M/s. Hindusthan Engineering & Industries Ltd., , Kolkata V. DCIT, CC - 1(4), Kolkata, Kolkata

ITSSA 146/KOL/2017

• Counselvise Citation: [2018] 122 COUNSELVISE.COM (IT) 3589 (ITAT-KOLKATA)
• Duration Of Justice: 3 month(s) 8 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 24-01-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 16-10-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MD USMAN
• Keywords: Reopening of assessment; Bogus purchase; Capital asset; Business income; Depreciation; Period of limitation; Question of law; Scheme of amalgamation; Time period of passing order; Revised return; Unabsorbed depreciation; Revenue expenditure
• Section: 43B; 143(3); 153A; 234B; 115JB; 32; 147; 145; 6; 132; 139

Judgement Text

1 IT(SS)A NOS.146 TO 152/KOL/2017 HINDUSTHAN ENGINEERING & IND. LTD., AY 2009-10 TO 2015-16 , B , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH: KOL KATA ( ) . . , . ' # $% % , '( ) [BEFORE SHRI A. T. VARKEY, JM & DR. A. L. SAINI, A M] I.T(SS).A. NO. 146 TO 152/KOL/2017 ASSESSMENT YEARS: 2009-10 TO 2015-16 M/S. HINDUSTHAN ENGINEERING & INDUSTRIES LTD. (PAN: AAACH8505Q) VS. DEPUTY COMMISSIONER OF INCOME-TAX CENTRAL CIRLE-1(4), KOLKATA. (APPELLANT) (RESPONDENT) DATE OF HEARING 17.11.2017 DATE OF PRONOUNCEMENT 24.01.2018 FOR THE APPELLANT SHRI S. JHAJHARIA, FCA, SHRI SUJO Y SEN, ADVOCATE FOR THE RESPONDENT MD. USMAN, CIT (DR) ORDER PER SHRI A.T.VARKEY, JM ALL THESE SEVEN APPEALS FILED BY THE ASSESSEE ARE A GAINST THE SEPARATE ORDERS OF LD. CIT(A)- 20, KOLKATA, DATED 01.08.2017 FOR AYS 2009-10 TO 20 15-16. SINCE FACTS ARE COMMON AND GROUNDS ARE IDENTICAL, WE DISPOSE OF ALL THESE APPEALS BY T HIS CONSOLIDATED ORDER. THE ISSUES RAISED IN THESES APPEALS ARE TABULATED H ERE UNDER: SR. NO. AY ADDITION U/S AMOUNT (RS.) GROUND NO. 1 2009-10 VALIDITY OF ORDER U/S 153A 1 TO 3 & ADDL. GR. 1 UNAB. DEPRECIATION 2,52,69,798 4 TAX LIABILITY CALCULATION 5 INTEREST U/S 234A 57,093 6 INTEREST U/S 234 R/W 234B(3) 5,54,45,230 7 NOT GRANTING CREDIT OF TDS 5,35,65,670 8 2 2010-11 VALIDITY OF ORDER U/S 153A 1,2,3 & ADDL. GR. 1 2 IT(SS)A NOS.146 TO 152/KOL/2017 HINDUSTHAN ENGINEERING & IND. LTD., AY 2009-10 TO 2015-16 BOGUS PURCHASE 15,46,02,444/- 4 A) INTEREST ON INVESTMENT B) FEES C) PRIOR PERIOD EXPENSES D) PF E) INCOME CESSATION NOT ALLOWING DEPN. ON ASSET OF MALANPUR STEEL LTD MERGED VIDE BIFR ORDER. DISALLOWANCE OF SET OFF OF B/F LOSS ON ASSET OF AY 2000-01 OF MALANPUR STEEL LTD. ADDITION FOR DIFFERENCE OF ASSETS AND LIABILITIES OF MALANPUR STEEL LTD INTEREST U/S 234B R.W234B (3) INTEREST U/S 234D 4,370/- 19,00,000/- 1,67,854/- 59,90,318/- 1,25,040/- 1,53,62.000/- 18,63,71,316/- 3,18,98,060 8,06,26,679 5 6,7 & 8 9 10 11 & 12 13 3 2011-12 VALIDITY OF ORDER U/S 153A BOGUS PURCHASE A) PRIOR PERIOD EXPENSES B) PF & ESI U/S.36(1) (VA) 8,66,49,802 60,309 3,03,447 1 TO 3 & ADDL.GR.1 4 5 NOT ALLOWING DEPN. ON ASSET OF 1,32,78,000 6,7 & 8 3 IT(SS)A NOS.146 TO 152/KOL/2017 HINDUSTHAN ENGINEERING & IND. LTD., AY 2009-10 TO 2015-16 MALANPUR STEEL LTD. MERGED VIDE BIFR ORDER B/F LOSS OF MALANPUR STEEL LTD AND VIDE BIFR ORDER. 58,17,10,822 9 UNABSORBED DEPN. FOR AYS 2004- 05 & 06-07 VIDE BIFR ORDER 6,57,59,533 10 INTEREST U/S 234B R/W 234B(3) 4,43,28,510 11 & 12 INT. U/S 234D 18,01,501 13 4 2012-13 VALIDITY OF ORDER U/S 153A 1,2,3 & ADDL. GROUND 1 BOGUS PURCHASE A) PRIOR PERIOD EXPENSES B) PF & ESI U/S. 36 (1) (VA) 8,66,49,802 60,309 3,03,447 3 5 NOT ALLOWING DEPN. ON ASSETS OF MALANPUR STEEL LTD MERGED VIDE ORDER OF BIFR. NOT SET OFF OF B/F LOSS OF MALAPUR STEEL LTD. 1,14,79,000 121,06,26,360 6,7 & 8 9 U/S,36(1) (VA) 30,75,281 10 PRIOR PERIOD EXPENSES 71,911 11 NOT GRANTING CREDIT OF TDS 7,01,72,804 13 INTEREST U/S 234B 14 5 2013-14 VALIDITY OF ORDER U/S.153A 1,2,3& ADDL. GROUND 1 NOT ALLOWING DEPN. ON ASSETS OF MALANPUR STEEL LTD. 99,29,000 4,5 & 6 SET OFF OF B/F LOSS AND UNABSORBED DEPN. ALLOWED IN AY 10-11 & 