER A REFERENCE IS GONE THROUGH THE PROCESS OF ITA NO. 784/JP/2011 THE DCIT, CIRCLE- 6, JAIPUR VS. M/S. MODERN INSULA TORS LTD., JAIPUR . 7 SECTIONS 17 & 18 OF THE SICA, THE SAID SCHEME WOULD HAVE THE FORCE OF LAW NOTWITHSTANDING ANYTHING INCONSIST ENT THEREWITH CONTAINED IN ANY OTHER LAW. THUS, NEITHER THE PARTY MAKING ANY CONCESSIONS AT THE TIME OF FORMULATION O F THE SCHEME NOR THE COMPANY AT WHOSE BEHEST THE SCHEME I S FORMULATED AND SANCTIONED CAN GET OUT OF THE SCHEME . I ACCORDINGLY, DIRECT THE AO TO ALLOW SET OFF OF CURR ENT YEAR LOSSES AND BROUGHT FORWARD LOSSES/UNABSORBED DEPREC IATION OF M/S. MODERN TERRY TOWELS LTD. AS PER SECTION 72A AGAINST THE INCOME OF THE APPELLANT. AT THE SAME TI ME, THE AO SHALL PASS A PROTECTIVE ASSESSMENT ORDER IN THE CASE OF APPELLANT FOR A.Y. 2008-09 PRESUMING THAT NO AMALGA MATION HAS TAKEN PLACE. IN CASE IF THE AMALGAMATION SCHEME IS NOT SANCTIONED THEN THE PROTECTIVE ASSESSMENT ORDER SHA LL PREVAIL OVER THE SUBSTANTIVE ORDER. THIS GROUND OF APPEAL I S ACCORDINGLY PARTLY ALLOWED. 2.3 DURING THE COURSE OF HEARING, THE LD. AR OF THE ASSESSEE RELIED ON THE ORDER OF THE LD. CIT(A) AND FILE THE WRITTEN SU BMISSION TO THIS CASE WHICH HAS BEEN TAKEN INTO CONSIDERATION. 2.4 THE LD. DR RELIED ON THE ORDER OF THE AO AND SU BMITTED THAT LD. CIT(A) HAS ERRED IN ALLOWING THE RELIEF TO THE ASSE SSEE AND APPROVAL OF BIFR IS NOT RECEIVED IN THE ASSESSEE'S PRESENT CASE . 2.5 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. THE BRIEF FACTS OF THE CASE AR E THAT THE ASSESSEE COMPANY IS A PRIVATE LIMITED COMPANY AND IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF INSULATORS AND BUSINESS. DURING TH E YEAR UNDER ITA NO. 784/JP/2011 THE DCIT, CIRCLE- 6, JAIPUR VS. M/S. MODERN INSULA TORS LTD., JAIPUR . 8 CONSIDERATION, A SUBSIDIARY COMPANY NAMELY M/S MODE RN TERRY TOWELS LIMITED (MTTL) MERGED WITH THE ASSESSEE COMPANY W.E .F. 01.01.2008 AND THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE AY 2009-10 INCORPORATING AND SETTING OFF THE BROUGHT FORWARD B USINESS LOSSES/ UNABSORBED DEPRECIATION OF PRECEDING YEARS OF THE A MALGAMATING COMPANY. FURTHER, IT IS NOTED THAT MTTL WAS A SICK COMPANY AND THEREFORE, THE PERMISSION OF BIFR WAS REQUIRED FOR STATUTORY AMALGAMATION AND THE RETURN FILED BY THE ASSESSEE W AS SUBJECT TO THE ORDER OF BIFR WHICH IS PENDING. HOWEVER, THE ASSESSEE COU LD NOT RECEIVE THE APPROVAL BEFORE THE ASSESSMENT PROCEEDING AND THER EFORE THE AO RAISED HIS CONTENTION TO RESTRICT THE ASSESSMENT ONLY IN R ESPECT OF THE ASSESSEE COMPANY WITHOUT CONSIDERING AMALGAMATION OF MTTL WI TH THE ASSESSEE COMPANY TREATING THE ASSESSEE COMPANY AS THE SEPARA TE COMPANY. IN THIS REGARD, ASSESSEE PLACED HIS RELIANCE ON THE DECISIO N OF HONBLE SUPREME COURT IN THE CASE OF M/S MARSHAL SONS & CO. (INDIA) LTD. VS ITO 223 ITR 809 IN WHICH IT HAS BEEN HELD THAT ONCE A SCHEME IS SANCTIONED BY THE APPROPRIATE AUTHORITY, IT IS OPERATIVE FROM THE DAT E MENTIONED IN THE SCHEME AND NOT FROM THE DATE OF WHICH ORDER IS PASS ED BY THE AUTHORITY. THE RELEVANT FINDING OF THE COURT IS AS UNDER:- ITA NO. 784/JP/2011 THE DCIT, CIRCLE- 6, JAIPUR VS. M/S. MODERN INSULA TORS LTD., JAIPUR . 