11- 12 OF MALANPUR STEEL LTD. NOW 91,70,02,240 7,8 & 9 & ADDL.GRS. 2,3 & 4 SET OFF OF B/F LOSS AND UNABSORBED DEPN OF MALANPUR STEEL LTD. 15,57,28,874 10 INTEREST U/S.234B R/W 234B (3) 31,56,57,810 11-12 4 IT(SS)A NOS.146 TO 152/KOL/2017 HINDUSTHAN ENGINEERING & IND. LTD., AY 2009-10 TO 2015-16 INTEREST U/S 234C 58,33,364 13 6 2014-15 VALIDITY OF ORDER U/153A 1,2,3, & ADDL.GR.1 NOT ALLOWING DEPN. ON ASSETS OF MALANPUR STEEL LTD MERGED VIDE ORDER OF BIFR 38,82,43,000 4,5 & 6 INTEREST U/S.234B R/W 234B(3) 12,88,83,249 7 7 2015-16 VALIDITY OF ORDER U/S 153A 1,2,3 & ADDL. GROUND 1 NOT ALLOWING DEPN. ON ASSETS OF MALANPUR STEEL LTD MERGED VIDE ORDER OF BIFR 33,01,23,000 4,5,6 & 7 INTEREST U/S 234B R/W 234B(3) 12,88,83,249 8 INTEREST U/S 234D 24,808 9 2 AT THE OUTSET ITSELF, THE LD.AR SHRI SIDDHARTH JH AJHARIA DREW OUR ATTENTION TO THE FACT THAT ASSESSMENTS OF AYS 2009-10, 2010-11 AND 2011-12 WER E COMPLETED ORIGINALLY U/S 143(3) OF THE ACT BEFORE THE SEARCH WHICH TOOK PLACE ON 23 RD DECEMBER, 2014. HE ALSO DREW OUR ATTENTION TO THE F ACT THAT FOR AY 2013-14, ASSESSMENT U/S 143(1) OF THE A CT WAS ALSO PASSED BEFORE SEARCH AND THE TIME LIMIT FOR SELECTION OF SCRUTINY ASSESSMENT BECAME T IME BARRED ON 30.09.2014. THEREFORE, ACCORDING TO THE LD. COUNSEL, SINCE THE ORIGINAL ASSESSMENTS PERTAINING TO AY 2009-10, 2010-11 AND 2011-12 WERE COMPLETED BY SCRUTINY ASSESSMENTS U/S 143(3) OF THE ACT AND ASSESSMENT FOR AY 2013-14 U/S 143(1) OF THE ACT WAS NOT SELECTED FOR SCRUTINY BY 30.09.2014, NO PROCEEDINGS IN-RESPECT TO THESE ASSESSMENTS WERE PENDING BEFORE THE AO ON THE DATE OF SEARCH I.E. ON 23.12.2014 FOR THE SAID YEARS AND CONSEQUENTLY, ACCORDING TO LD. COUNSEL FOR THE ASSESSEE, NO ADDITION/DISALLOWANCE COULD BE MADE WITHOUT THE AID OF INCRIMINATING MATERIAL WHIC H HAD BEEN SEIZED/UNEARTHED DURING THE SEARCH AND FOR THE SAID PROPOSITION OF LAW HE RELIED ON TH E DECISIONS OF THE HONBLE DELHI HIGH COURT IN CIT VS.KABUL CHAWLA (2016)380 ITR 573 (DEL) AND, HO NBLE JURISDICTIONAL HIGH COURT IN CIT VS.VEERPRABHU MARKETING LTD (2016) 388 ITR 574 (CA L). HE SUBMITTED THAT SINCE NO INCRIMINATING MATERIAL WAS UNEARTHED AND SEIZED, THE ADDITIONS MA DE IN THE AFORESAID IMPUGNED YEARS ARE BEYOND THE SCOPE OF ASSESSMENTS MADE U/S 153A OF THE ACT. 3 ON THE OTHER HAND, THE LD.CIT, DR MD USMAN VEHEME NTLY OPPOSED THE CONTENTION OF THE LD. AR AND SUBMITTED BEFORE US THAT BIFR ORDER ITSE LF HAS TO BE CONSTRUED AS INCRIMINATING MATERIAL AND THE FACT THAT M/S. MALANPUR STEELS LTD (IN SHOR T M/S.MSL) THOUGH AMALGAMATED W.E.F. 5 IT(SS)A NOS.146 TO 152/KOL/2017 HINDUSTHAN ENGINEERING & IND. LTD., AY 2009-10 TO 2015-16 01.04.2009 BY RETROSPECTIVE OPERATION OF THE BIFR O RDER DATED 04.09.2012, THE FACT IS THAT THE SAID UNIT M/S. MSL HAS NOT EVEN STARTED FUNCTIONING. THI S INFORMATION ABOUT NON-FUNCTIONING OF M/S.MSL WAS ALSO AN INCRIMINATING FACT AND ACCORDIN G TO HIM EVEN THE BIFR ORDER ITSELF IS IN THE NATURE OF INCRIMINATING MATERIAL AND, THEREFORE, HE CONTENDED THAT THE AO HAS ALL THE POWERS U/S 153A OF THE ACT TO MAKE APPROPRIATE ADDITION/DISALL OWANCE AND THE DEPRECIATION FOR THE NON- FUNCTIONAL ASSETS OF M/S. MSL CANNOT BE EXTENDED TO ABSURD LIMITS WHEN THE FACT IS THAT FROM 1998 ONWARDS M/S. MSL UNIT HAS BEEN CLOSED DOWN AND DEPR ECIATION CANNOT BE CLAIMED. WITHOUT PREJUDICE TO THE AFORESAID SUBMISSIONS, THE LD. CIT , DR ALSO CONTENDED THAT IF THE ORIGINAL ASSESSMENTS CANNOT BE DISTURBED WITHOUT INCRIMINATI NG MATERIAL, HE WONDERED AS TO HOW THE ASSESSEE IS MAKING NEW CLAIM ON THE BASIS OF BIFR O RDER, WHEN HONBLE SUPREME COURT IN CIT VS. SUN ENGINEERING (1992) 198 ITR 297 (SC) THOUGH IN T HE CONTEXT OF REOPENING OF ASSESSMENT U/S 147/148 OF THE ACT, HAS HELD THAT SUCH ACTION I.E. (REOPENING ASSESSMENT FOR ESCAPE OF INCOME) IS FOR THE BENEFIT OF REVENUE AND THE ASSESSEE CANNOT MAKE ANY FRESH CLAIM DURING THOSE PROCEEDINGS. SO, ACCORDING TO LD. CIT DR WITHOUT PREJUDICE, TO HIS A RGUMENT THAT BIFR ORDER AND THE INFORMATION THAT M/S.MSL WAS NOT FUNCTIONAL AT ALL, IS INDEED A N INCRIMINATING MATERIAL, IN ANY EVENT, IN THE NON- PENDING ASSESSMENTS BEFORE THE AO ON THE DATE OF S EARCH, THE ASSESSEE IS PRECLUDED FROM MAKING ANY NEW CLAIM BASED ON BIFR ORDER. 4 THE LD. AR IN HIS REJOINDER TO THE CONTENTION OF LD.CIT, DR THAT BIFR ORDER IS AN INCRIMINATING MATERIAL WHICH WAS UNEARTHED DURING S EARCH, HE DREW OUR ATTENTION TO THE ORIGINAL ASSESSMENT PASSED FOR AY 2011-12 TO POINT OUT THAT THE AO IN THE ORIGINAL SCRUTINY ASSESSMENT ORDER DATED 31.03.2014 ITSELF AT PAGE 17 HAS TAKEN NOTE OF BIFR ORDER AND HAS DULY MENTIONED ABOUT IT AND CONSIDERED AND DISCUSSED ABOUT THE BIFR ORDE R AND THEREAFTER ONLY HAD PASSED THE ORIGINAL ASSESSMENT ORDER U/S 143(3) OF THE ACT. SO, ACCORDI NG TO LD. AR, THE ACTION OF AO AS EARLY AS 31.03.2014 CLEARLY GOES ON TO SHOW THE FACT THAT AO HAD IN HIS KNOWLEDGE AND POSSESSION THE BIFR ORDER VERY WELL BEFORE THE SEARCH WHICH HAPPENED ON LY ON 23.12.2014. THEREFORE, ACCORDING TO THE LD. COUNSEL, THE QUESTION OF BIFR ORDER BECOMING AN INCRIMINATING MATERIAL UNEARTHED DURING THE SEARCH CANNOT ARISE AT ALL. COUNTERING THE ARGUMENT RAISED BY THE LD.CIT, DR THAT THE FACT OF M/S. MSL NOT FUNCTIONING AT ALL AND WHICH FACT CAME TO THE NOTICE OF REVENUE ONLY DURING THE SEARCH PROCEEDINGS, THEREFORE, THIS INFORMATION/FACT SHOUL D BE TREATED AS INCRIMINATING MATERIAL, THE LD. COUNSEL SUBMITTED THAT THE INFORMATION ABOUT M/S.MS L BEING NON-FUNCTIONAL WHEN THE SEARCH HAPPENED IS COMMON KNOWLEDGE AND IS IN PUBLIC DOMAI N AND, THEREFORE, CANNOT BE CONSIDERED AS AN INCRIMINATING MATERIAL UNEARTHED DURING SEARCH. THE REFORE, ACCORDING TO HIM, NO ADDITION/ 6 IT(SS)A NOS.146 TO 152/KOL/2017 HINDUSTHAN ENGINEERING & IND. LTD., AY 2009-10 TO 2015-16 DISALLOWANCE CAN BE MADE IN THE ASSESSMENT YEARS WH ICH WERE NOT PENDING BEFORE THE AO ON THE DATE OF SEARCH, WITHOUT NEXUS WITH THE INCRIMINATIN G MATERIAL UNEARTHED DURING SEARCH. 5 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND HAVE PERUSED THE RECORDS CAREFULLY. WE NOTE THAT A SEARCH WAS CONDUCTED ON THE APPELLANT ON 23. 12.2014 AND PROCEEDINGS U/S.153A OF THE ACT WAS INVOKED AGAINST THE ASSESSEE. THE MAIN THRUST OF THE ARGUMENT OF THE LD.AR IS THAT ASSESSMENTS FOR AY 2009-10, 2010-11 AND 2011-12 WERE COMPLETED U/S.143(3) OF THE ACT, WELL BEFORE THE DATE OF SEARCH I.E. ON 23.12.2014, THEREFORE, THOSE ASSE SSMENTS FOR THOSE YEARS CANNOT BE SAID TO BE PENDING BEFORE THE AO ON THE DATE OF SEARCH. THE LD .AR ALSO BROUGHT TO OUR NOTICE THAT FOR AY 2013-14, THE ASSESSMENT WAS MADE U/S 143(1) OF THE ACT AND SINCE NO NOTICE FOR SCRUTINY WAS ISSUED BEFORE THE TIME LIMIT PRESCRIBED BY THE STATUTE, IN OTHER WORDS, THE TIME LIMIT TO PASS THE 143(2) NOTICE GOT BARRED AFTER 30.09.2014, THEREFORE, ON T HE DATE OF SEARCH I.E. ON 23.12.2014, THE ASSESSMENT PERTAINING TO AY 2013-14 CANNOT BE SAID TO BE PENDING BEFORE THE AO. WE HAVE GONE THROUGH THE RECORDS AND THE FOLLOWING CHART, WILL G IVE A BIRDS-EYE VIEW ON THE DATE OF EVENTS WHICH TOOK PLACE BEFORE THE SEARCH. SL. NO. ASSESSMENT YEAR ORIGINAL ASSESSMENT U/S PENDING BEFORE AO ON THE DATE OF SEARCH ORDER BY AO DATE OF SEARCH REMARKS 1. 2009-10 143(3) NOT PENDING 143(3) DATED 28.12.2011 23.12.2014 SO, ASSESSMENT IS NOT PENDING ON THE DATE OF SEARCH I.E. 23.12.2014 2 2010-11 143(3) NOT PENDING 143(3) DATED 28.03.2013 -DO- -DO- 3 2011-12 143(3) NOT PENDING 143(3) DATED 31.03.2014 -DO- -DO- 4 2012-13 153A/143(3) ABATED -DO- PROCEEDINGS U/S 143(2) WAS PENDING 5. 2013-14 143(1) NOT PENDING 143(1) -DO- TIME FOR NOTICE U/S.143.143(2)EXPIRED ON 30.09.2014 LAST DATE OF ISSUING OF NOTICE WAS 7 IT(SS)A NOS.146 TO 152/KOL/2017 HINDUSTHAN ENGINEERING & IND. LTD., AY 2009-10 TO 2015-16 30.09.2014. 6. 2014-15 153A/143(3) ABATED - -DO- 7. 