9 EVERY SCHEME OF AMALGAMATION HAS TO NECESSARILY P ROVIDE A DATE WITH EFFECT FROM WHICH THE AMALGAMATION/TRAN SFER SHALL TAKE PLACE. THE SCHEME CONCERNED HEREIN DOES SO PROVIDE, VIZ., JANUARY 1, 1982. IT IS TRUE THAT WHI LE SANCTIONING THE SCHEME, IT IS OPEN TO THE COURT TO MODIFY THE SAID DATE AND PRESCRIBE SUCH DATE OF AMALGAMATION/T RANSFER AS IT THINKS APPROPRIATE IN THE FACTS AND CIRCUMSTA NCES OF THE CASE. IF THE COURT SO SPECIFIES A DATE, THERE IS LI TTLE DOUBT THAT SUCH DATE WOULD BE THE DATE OF AMALGAMATION/DATE OF TRANSFER. BUT WHERE THE COURT DOES NOT PRESCRIBE AN Y SPECIFIC DATE BUT MERELY SANCTIONS THE SCHEME PRESENTED TO I T---AS HAS HAPPENED IN THIS CASE---IT SHOULD FOLLOW THAT THE D ATE OF AMALGAMATION/DATE OF TRANSFER IS THE DATE SPECIFIED IN THE SCHEME AS ' THE TRANSFER DATE '. IT CANNOT BE OTHER WISE. IT MUST BE REMEMBERED THAT BEFORE APPLYING TO THE COUR T UNDER SECTION 391(1), A SCHEME HAS TO BE FRAMED AND SUCH SCHEME HAS TO CONTAIN A DATE OF AMALGAMATION/TRANSFER. THE PROCEEDINGS BEFORE THE COURT MAY TAKE SOME TIME; IN DEED, THEY ARE BOUND TO TAKE SOME TIME BECAUSE SEVERAL ST EPS PROVIDED BY SECTIONS 391 TO 394A AND THE RELEVANT R ULES HAVE TO BE FOLLOWED AND COMPLIED WITH. DURING THE PERIOD THE PROCEEDINGS ARE PENDING BEFORE THE COURT, BOTH THE AMALGAMATING UNITS, I.E., THE TRANSFEROR COMPANY AN D THE TRANSFEREE COMPANY MAY CARRY ON BUSINESS, AS HAS HA PPENED IN THIS CASE, BUT NORMALLY PROVISION IS MADE FOR TH IS ASPECT ALSO IN THE SCHEME OF AMALGAMATION. IN THE SCHEME B EFORE US, CLAUSE 6(B) DOES EXPRESSLY PROVIDE THAT WITH EF FECT FROM THE TRANSFER DATE, THE TRANSFEROR COMPANY (SUBSIDIA RY COMPANY) SHALL BE DEEMED TO HAVE CARRIED ON THE BUS INESS FOR AND ON BEHALF OF THE TRANSFEREE COMPANY (HOLDIN G COMPANY) WITH ALL ATTENDANT CONSEQUENCES. IT IS EQU ALLY RELEVANT TO NOTICE THAT THE COURTS HAVE NOT ONLY SA NCTIONED THE SCHEME IN THIS CASE, BUT HAVE ALSO NOT SPECIFIE D ANY OTHER DATE AS THE DATE OF TRANSFER/AMALGAMATION. IN SUCH A SITUATION, IT WOULD NOT BE REASONABLE TO SAY THAT T HE SCHEME OF AMALGAMATION TAKES EFFECT ON AND FROM THE DATE O F THE ORDER SANCTIONING THE SCHEME. WE ARE, THEREFORE, OF THE OPINION THAT THE NOTICES ISSUED BY THE INCOME-TAX O FFICER (IMPUGNED IN THE WRIT PETITION) WERE NOT WARRANTED IN LAW. ITA NO. 784/JP/2011 THE DCIT, CIRCLE- 6, JAIPUR VS. M/S. MODERN INSULA TORS LTD., JAIPUR . 10 THE BUSINESS CARRIED ON BY THE TRANSFEROR COMPANY (SUBSIDIARY COMPANY) SHOULD BE DEEMED TO HAVE BEEN CARRIED ON FOR AND ON BEHALF OF THE TRANSFEREE COMP ANY. THIS IS THE NECESSARY AND THE LOGICAL CONSEQUENCE OF THE COURT SANCTIONING THE SCHEME OF AMALGAMATION AS PRESENTED TO IT. THE ORDER OF THE COURT SANCTIONING THE SCHEME, THE FILING OF THE CERTIFIED COPIES OF THE ORDERS OF THE COURT BEF ORE THE REGISTRAR OF COMPANIES, THE ALLOTMENT OF SHARES, ET C., MAY HAVE ALL TAKEN PLACE SUBSEQUENT TO THE DATE OF AMALGAMATION/TRANSFER, YET THE DATE OF AMALGAMATION IN THE CIRCUMSTANCES OF THIS CASE WOULD BE JANUARY 1, 1982 . THIS IS ALSO THE RATIO OF THE