2015-16 143(3) ABATED - -DO- 6 A PERUSAL OF THE AFORESAID CHART, REVEALS THAT PR OCEEDINGS FOR AYS.2009-10, 2010-11, 2011- 12 AND 2013-14 WERE NOT PENDING BEFORE THE AO ON TH E DATE OF SEARCH I.E. ON 23.12.2014. WE NOTE FROM A PERUSAL OF THE IMPUGNED ASSESSMENTS PASSED U /S 153A OF THE ACT THAT THE DISALLOWANCE/ADDITIONS FOR THE AFORESAID ASSESSMENT YEARS HAVE BEEN MADE BASED ON TWO ISSUES I.E. (A) INVESTIGATION REPORT OF EXCISE DEPARTMENT ALLEG ING BOGUS PURCHASE (AYS 2010-11 AND 2011-12) AND (B) THE SET OFF OF LOSS AND OTHER RELIEFS AS PE R THE ORDER OF BIFR WHICH WAS PASSED ON 04.09.2012. IN RESPECT TO THE INVESTIGATION REPORT OF EXCISE DEPARTMENT, WE NOTE THAT AO IN THE ORIGINAL ASSESSMENTS PASSED ON 28.03.2013 AND 31.03 .2014 FOR AYS 2010-11 AND 2011-12 RESPECTIVELY HAD ALREADY MADE THE ADDITION ON THE B ASIS OF SUCH REPORT WHILE COMPLETING ASSESSMENT U/S.143(3) OF THE ACT. SO THE SAID REPORT OF EXCISE DEPARTMENT CANNOT BE TREATED AS INCRIMINATING MATERIAL SEIZED/UNEARTHED DURING THE SEARCH CONDUCT ED ON 23.12.2014. COMING NEXT TO THE CONTENTION OF THE LD.CIT, DR THAT THE BIFR ORDER SH OULD BE CONSIDERED AS AN INCRIMINATING MATERIAL CANNOT BE ACCEPTED FOR THE SIMPLE REASON THAT IN TH E ORIGINAL ASSESSMENT FOR AY 2011-12 ITSELF THE AO HAS DISCUSSED ABOUT THE BIFR ORDER WHICH WAS COM PLETED U/S 143(3) OF THE ACT ON 31.0.3.2014, THEREFORE, THE AO WAS VERY WELL AWARE OF THE BIFR O RDER WHICH WAS PASSED ON 04.09.2012 WELL BEFORE THE SEARCH. MOREOVER, WE NOTE THAT THE DIREC TOR GENERAL INCOME-TAX, (ADMN) AND DIRECTOR OF INCOME TAX (RECOVERY) WAS A PARTY IN THE BIFR PROCE EDINGS AS EARLY AS ON 10.05.2012, AND THE DEPARTMENT RECEIVED THE BIFRS DRAFT REHABILITATION SCHEME (DRS) DATED 20.4.2012, WHICH WAS REPLIED TO BY THE DEPARTMENT VIDE LETTER DATED 08. 06.2012, WHEREIN OBJECTION WERE IN FACT RAISED BY THE DEPARTMENT BEFORE THE BIFR. WE NOTE THAT AFTER THE MSL COMPANYS LETTER DATED 04.06.2012, THE DEPARTMENT HAS FILED ITS DETAILED REPLY VIDE LETTER DATED 13.07.2012 TO BIFR/OA, WHICH FACTS ARE EVIDENT FROM THE APPEAL FILED BY DEPARTMENT BEFORE AAFIR AT (PAGE 6), WHICH IS FOUND PLACED AT PAGE 1420 OF THE PAPER BOOK, WHICH IS AN APPEAL AGA INST THE ORDER OF THE BIFR ORDER DATED 04.09.2012. IN THE LIGHT OF THE AFORESAID FACTS AND CIRCUMSTANCES, THE BIFR ORDER DATED 04.09.2012 CANNOT BE SAID TO BE AN INCRIMINATING MATERIAL WHIC H WAS UNEARTHED DURING THE SEARCH CONDUCTED ON THE ASSESSEES PREMISES ON 23.12.2014 AND, THEREFOR E, CANNOT BE TREATED AS AN INCRIMINATING MATERIAL. COMING TO THE CONTENTION OF THE LD.CIT, DR, THAT FA CT REGARDING M/S. MSL HAD NOT STARTED FUNCTIONING CAME TO THE NOTICE OF THE REVENUE, ONLY DURING SEARCH PROCEEDINGS AND, THEREFORE, SHOULD BE CONSIDERED AS INCRIMINATING MATERIAL, IS ALSO UN ACCEPTABLE. WE NOTE THAT M/S MSL, A STEEL FACTORY HAD BEEN CLOSED ON 4.3.2000 BY DEPTT. OF LA BOUR AFFAIRS, STATE GOVT. OF MP MUCH PRIOR TO 8 IT(SS)A NOS.146 TO 152/KOL/2017 HINDUSTHAN ENGINEERING & IND. LTD., AY 2009-10 TO 2015-16 SEARCH. THIS FACT OF CLOSING DOWN OF THE UNIT ONLY TRIGGERED THE PROCEEDINGS BEFORE BIFR AND AAIFR. THERE IS NO NEW DEVELOPMENT CLAIMED BY THE APPELLANT IN RESPECT OF ITS AMALGAMATED UNIT I.E. M/S. MSL, OTHER THAN THE STATUTORY CLAIM ARISI NG DUE TO RETROSPECTIVE OPERATION OF AMALGAMATION ORDERED BY BIFR. THE ORDER OF ORIGINAL ASSESSMENT IN RESPECT TO THE ASSESSEE COMPANY FOR AY 2011-12 HAS BEEN PASSED AFTER NOTICING THE ABOVE OR DER OF BIFR. MOREOVER, THE AO IN HIS IMPUGNED ORDER (153A ORDER) HAS NOWHERE STATED THAT DURING SEARCH ONLY HE CAME ACROSS THIS FACT OR THAT THE ASSESSEE HAD MISREPRESENTED EARLIER (I.E. BEFORE SEARCH DURING ORIGINAL ASSESSMENT) THAT M/S MSL WAS FUNCTIONAL AND ONLY DURING SEARCH THE TRUTH THAT M/S MSL WAS NOT FUNCTIONAL WAS REVEALED. SO THE CONTENTION OF LD. CIT, DR ON THIS SCORE CANNOT BE ACCEPTED AND SO THE FACT OF M/S MSL NOT FUNCTIONAL CANNOT BE TREATED AS INCRIMINATI NG MATERIAL UNEARTHED DURING SEARCH. THEREFORE, THE