DECISION OF THE PRIVY COUNCIL IN RAGHUBAR DAYAL V. BANK OF UPPER INDIA LTD., AIR 191 9 PC 9. IT IS FURTHER NOTED THAT THE AO DID NOT APPLY THE JUDGEMENT GIVEN BY THE SUPREME COURT AND DISALLOWED THE SET-OFF OF CUR RENT YEAR LOSS OF M/S MODERN TERRY TOWELS LIMITED (MTTL). HOWEVER, IN FIRST APPEAL THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE AND THE ORDER PASSED BY THE AO PASSED A DETAILED ORDER HIGH LIGHTING THE SPECIFIC ASPECTS OF THE PROVISIONS OF SICK INDUSTRI AL COMPANIES ACT AND BIFR AND THE PROVISIONS OF THE I.T. ACT . IT IS FURTHER NOTED THAT THE LD. CIT(A) GAVE ITS FINDING AT PARA 3 AND 4.1 ALLOW ING THE GROUND NO. 1 OF THE ASSESSEE TAKING INTO CONSIDERATION THE JUDGE MENT OF M/S MARSHALL SONS & CO. (INDIA) LTD. VS ITO 223 ITR 809 (SC) BY HOLDING THAT THE SCHEME WAS EFFECTIVE FROM 01.01.20 08 AND ACCORDINGLY THE ASSESSEE WAS ELIGIBLE TO CLAIM LOSS ES OF AMALGAMATED ITA NO. 784/JP/2011 THE DCIT, CIRCLE- 6, JAIPUR VS. M/S. MODERN INSULA TORS LTD., JAIPUR . 11 COMPANY AND THEREFORE THE AO WAS DIRECTED TO ALLOW SET-OFF OF CURRENT YEAR LOSSES AND BROUGHT FORWARD LOSSES/ UNABSORBED DEPRECIATION OF M/S MTTL AS PER SECTION 72A OF THE INCOME TAX ACT A GAINST THE INCOME OF THE ASSESSEE AND AT THE SAME TIME IT WAS ALSO DIRECTED TO THE AO THAT HE SHOULD PASS A PROTECTIVE ASSESSMENT ORDE R IN THE CASE OF THE ASSESSEE FOR THE AY 2008-09 PRESUMING THAT NO AMAL GAMATION HAS TAKEN PLACE. IN CASE, IF THE AMALGAMATION SCHEME IS NOT SANCTIONED THEN THE PROTECTIVE ASSESSMENT ORDER SHALL PREVAIL OVER THE SUBSTANTIVE ORDER. IT IS PERTINENT TO MENTION HERE THAT ASSESSE E HAS RECEIVED THE ORDER OF APPELLATE AUTHORITY FOR INDUSTRIAL & FINAN CIAL RECONSTRUCTION, NEW DELHI (PB PGS. 88-89) DATED 03 .06.2013 WHEREBY IT HAS BEEN HELD AS UNDER: WE ARE OF THE VIEW THAT THE RECORD DATE OF MERGER IS THE DATE ON WHICH THE MERGER OF THE SICK COMPANY WITH M /S. MODERN INSULATORS LTD. HAS BEEN APPROVED BY THE SHAREHOLDERS OF THE COMPANY AND THIS DATE CANNOT BE ARBITRARILY CHANGED BY THE BIFR. AS SUCH WE DISPOSE OF THE APPEAL WITH THE CLARIFICATION THAT THE COD MENTIONE D IN THE IMPUGNED ORDER WILL APPLY ONLY FOR THE PURPOSE OF IMPLEMENTATION OF THE SANCTIONED SCHEME. THE RECO RD DATE FOR MERGER OF THE APPELLANT COMPANY WITH THE M/S MI L WILL CONTINUE TO BE TREATED AS 1.1.2008 I.E., THE DATE O N WHICH THE MERGER WAS APPROVED BY THE SHAREHOLDER OF THE COMPA NY. ITA NO. 784/JP/2011 THE DCIT, CIRCLE- 6, JAIPUR VS. M/S. MODERN INSULA TORS LTD., JAIPUR . 12 IT MAY BE NOTED THAT DURING THE COURSE OF HEARING, THE LD. AR OF THE ASSESSEE RELIED ON FOLLOWING CASE LAWS:- (I) M/S MARSHALL SONS & CO. (INDIA) LTD. VS ITO 223 ITR 809 (SC) WHICH IS ALSO FOLLOWED IN THE FOLLOWING JUDGEM ENTS: (II) IRM LIMITED VS DCIT- CIRCLE-4 2016 (7) TMI 972 (GUJARAT HIGH COURT) (III) PENTMEDIA GRAPHICS LTD & OTHERS VS INCOME TAX OFFICER 2010 (1) TMI 753- MADRAS HIGH COURT . IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES OF THE CASE AND THE CASE LAWS RELIED ON (SUPRA) BY THE LD. AR OF THE ASSESSE E, WE FIND NO INFIRMITY IN THE ORDER OF THE LD. CIT(A) WHICH IS SUSTAINED O N THIS ISSUE. THUS GROUND NO. 1 OF THE REVENUE IS DISMISSED. 