CONTENTIONS RAISED BY THE LD. CIT DR CANNOT BE COUNTENANCED AND CONSEQUENTLY AS PER THE ORDER OF HONBLE DELHI HIGH COURT IN KABUL CHAWLA (SUPRA) WHEREIN THE LAW IS SETTLED THAT FOR COMPLETED ASSESSMENTS/FOR ASSESSMENTS WHICH ARE NOT PENDING O N THE DATE OF SEARCH, THEN COMPLETED ASSESSMENTS CANNOT BE DISTURBED UNLESS INCRIMINATIN G MATERIAL HAVE BEEN UNEARTHED DURING THE SEARCH HAS TO BE FOLLOWED AND NECESSARILY GIVEN EFF ECT TO. ADMITTEDLY, NO SPECIFIC INCRIMINATING MATERIALS HAVE BEEN MENTIONED IN THE ASSESSMENT ORD ERS FOR AYS 2009-10, 2010-11, 2011-12 WHICH HAVE BEEN ADMITTEDLY COMPLETED BEFORE SEARCH BY ORI GINAL ASSESSMENTS CONDUCTED BY SCRUTINY THEREFORE, NO ADDITION/DISALLOWANCE CAN BE MADE BY THE AO IN 153A PROCEEDINGS. LIKEWISE, FOR AY 2013-14, THE ASSESSMENT U/S 143(1) OF THE ACT WAS P ASSED PRIOR TO SEARCH AND NOTICE FOR SCRUTINY U/S 143(2) OF THE ACT WAS NOT ISSUED BY AO BEFORE THE L IMITATION DATED 30.09.2014, SO, THE ASSESSMENT FOR AY 2013-14 CANNOT BE SAID TO BE PENDING BEFORE AO ON DATE OF SEARCH. THEREFORE, NO ADDITION/DISALLOWANCE CAN BE MADE WITHOUT THE AID O F AN INCRIMINATING MATERIAL UNEARTHED FOR THE YEARS REFERRED AS A RESULT OF SEARCH. THE HONBLE D ELHI HIGH COURT IN KABUL CHAWLA (SUPRA) HAS LAID DOWN THE LAW AS UNDER: SUMMARY OF LEGAL POSITION 37. ON A CONSPECTUS OF SECTION 153A(1) OF THE ACT, READ WITH PROVISIONS THERETO, AND IN THE LIGHT OF THE LAW EXPLAINED IN THE AFOREM ENTIONED DECISIONS, THE LEGAL POSITION THAT EMERGES IS AS UNDER: I. ONCE A SEARCH TAKES PLACE UNDER SECTION 132 OF THE ACT, NOTICE UNDER SECTION 153 A(1) WILL HAVE TO BE MANDATORILY ISSUED TO THE PERSON SEARCHED REQUIRING HIM TO FILE RETURNS FOR SIX AYS IMMEDIATELY PRECEDING THE PREV IOUS YEAR RELEVANT TO THE AY IN WHICH THE SEARCH TAKES PLACE. II. ASSESSMENTS AND RE-ASSESSMENTS PENDING ON THE D ATE OF THE SEARCH SHALL ABATE. THE TOTAL INCOME FOR SUCH AYS WILL HAVE TO BE COMP UTED BY THE AOS AS A FRESH EXERCISE. III. THE AO WILL EXERCISE NORMAL ASSESSMENT POWERS IN RESPECT OF THE SIX YEARS PREVIOUS TO THE RELEVANT AY IN WHICH THE SEARCH TAK ES PLACE. THE AO HAS THE POWER TO ASSESS AND REASSESS THE `TOTAL INCOME OF THE AFOR EMENTIONED SIX YEARS IN SEPARATE WILL 9 IT(SS)A NOS.146 TO 152/KOL/2017 HINDUSTHAN ENGINEERING & IND. LTD., AY 2009-10 TO 2015-16 BE ONLY ONE ASSESSMENT ORDER IN RESPECT OF EACH OF THE SIX `AYS IN WHICH BOTH THE DISCLOSED AND THE UNDISCLOSED INCOME WOULD BE BROUG HT TO TAX. ALTHOUGH SECTION 153 A DOES NOT SAY THAT ADDITIONS SHOULD BE STRICTLY MADE ON THE BASIS OF EVIDENCE FOUND IN THE COURSE OF THE SEARCH, OR O THER POST-SEARCH MATERIAL OR INFORMATION AVAILABLE WITH AO WHICH CAN BE RELATED TO THE EVIDENCE FOUND, IT DOES NOT MEAN THAT THE ASSESSMENT CAN BE ARBITRARY OR MADE WITHOUT ANY RELEVANCE OR NEXUS WITH THE SEIZED MATERIAL. OBVIOUSLY AN ASSESSMENT H AS TO BE MADE UNDER THIS SECTION ONLY ON THE BASIS OF SEIZED MATERIAL. V) IN ABSENCE OF ANY INCRIMINATING MATERIAL, THE CO MPLETED ASSESSMENT CAN BE REITERATED AND THE ABATED ASSESSMENT OR REASSESSMENT CAN BE MA DE. THE WORD `ASSESS IN SECTION 153 A IS RELATABLE TO ABATED PROCEEDINGS (I.E. THOS E PENDING ON THE DATE OF SEARCH) AND THE WORD `REASSESS TO COMPLETED ASSESSMENT PROCEE DINGS. VI. INSOFAR AS PENDING ASSESSMENTS ARE CONCERNED, THE JURISDICTION TO MAKE THE ORIGINAL ASSESSMENT AND THE ASSESSMENT UNDER SECTIO N 153A MERGES INTO ONE. ONLY ONE ASSESSMENT SHALL BE MADE SEPARATELY FOR EACH AY ON THE BASIS OF THE FINDINGS OF THE SEARCH AND ANY OTHER MATERIAL EXISTING OR BROUGHT O N THE RECORD THE AO. VII. COMPLETED ASSESSMENT CAN BE INTERFERED WITH BY THE AO WHILE MAKING THE ASSESSMENT UNDER SECTION 153A ONLY ON THE BASIS OF SOME INCRIMINATING MATERIAL UNEARTHED DURING THE COURSE OF PROPERTY DISCOVERED IN THE COURSE OF SEARCH WHICH WERE NOT PRODUCED OR NOT ALREADY DISCLOSED OR MADE KNOWN IN THE COURSE OF ORIGINAL ASSESSMENT. 