3.1 AS REGARDS GROUND NO. 2 OF THE REVENUE, THE FAC TS AS EMERGES FROM THE ORDER OF THE LD. CIT(A) IS AS UNDER:- 4. IN THE FOURTH TO EIGHTH GROUND OF APPEAL, THE APPELLANT HAS CHALLENGED THE ADDITION OF RS. 414,78,794/- U/S 40(A)(IA) AS NO TDS WAS DEDUCTED ON PAYMENT OF COMMISSION TO NON- RESIDENTS. I FIND THAT THIS ISSUE IS COVERED IN FAV OUR OF THE ASSESSEE BY THE ORDER OF MY PREDECESSOR (APPEAL NO. 397/08- 09 DATED 28-01-2010) AND HON'BLE JAIPUR TRIBUNAL ( ITA NO. 281/JP/2010) DATED 13-04-2011 FOR A.Y. 2007-08. THE OBSERVATION OF THE HON'BLE TRIBUNAL IN PARA 2.14 O N PAGE 8 ARE REPRODUCED AS UNDER:- ITA NO. 784/JP/2011 THE DCIT, CIRCLE- 6, JAIPUR VS. M/S. MODERN INSULA TORS LTD., JAIPUR . 13 2.14 WE HAVE ALREADY REPRODUCED SECTION 9(1)(I) O F THE ACT. IT IS NOT DISPUTED AFTER THE FINDING OF THE LD. CIT(A) TH AT NON-RESIDENTS HAVE PROVIDED SERVICES FOR EARNING COMMISSION. THE SERVI CES HAVE BEEN RENDERED OUTSIDE INDIA. THE COMMISSION SO EARNED BY NON-RESI DENT IS BUSINESS PROFIT. AS PER DTAA BETWEEN INDIA AND UK AND DTAA BETWEEN I NDIA AND UAE, IT IS MENTIONED IN ARTICLE 7 OF BOTH THE DTAA THAT BUSINE SS PROFIT CAN BE TAXED IN OTHER CONTRACTING STATE IN CASE THE ENTERPRISE OF A CONTRACTING STATE IS HAVING PERMANENT ESTABLISHMENT IN OTHER CONTRACTING STATE. IT IS NOT THE CASE OF THE REVENUE THAT NON-RESIDENT COMPANIES ARE HAVING THEI R PERMANENT ESTABLISHMENT. HENCE, EVEN IF COMMISSION HAS BEEN R ECEIVED BY THE NON- RESIDENTS ON ACCOUNT OF THE BUSINESS CONNECTIONS ME NTIONED IN SECTION 9(1)(I) OF THE ACT THEN THE SAME IS NOT CHARGEABLE IN INDIA BECAUSE SUCH NON- RESIDENT COMPANIES ARE NOT HAVING ANY PERMANENT EST ABLISHMENT. THE CBDT CIRCULAR NO.333 DATED 2-4-1982 HAS STATED THAT THE SPECIFIC PROVISION IN DTAA IS TO BE FOLLOWED IRRESPECTIVE OF THE PROVISIONS OF INCOME TAX ACT. THE HON'BLE APEX COURT IN THE CASE CIT VS PAVL KULANDA GAN CHETTIAR 267 ITR 654 HAS HELD THAT WHERE TAX LIABILITY IS MUST BY THE AC T THEN AGREEMENT MAY BE RESTORED TO EITHER FOR REDUCING THE TAX LIABILITY O R ALTOGETHER AVOIDING TAX LIABILITY. THE OBSERVATION OF THE HON'BLE TRIBUNAL IN PARA 2. 19 AND 2.20 ON PAGE 12 ARE REPRODUCED AS UNDER:- 2.19 WE ALSO AGREE WITH THE VIEW TAKEN BY THE LD. C IT(A) THAT TDS WAS NOT REQUIRED TO BE DEDUCTED AT SOURCE ON ACCOUNT OF CIRCULAR NO. 786 DATED 7-2-2000. THE CIRCULAR NO.7 OF 22-10- 2009 CANNOT BE CONSIDERED RETROSPECTIVELY TO MAKE IT APPLICABLE FO R PAYMENTS BEFORE THAT DATE. THIS HAS BEEN CONSIDERED BY LUCKNOW BENCH IN THE CASE OF DCIT VS SANJIV GUPTA 50 DTR (LUCKNOW) TRIBUNAL 225. 2.20 THE HON'BLE APEX COURT IN THE CASE OF G.E.INDI A TECHNOLOGIES CENTRE (P) LTD. VS CIT 327 ITR 456 HAS HELD THAT I N CASE WHOLE REMITTANCE IS NOT CHARGEABLE IN INDIA THEN THERE IS NO QUESTION O F TAX AT SOURCE BEING DEDUCTED. SINCE THE TAX AT SOURCE IS NOR REQUIRED T O BE DEDUCTED THEN SECTION 40(A) WILL NOT BE APPLICABLE. IT IS FURTHER NOTICED THAT SECTION 40((A)(IA) REFERS TO COMMISSION PAYABLE TO A RESID ENT. HENCE, THIS PROVISION IS NOT AT ALL APPLICABLE. SECTION 40(A) IS APPLICAB LE IN RESPECT OF PAYMENTS TO NON-RESIDENT AND THE PAYMENT SHOULD BE IN THE NATU RE OF INTEREST, ROYALTY, FEE FOR TECHNICAL SERVICES OR OTHER SUM CHARGEABLE UNDER THIS ACT. IT IS UNDISPUTED FACT THAT THE SUM IS COMMISSION AND THE WORD COMMISSION IS NOT SPECIFICALLY MENTIONED IN SECTION 40(A). THE SUM P AID IS NOT CHARGEABLE IN INDIA UNDER INCOME TAX ACT, 1961. HENCE, SECTION 40 (A) IS NOT APPLICABLE. THE LD. CIT(A) WAS THEREFORE, JUSTIFIED IN DELETING THE DISALLOWANCE OF RS. 6,04,58,699/-. THUS THE SOLITARY GROUND OF THE REVE NUE IS DISMISSED. ITA NO. 784/JP/2011 THE DCIT, CIRCLE- 6, JAIPUR VS. M/S. MODERN INSULA TORS LTD., JAIPUR . 14 SINCE THE ISSUE UNDER CONSIDERATION IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF M Y PREDECESSOR AND HON'BLE TRIBUNAL FOR THE ASSESSMEN T YEAR 2007-08, THEREFORE, MAINTAINING JUDICIAL DISCIPLINE , I DIRECT THE AO TO DELETE THE ADDITION OF RS. 4,14,78,794 U/ S 40(A)(IA) OF THE I.T. ACT. THESE GROUNDS OF APPEAL ARE ALLOWE D. 3.2 DURING THE COURSE OF HEARING, THE LD. DR RELIED ON THE ORDER OF THE AO 3.3 DURING THE COURSE OF HEARING, THE LD. AR OF THE ASSESSEE RELIED ON THE ORDER OF THE LD. CIT(A) AND ALSO FILED THE WRIT TEN SUBMISSION TO THIS EFFECT WHICH HAS BEEN TAKEN INTO CONSIDERATION. 3.4 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. TAKING INTO CONSIDERATION ALL THE FACTS AND CIRCUMSTANCES OF THE CASE, WE HAVE OBSERVED THAT SU CH AN ISSUE HAS BEEN DECIDED BY THIS COORDINATE BENCH IN CASE OF ACIT VS. MODERN INSULATORS LTD. IN ITA NO. 281/JP/2010 DATED 13-04 -2011 FOR THE ASSESSMENT YEAR 2007-08 BY OBSERVING AS UNDER:- 2.19 WE ALSO AGREE WITH THE VIEW TAKEN BY THE LD. CIT(A) THAT TDS WAS NOT REQUIRED TO BE DEDUCTED AT SOURCE ON ACCOUNT OF CIRCULAR NO. 786 DATED 7-2-2000. THE CIRCULAR NO.7 OF 22-10-2009 CANNOT BE CONSIDERED RETROSPECTIVELY TO MAKE IT APP LICABLE FOR PAYMENTS BEFORE THAT DATE. THIS HAS BEEN CONSIDERED BY LUCKNOW BENCH IN THE CASE OF DCIT VS SANJIV GUPTA 50 DTR ( LUCKNOW) TRIBUNAL 225. 2.20 THE HON'BLE APEX COURT IN THE CASE OF G.E.INDI A TECHNOLOGIES CENTRE (P) LTD. VS CIT 327 ITR 456 HA S HELD THAT IN CASE WHOLE REMITTANCE IS NOT CHARGEABLE IN INDIA THEN TH ERE IS NO QUESTION OF ITA NO. 784/JP/2011 THE DCIT, CIRCLE- 6, JAIPUR VS. M/S. MODERN INSULA TORS LTD., JAIPUR . 15 TAX AT SOURCE BEING DEDUCTED. SINCE THE TAX AT SOUR CE IS NOR REQUIRED TO BE DEDUCTED THEN SECTION 40(A) WILL NOT BE APPLICAB LE. IT IS FURTHER NOTICED THAT SECTION 40((A)(IA) REFERS TO COMMISSIO N PAYABLE TO A RESIDENT. HENCE, THIS PROVISION IS NOT AT ALL APPLI CABLE. SECTION 40(A) IS APPLICABLE IN RESPECT OF PAYMENTS TO NON-RESIDENT AND THE PAYMENT SHOULD BE IN THE NATURE OF INTEREST, ROYALTY, FEE F OR TECHNICAL SERVICES OR OTHER SUM CHARGEABLE UNDER THIS ACT. IT IS UNDISPUT ED FACT THAT THE SUM IS COMMISSION AND THE WORD COMMISSION IS NOT SPECIF ICALLY MENTIONED IN SECTION 40(A). THE SUM PAID IS NOT CHARGEABLE I N INDIA UNDER INCOME TAX ACT, 1961. HENCE, SECTION 40(A) IS NOT A PPLICABLE. THE LD. CIT(A) WAS THEREFORE, JUSTIFIED IN DELETING THE DIS ALLOWANCE OF RS. 6,04,58,699/-. THUS THE SOLITARY GROUND OF THE REVENUE IS DISMISSED. RESPECTFULLY FOLLOWING THE DECISION OF THE COORDINA TE BENCH DATED 13-04- 2011 FOR THE ASSESSMENT YEAR 2007-08 (SUPRA), WE FI ND NO REASON TO INTERFERE WITH THE ORDER OF THE LD. CIT(A). THUS GR OUND NO. 2 OF THE REVENUE IS DISMISSED. 