7 THE HONBLE JURISDICTIONAL CALCUTTA HIGH COURT IN VEERPRABHU MARKETING LTD (SUPRA) HAS ALSO HELD AS UNDER: WE AGREE WITH THE VIEW EXPRESSED BY THE DELHI HIGH COURT THAT INCRIMINATING MATERIAL IS PRE-REQUISITE BEFORE POWER COULD HAVE BEEN EXERC ISE U/S 153(C) R.W. SECTION 153(A). IN THE CASE BEFORE US, THE AO HAS MADE A DISALLOW ANCE OF THE EXPENDITURE, WHICH WAS HELD DISCLOSED, FOR ONE REASON OR THE ORDER, BUT S UCH DISALLOWANCES MADE BY THE AO WERE UPHELD BY THE L.D.CIT (A) BUT THE LD. TRIBUNAL DELETED THESE DISALLOWANCE. WE FIND NO INFIRMITY IN THE AFORESAID ACT OF THE LD. T RIBUNAL. THE APPEAL IS THEREFORE, DISMISSED. 8. ALSO, APEX COURT IN THE CASE OF CIT V. SINHGAD T ECHNICAL EDUCATION SOCIETY 397 ITR 344 HAS HELD AS UNDER: 18) IN THIS BEHALF, IT WAS NOTED BY THE ITAT THAT AS PER THE PROVISIONS OF SECTION 153C OF THE ACT, INCRIMINATING MATERIAL WHICH WAS SEIZED HAD TO PERTAIN TO THE ASSESSMENT YEARS IN QUESTION AND IT IS AN UNDISPUTED FACT THAT THE DOCUMENTS WHICH WERE SEIZED DID NOT ESTABLISH ANY CO-RELATION, DOCUMENT-WISE, WITH THESE FOUR ASSESSMENT YEARS. SINCE THIS REQUIREMENT UNDER SECTION 153C OF THE ACT IS E SSENTIAL FOR ASSESSMENT UNDER THAT PROVISION, IT BECOMES A JURISDICTIONAL FACT. WE FIN D THIS REASONING TO BE LOGICAL AND VALID, HAVING REGARD TO THE PROVISIONS OF SECTION 1 53C OF THE ACT. PARA 9 OF THE ORDER OF THE ITAT REVEALS THAT THE ITAT HAD SCANNED THROUGH THE SATISFACTION NOTE AND THE MATERIAL WHICH WAS DISCLOSED THEREIN WAS CULLED OUT AND IT SHOWED THAT THE SAME BELONGS TO ASSESSMENT YEAR 2004-05 OR THEREAFTER. A FTER TAKING NOTE OF THE MATERIAL IN PARA 9 OF THE ORDER, THE POSITION THAT EMERGES THER EFROM IS DISCUSSED IN PARA 10. IT WAS SPECIFICALLY RECORDED THAT THE COUNSEL FOR THE DEPA RTMENT COULD NOT POINT OUT TO THE CONTRARY. IT IS FOR THIS REASON THE HIGH COURT HAS ALSO GIVEN ITS IMPRIMATUR TO THE AFORESAID APPROACH OF THE TRIBUNAL. THAT APART, LEA RNED SENIOR COUNSEL APPEARING FOR 10 IT(SS)A NOS.146 TO 152/KOL/2017 HINDUSTHAN ENGINEERING & IND. LTD., AY 2009-10 TO 2015-16 THE RESPONDENT, ARGUED THAT NOTICE IN RESPECT OF AS SESSMENT YEARS 2000- 01 AND 2001-02 WAS EVEN TIME BARRED. 9 SUPPORT, IS ALSO DRAWN FROM THE FOLLOWING JUDGMEN TS: I) BISWANATHGARODIAVS.DCIT (2016) 76 TAXMANN.COM81 II) CIT VS.CONTINENTAL WAREHOUSINHG (NHAVASHEVA) LT D (2015 374 ITR 645). III) JAI STEEL (INDIA) JODHPUR VS. ACIT (2013) 259 CTR 281 IV) CIT VS.DEEPAK KUMAR AGGARWAL (2017) 398 ITR 586 V) PRINCIPAL CIT VS.DIPAKJASHVANTALAPANCHAL (2017) 397 ITR 253. VI) PRINCIPAL VIT VS.LALIT JAIN (2017) 384 ITR 543 VII) PR.CIT VS. DVANGI ALIAS RUPA (2017 394 ITR 184 VIII) CHINTELS INDIA LTD VS. DCIT (2017) 397 ITR 41 6 IX) SMT.ANJLIPANDITVS.ACIT (2017) 157 DTR (MUM) (TR I.) 17 X) PR.CITVS.MEETAGUTGUTIA (2016)395 ITR 526. 10 WE ARE THUS OF THE CONSIDERED OPINION THAT SINCE THERE IS NO INCRIMINATING MATERIAL UNEARTHED DURING SEARCH IN RESPECT OF THE CONCLUDED ASSESSMEN TS, NO ADDITION/DISALLOWANCE COULD BE MADE BY THE AO FOR AYS 2009-10, 2010-11, 2011-12 AND 2013-1 4. THEREFORE, THE ADDITION/DISALLOWANCE MADE IN IMPUGNED ASSESSMENTS FOR THE AYS 2009-10, 2 010-11, 2011-12 AND 2013-14 ARE ORDERED TO BE DELETED. 11 WE ALSO FURTHER NOTE THAT APPELLANT HAS MADE FRE SH CLAIMS FOR AY 2010-11, 2011-12 ETC., FOR GIVING EFFECT TO BIFR ORDER, WE ARE OF THE CONSIDER ED OPINION SINCE AYS 2010-11 AND 2011-12 HAVE BEEN COMPLETED U/S.143(3) OF THE ACT BEFORE THE SEA RCH, THE ASSESSMENT SHOULD NOT BE DISTURBED IN SEC.153A PROCEEDINGS, UNLESS THERE IS INCRIMINATING MATERIAL UNEARTHED DURING SEARCH. ON THE SAME LOGIC/ANALOGY, THE ASSESSEE ALSO CANNOT MAKE ANY FR ESH CLAIM IN SEC.153A PROCEEDINGS WHERE ORIGINAL ASSESSMENTS ARE COMPLETED AND (NOT PENDING BEFORE AO ON THE DATE OF SEARCH ) BECAUSE THE ASSESSMENT IN THE CASE OF SEARCH OR REQUISITION IS FOR THE BENEFIT OF REVENUE. BY DOING SEARCH, THE REVENUE AUTHORITIES TRY TO CATCH THE ASSESSEE BY SU RPRISE AND BY