4.1 SECONDLY, WE TAKE UP THE GROUND OF APPEAL OF TH E REVENUE IN ITA NO. 586/JP/2012 FOR THE ASSESSMENT YEAR 2009-10 FOR ADJUDICATION 4.2 APROPOS SOLITARY GROUND OF THE REVENUE, THE FAC TS AS EMERGES FROM THE ORDER OF THE LD. CIT(A) IS AS UNDER:- 3.1 I HAVE DULY CONSIDERED THE SUBMISSIONS OF THE APPELLANT. THE ISSUE IN QUESTION IS COVERED BY THE APPELLATE ORDER OF UNDERSIGNED FOR A.Y. 2008-09 (APPEAL NO. 464/10-11 DATED 27-06- 2011) WHEREIN I HAVE UPHELD THE ADDITION MADE BY TH E AO ON PROTECTIVE BASIS. THE FINDING IN PARA 4.1 ARE RELEV ANT WHEREIN IT WAS HELD THAT PRIOR TO DATE OF SANCTION BY BIFR AND HIG HER COURTS, THERE WAS PROVISION IN THE SCHEME THAT BUSINESS DONE BY M ODERN TERRY TOWELS LTD. SHALL BE ON BEHALF OF THE APPELLANT COM PANY. I HAD ACCORDINGLY, DIRECTED THE AO TO ALLOW SET OFF OF CU RRENT YEAR LOSSES AND BROUGHT FORWARD LOSSES/UNABSORBED DEPRECIATION TO M/S. MODERN TERRY TOWELS LTD. AS PER SECTION 72A AGAINST THE INCOME ITA NO. 784/JP/2011 THE DCIT, CIRCLE- 6, JAIPUR VS. M/S. MODERN INSULA TORS LTD., JAIPUR . 16 OF THE APPELLANT. AT THE SAME TIME, THE AO WAS DIRE CTED TO PASS A PROTECTIVE ASSESSMENT ORDER IN THE CASE OF THE APPE LLANT COMPANY FOR A.Y. 2008-09 PRESUMING THAT NO AMALGAMATION HAD TAKEN PLACED. IT WAS ALSO HELD THAT IN CASE IF THE AMALGA MATION SCHEME WAS NOT SANCTIONED THEN THE PROTECTIVE ASSESSMENT O RDER SHALL PREVAIL OVER THE SUBSTANTIVE ORDER. HOWEVER, IT APP EARS THAT THE AO HAS DEEMED THAT THE ORDER OF BIFR DATED 13-04-2011 WAS FINAL AND CONCLUSIVE. THE COUNSEL OF APPELLANT HAS BROUGHT TO MY NOTICE THE ORDER PASSED BY AAIFR DATED 21-11-2011 WHEREIN IT H AS BEEN CATEGORICALLY STATED THAT THE DIRECTION OF BIFR AT PARA 3(I) REGARDING SUBMISSIONS OF DRS WITH CUTOFF DATE ON 31-03-2010 A ND DIRECTION AT PARA 3(II) SHALL REMAIN STAYED TILL THE DISPOSAL OF APPEAL. EVEN AFTER THE DISPOSAL OF APPEAL BY AAIFR, THERE WILL B E AN OPTION TO THE ASSESSEE COMPANY TOTAL INCOME FILE APPEAL BEFOR E HON'BLE JURISDICTIONAL HIGH COURT AND SUPREME COURT. CONSID ERING THESE DIFFICULTIES, I HAD DIRECTED THE AO TO PASS BOTH TH E SUBSTANTIVE ASSESSMENT AND PROTECTIVE ASSESSMENT IN THE CASE O F THE APPELLANT. IN CASE IF THE AMALGAMATION SCHEME WAS NOT SANCTION ED BY THE AAIFR AND HIGHER COURTS WITH EFFECT FROM 01-01-2008 THEN THE PROTECTIVE ASSESSMENT COMPLETED BY THE AO SHALL PRE VAIL OVER THE SUBSTANTIVE ASSESSMENT. I THEREFORE, DIRECT THE AO TO ALLOW SET OFF OF CURRENT YEAR LOSSES AND BROUGHT FORWARD LOSSES/U NABSORBED DEPRECIATION OF M/S. MODERN TERRY TOWELS LTD. AS PE R SECTION 72A AGAINST THE INCOME OF THE APPELLANT. AT THE SAME TI ME, THE AO SHALL PASS A PROTECTIVE ASSESSMENT ORDER IN THE CASE OF T HE APPELLANT FOR A.Y. 2009-10 PRESUMING THAT NO AMALGAMATION HAS TAK E PLACE. THIS GROUND OF APPEAL IS ALLOWED. 4.3 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. IT IS NOT IMPERATIVE TO REPEAT FACTS OF THE CASE OF ISSUE IN QUESTION AS THE SIMILAR ISSUE HAS BEEN DECIDED I N FAVOUR OF THE ASSESSEE BY DISMISSING THE GROUND OF APPEAL NO. 1 OF THE REV ENUE IN ITA NO. 784/JP/2011 AND THE DECISION THEREIN SHALL APPLY MU TATIS MUTANDIS ON THIS GROUND NO. 1 OF THE REVENUE ALSO. THUS SOLITARY GRO UND RAISED BY THE ITA NO. 784/JP/2011 THE DCIT, CIRCLE- 6, JAIPUR VS. M/S. MODERN INSULA TORS LTD., JAIPUR . 17 REVENUE IS DISMISSED AND APPEAL OF THE REVENUE IN I TA NO. 686/JP/2012 IS DISMISSED, 5.1 THIRDLY, WE TAKE UP THE GROUNDS OF APPEAL OF TH E REVENUE IN ITA NO. 672/JP/2014 FOR THE ASSESSMENT YEAR 2010-11 FOR ADJUDICATION 5.2 APROPOS SOLITARY GROUND OF THE REVENUE, THE FACTS A S EMERGES FROM THE ORDER OF THE LD. CIT(A) IS AS UNDER:- 3.1 M/S. MODERN TERRY TOWELS LTD. WAS AMALGAMATED WITH THE APPELLANT COMPANY WITH EFFECT FROM 01-01-2008 SUBJECT TO APPROVAL OF BIFR. IN THIS ASS ESSMENT YEAR, THE APPELLANT COMPANY HAD CLAIMED THE SET OFF OF BUSINESS LOSS OF M/S. MODERN TERRY TOWELS LTD. FOR A.Y. 2010-11 AMOUNTING TO RS. 62,18,541/- AND HAS ALSO C LAIMED THE SET OFF OF BROUGHT FORWARD BUSINESS LOSS AND UN ABSORBED DEPRECIATION OF M/S. MODERN TERRY TOWELS LTD. AMOUN TING TO RS. 94,24,43,685/-. IN THE ORDER U/S 143(3) DATE D 6-03- 12013, THE ASSESSING OFFICER HAS NOT ALLOWED THE SE T OFF OF LOSSES DUE TO AMALGAMATION BECAUSE AS PER THE ORDER OF BIFR DATED 13-04-2011, THE AMALGAMATION WAS EFFECTIVE ON LY AFTER 31-03-2010. 3.2 THIS ISSUE ALSO AROSE IN A.Y. 2008-09 AND 2009- 10.THE SUBMISSIONS MADE BY THE APPELLANT DURING APP ELLATE PROCEEDINGS WERE THE SAME AS THE PRECEDING YEARS EX CEPT FOR TWO NEW FACTS AS UNDER:- (1) THE APPELLATE AUTHORITY FOR INDUSTRIAL AND FINA NCIAL RECONSTRUCTION (AAIFR) HAS PASSED AN ORDER IN FAVOU R OF THE ASSESSEE (APPEAL NO. 130/11 DATED 3-06-2013) BY HOL DING THAT THE RECORD DATE FOR MERGER OF THE APPELLANT CO MPANY WITH M/S. MODERN TERRY TOWELS LTD. WILL CONTINUE TO BE TREATED AS 01-01-2008 ITA NO. 784/JP/2011 THE DCIT, CIRCLE- 6, JAIPUR VS. M/S. MODERN INSULA TORS LTD., JAIPUR . 18 (2) ON THE BASIS OF THE ABOVE, THE ASSESSING OFFICE R HAS ALSO ACCEPTED THE CLAIM OF THE ASSESSEE IN A.Y. 201 1-12 IN THE ORDER U/S 143(3) DATED 27-03-2014. THE APPELLANT HAS STATED THAT ITS CASE IS COVERED B Y THE ORDERS OF THE CIT (A)-II JAIPUR FOR A.Y. 2008-09 AN D FOR A.Y. 2009-10. 3.3 I HAVE PERUSED THE FACTS OF THE CASE THE ASSESSMENT ORDER, SUBMISSIONS OF THE APPELLANT AND THE ABOVE REFERRED ORDER OF AAIFR HOLDING THE DATE OF MERGER TO BE 01.01.2008. THE ISSUE IN QUESTION IS COVERED BY TH E APPELLATE ORDER OF CIT(A)-II, JAIPUR FOR A.Y. 2008- 09 (APPEAL NO. 464/10-11, DATED 27-06.2011) AND FOR A. Y 2009-10 (APPEAL NO. 502/11-12, DATED 20.03.2012) WH EREIN THE ADDITIONS MADE BY THE ASSESSING OFFICER ON THE ABOVE ISSUE HAVE BEEN UPHELD BY THE CIT(A) ON PROTECTIVE BASIS, IN VIEW OF THE DECISION OF THE SUPREME COURT IN THE CA SE OF MARSHALL SONS AND CO. (INDIA) LTD. VS. ITO (1997) 2 23 ITR 809. THE RELEVANT EXTRACT OF THE ORDER OF THE CIT (A)-II, JAIPUR FOR A.Y. 2009-10 IS REPRODUCED BELOW:- THE FINDINGS IN PARA 4.1 (OF THE ORDER OF A.Y. 20 08- 09) ARE RELEVANT WHEREIN IT WAS HELD THAT PRIOR TO THE DATE OF SANCTION BY BIFR AND HIGHER COURTS, THERE W AS PROVISION IN THE SCHEME THAT BUSINESS DONE BY MODER N TERRY TOWELS LTD. SHALL BE ON BEHALF OF THE APPELLA NT COMPANY.. CONSIDERING THESE DIFFICULTIES, I HAD DIRECTED THE AO TO PASS BOTH THE SUBSTANTIVE ASSESSMENT AND PROTECTIVE ASSESSMENT IN THE CASE OF THE APPELLANT. IN CASE IF THE AMALGAMATION SCHEME W AS NOT SANCTIONED BY AAIFR AND HIGHER COURTS WITH EFFECT FROM 01-01-2008 THEN THE PROTECTIVE ASSESSME NT COMPLETED BY THE AO SHALL PREVAIL OVER THE SUBSTANT IVE ASSESSMENT. I THEREFORE, DIRECT THE AO TO ALLOW SET OFF OF CURRENT YEAR LOSSES AND BROUGHT FORWARD LOSES / UNABSORBED DEPRECIATION OF MODERN TERRY TOWELS LTD. AS PER SECTION 72A AGAINST THE INCOME OF THE APPELLANT. AT THE SAME TIME, THE AO SHALL PASS ITA NO. 784/JP/2011 THE DCIT, CIRCLE- 6, JAIPUR VS. M/S. MODERN INSULA TORS LTD., JAIPUR . 19 PROTECTIVE ASSESSMENT ORDER IN THE CASE OF APPELLAN T FOR A.Y. 2009-10 PRESUMING THAT NO AMALGAMATION HAS TAKEN PLACE. THIS GROUND OF APPEAL IS ALLOWED. 3.4 IN VIEW OF THE ABOVE DISCUSSION, RESPECTFULLY FOLLOWING THE ABOVE ORDERS OF THE LD. CIT(A) II JA IPUR FOR A.Y. 2008-09 AND 2009-10, THE ASSESSING OFFICER IS DIRECTED TO ALLOW SET OFF OF CURRENT YEAR LOOSES AND BROUGHT FORWARD LOSSES/UNABSORBED DEPRECIATION OF M/S. MODERN TERRY TOWELS LTD. AS PER SECTION 72A AGAINST THE INCOME O F THE APPELLANT. AT THE SAME TIME, THE AO SHALL PASS A PR OTECTIVE ASSESSMENT ORDER IN THE CASE OF APPELLANT FOR A.Y. 2010-11 PRESUMING THAT NO AMALGAMATION HAS TAKEN PLACE. IN CASE, THE AMALGAMATION SCHEME WERE NOT TO BE SANCTIONED BY BI FR OR THE HIGHER COURTS WITH EFFECT FROM 01-01-2008, THEN THE PROTECTIVE ASSESSMENT COMPLETED BY THE AO SHALL PRE VAIL OVER THE SUBSTANTIVE ASSESSMENT. THIS GROUND OF APP EAL IS ALLOWED. 5.3 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. IT IS NOT IMPERATIVE TO REPEAT FACTS OF THE CASE OF ISSUE IN QUESTION AS THE SIMILAR ISSUE HAS BEEN DECIDED I N FAVOUR OF THE ASSESSEE BY DISMISSING THE GROUND OF APPEAL NO. 1 OF THE REV ENUE IN ITA NO. 784/JP/2011 (SUPRA) AND THE DECISION TAKEN THEREIN SHALL APPLY MUTATIS MUTANDIS ON THIS SOLITARY GROUND OF THE REVENUE AL SO . THUS SOLITARY GROUND RAISED BY THE REVENUE IS DISMISSED AND APPE AL OF THE REVENUE IN ITA NO. 672/JP/2014 IS DISMISSED, ITA NO. 784/JP/2011 THE DCIT, CIRCLE- 6, JAIPUR VS. M/S. MODERN INSULA TORS LTD., JAIPUR . 20 6.0 IN THE RESULT, ALL THE APPEALS OF THE REVENUE ARE DISMISSED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 30-01-2017. SD/- SD/- DQY HKKJR HKKXPUN (KUL BHARAT) ( BHAGCHAND) U;KF;D LNL; / JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 30 /01/ 2017 *MISHRA VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- THE DCIT, CIRCLE- 6, JAIPUR 2. IZR;FKHZ@ THE RESPONDENT- M/S. MODERN INSULATORS LTD., JAIP UR 3. VK;DJ VK;QDRVIHY@ CIT(A). 4. VK;DJ VK;QDR@ CIT, 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE (ITA NO. 784/JP/2011) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ @ ASSISTANT. REGISTRAR