INTRUSIVE SEARCH CONDUCTED AT THEIR PREMISES DIG OUT MATERIALS WHICH THROWS LIGHT TO IN COME UNDISCLOSED AND KEPT AWAY FROM THE EYES OF THE REVENUE. THUS SEARCH CONDUCTED BY REVENUE H AS TO BE FOR THE BENEFIT OF REVENUE. THE HONBLE SUPREME COURT THOUGH WHILE INTERPRETING ESC APEMENT OF INCOME U/S 147 OF THE ACT IN SUN ENGINEERING (SUPRA) HAS HELD THAT THE REOPENING OF ASSESSMENT U/S 147 TO ASSESS THE ESCAPED INCOME, IS THEREFORE, FOR THE BENEFIT OF REVENUE AND THE AS SESSEE CANNOT BE GIVEN ANOTHER INNINGS DURING THE RE-ASSESSMENT PROCEEDINGS PURSUANT TO REOPENING TO MAKE FRESH CLAIMS. 11 IT(SS)A NOS.146 TO 152/KOL/2017 HINDUSTHAN ENGINEERING & IND. LTD., AY 2009-10 TO 2015-16 12 WE ALSO NOTE OF THE FACT THAT ASSESSEE HAS ALREA DY MADE CLAIMS ARISING FROM BIFR ORDER IN THE REGULAR APPEALS BEFORE LD.CITA) FROM THE COMPLE TED ORIGINAL ASSESSMENT ALREADY MADE BEFORE SEARCH, BECAUSE BIFR ORDER DATED 04.09.2012 WAS RE CEIVED LATER ON I.E. AFTER THE ORIGINAL ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT IN C ERTAIN YEARS. 13 THE APPELLATE PROCEEDINGS BEFORE THE LD. CIT(A) FROM ORIGINAL ASSESSMENTS IS A CONTINUATION OF THE ASSESSMENT PROCEEDING ITSELF AND THE ASSESSE E CAN MAKE A FRESH CLAIM BEFORE THE TRIBUNAL/LD.CIT(A) AS HELD BY THE HONBLE SUPREME C OURT IN GOETZE (INDIA) LTD. VS.CIT (2006) 284 ITR 323 (SC) AND NTPC VS.CIT 229 ITR 383 AND CI T VS.PRITHVI BROKER (2012) 349 ITR 336 (BOM). 14 WITH THE AFORESAID OBSERVATIONS WE ALLOW GROUNDS 1 TO 3 AND ADDITIONAL GROUND NO 1IN TERMS OF OUR FINDINGS ABOVE FOR AY 2009-10, 2010-11, 2011 -12 AND 2013-14 AND DIRECT DELETION OF ADDITIONS MADE IN PURSUANCE OF SEC. 153A PROCEEDING S IN THESE ASSESSMENT YEARS. CONSEQUENTLY, PENDING ASSESSMENT PROCEEDINGS BEFORE AO ON THE DAT E OF SEARCH, GOT ABATED AND SEC. 153A PROCEEDINGS AGAINST THE ASSESSEE IS VALID IN RESPEC T OF AYS. 2012-13 AND 2014-15 AND SCRUTINY ASSESSMENT FOR AY 2015-16 U/S. 143(3) OF THE ACT IS VALID, SO, GROUNDS 1, 2, 3 AND ADDITIONAL GROUND NO. 1 FOR AY 2012-13, 2014-15 AND 2015-16 AR E ACCORDINGLY DISMISSED. 15 NEXT, LET US TAKE UP AY 2012-13 WHICH HAS ABATED BECAUSE THE ASSESSMENT WAS PENDING ON THE DATE OF SEARCH. THOUGH WE HAVE STATED THAT ASSE SSMENT PROCEEDINGS AFTER SEARCH, IS FOR THE BENEFIT OF REVENUE, ONCE THE ASSESSMENT PERTAINING TO AN YEAR IS PENDING BEFORE AO ON THE DATE OF SEARCH, LIKE IN THE PRESENT CASE, THEN BY OPERATION OF LAW, THE PENDING ASSESSMENT BEFORE THE AO ABATES IN VIEW OF THE SECOND PROVISO TO SEC.153(A) OF THE ACT, AND CONSEQUENTLY WHEN THE AO ISSUES NOTICE U/S 153A, THE ASSESSEE IS REQUIRED TO FURNISH FRESH RETURN OF INCOME IN PURSUANCE OF THE SAID NOTICE U/S. 153A OF THE ACT. IT IS THIS RETURN WHICH IS FILED CONSEQUENT TO THE NOTICE U/S 153A WHICH WOULD BE SUBJECT OF ASSESSMENT BY THE REVENUE FOR THE FIRST TIME IN THE CASE OF ABATED ASSESSMENT PROCEEDINGS. CONSEQUENT TO NOTICE U/S 15 3A, THE EARLIER RETURN FILED FOR THE PURPOSE OF ASSESSMENT WHICH IS PENDING WOULD BE TREATED AS NON -EST IN LAW. FOR THIS PROPOSITION, WE RELY ON THE RATIO DECIDENDI IN CIT VS. B.G SHIRKE CONSTRUCTION TECHNOLOGY LTD BY HONBLE BOMBAY HIGH COURT (2017) 293 CTR 505 (BOM). 16. FIRST OF ALL, THE ASSESSEE/APPELLANT COMPANY IS AGGRIEVED BY THE ACTION OF AO/CIT(A) IN NOT ALLOWING DEPRECIATION OF ASSETS OF AMALGAMATING COM PANY M/S. MSL LTD. BRIEF FACTS OF THE CASE ARE 12 IT(SS)A NOS.146 TO 152/KOL/2017 HINDUSTHAN ENGINEERING & IND. LTD., AY 2009-10 TO 2015-16 THAT A SICK COMPANY CALLED M/S.MSL WAS AMALGAMATED BY VIRTUE OF THE ORDER DATED 04.09.2012 OF BIFR WITH THE ASSESSEE COMPANY. BIFR ORDERED THE A MALGAMATION WITH RETROSPECTIVE DATE I.E. FROM 01.04.2009 I.E. FROM AY 2010-11 ONWARDS. THE ASSESS EE COMPANY CLAIMED DEPRECIATION OF ASSETS FROM AYS 2010-11 TO 2015-16. IN THE PRESENT APPEAL ALSO THE ASSESSEE RAISED THE CLAIM, HOWEVER, THE AO DENIED THE ASSESSEES CLAIM CITING THE ORDER OF LD. CIT(A) IN THE CASE OF M/S.MSL (PRE- AMALGAMATION) FOR AYS 2004-05 AND 2006-07. IN THE P RE-AMALGAMATION ORIGINAL ASSESSMENT, AND APPELLATE ORDER OF LD.CIT(A) IN THE HANDS OF PRE-AM ALGAMATED COMPANY, THE DEPRECIATION WAS DENIED, TAKING NOTE OF THE FACT THAT ITS PLANT AND MACHINERY WAS NOT USED/NON-USER OF IT, WHEN UNDISPUTEDLY, THE M/S MSL DECLARED LAY-OFF ON 20.10 .1998 DUE TO A MAJOR FIRE MISHAP IN THE SUB- STATION ON 15,.10.1978 AND ON 04.03.2000 THE UNIT OF M/S. MSL WAS CLOSED BY SECRETARY, LABOUR DEPT. (GOVT.OF MP). THEREFORE, M/S. MSL FILED REFER ENCE TO BIFR AND WAS DECLARED SICK COMPANY ON 03.08.2005. THE LIST OF DATES GIVEN BELOW TABULA TES THE EVENTS THAT TOOK PLACE LEADING TO AMALGAMATION OF M/S MSL WITH THE ASSESSEE M/S. HEIL BY BIFR ORDER 04.09.2012 W.E.F.01.04.2009; 1. 11.09.1944 HINDUSTAN DEVELOPMENT CORPORATION LTD . (HDCL) WAS INCORPORATED 2. 1989 MP IRON & STEEL CO. (MPISC) AS STEEL DIVISI ON OF HDCL WAS FORMED. ( LATER NAME CHANGED TO M/S MSL) 3. 03.1993 MPISC (LATER MALANPUR STEELS LTD. (MSL) COMPANYS PERFORMANCE REMAINED UNSATISFACTORY SINCE THEN. 4. 15.10.1998 MAJOR FIRE IN THE SUB-STATION, OPERAT ION SUSPENDED (MPISC LATER MSL) 5. 20.10.1998 DECLARED LAY OFF, HELD BY M P HIGH CO URT AS ILLEGAL 6. 04.03.2000 THE UNIT CLOSED BY THE SECRETARY, LAB OURDPTT. (GOVT. OF MP) 7. 04.2000 HDCL LATER NAME CHANGE TO MALANPUR STEEL LTD. (MSL) WHICH WAS A PUBLIC LTD. COMPANY TRANSFERRED ALL ITS DIVISIONS (ENGINEE RING, CHEMICAL, HIGH- TENSION INSULATED) IN VARIOUS PLACES TO HEIL (ASSES SEE) WHICH WAS SANCTIONED BY HONBLE CALCUTTA HIGH COURT EXCEPT THE STEEL DIV ISION M/S MPISC (LATER MSL) 8. 2000 RS.245.80 CR.INFUSED BY HDCL FOR CAPITAL AS SET/REVENUE 9. 16.04.2001 THE NAME OF HDCL WAS CHANGED TO MSL 10 14.06.2002/ 11.03.2003 MSL COMPANY FILED REFERENCE IN BIFR AS A SICK COMPA NY AND REGISTERED BIFR CASE NO.158/2001. 11 03.08.2005 COMPANY DECLARED SICK IN TERMS OF SECTION 3(1)(0) O F SICA AND PNB APPOINTED AS OPERATING AGENCY TO FORMULATED SCHEME U/S 17(3) OF SICA 12 01.04.2009 BIFR WAS AMALGAMATED WITH ASSESSEE FROM RETROSPECTIVE DATE WITH EFFECT FROM 01.04.2009. 13 04.09.2012 BIFR PASSED ORDER AMALGAMATING M/S.MSL W ITH THE ASSESSEE COMPANY AFTER CONSIDERING THE INCOME TAX DEPARTMENTS VIEW. 14 23.12.2014 SEARCH AT ASSESSEE COMPANY PREMISES WHIC H LED TO SEC.153A PROCEEDINGS. 17 FROM A PERUSAL OF THE ABOVE STATED DATES AND EVE NTS WHICH TOOK PLACE, IT REVEALS THAT THE UNIT OF M/S MSL WAS NON-FUNCTIONAL FROM 15.10.1998 TILL THE DATE OF ORDER OF BIFR (I.E. 04.09.2012). SO 13 IT(SS)A NOS.146 TO 152/KOL/2017 HINDUSTHAN ENGINEERING & IND. LTD., AY 2009-10 TO 2015-16 WHEN THE SICK COMPANY M/S MSL IN THEIR ORIGINAL ASS ESSMENTS (PRE-AMALGAMATION) CLAIMED DEPRECIATION, NATURALLY IT WAS DENIED TO IT BY THE AO AS WELL AS LD.CIT (A) CITING THE REASON THAT UNIT OF M/S.MSL WAS NON-FUNCTIONAL, BECAUSE THERE W AS NO OCCASION FOR ITS PLANT AND MACHINERY WAS USED DURING THE LAY-OFF/CLOSED PERIOD. HOWEVER, THE FACTUAL MATRIX IN AY 2010-11 ONWARDS CHANGED BECAUSE OF THE ORDER OF BIFR DATED 04.09.20 12, WHEREIN BIFR AMALGAMATED M/S. MSL WITH THE ASSESSEE/APPELLANT COMPANY RETROSPECTIVELY WITH EFFECT FROM 1.04.2009 I.E. FROM AY 2010- 11. IT SHOULD BE REMEMBERED THAT THE TRUE EFFECT AN D CHARACTER OF THE AMALGAMATION LARGELY DEPENDS ON THE TERMS OF THE SCHEME OF MERGER. BUT THERE CAN NOT BE ANY DOUBT THAT WHEN TWO COMPANIES AMALGAMATE AND MERGE INTO ONE, THE TRANSFEROR COMPA NY LOSES IT ENTITY (IN THE PRESENT CASE M/S.MSL) AS IT CEASES TO HAVE ITS BUSINESS, THOUGH THEIR RESPECTIVE RIGHTS OR LIABILITIES ARE DETERMINED UNDER THE SCHEME OF AMALGAMATION. WE NOT E THAT THE ASSESSEE/APPELLANT COMPANY HAD TAKEN OVER THE SICK COMPANY M/S.MSL THROUGH THE SCH EME OF AMALGAMATION SANCTIONED ON 04.09.2012 WITH EFFECT FROM 01.04.2009 (I.E. FROM A Y 2010-11 ONWARDS) AND SO IN THE EYES OF LAW, M/S MSL CEASED TO HAVE ANY IDENTITY AS IT DID NOT R EMAIN A PERSON EITHER IN FACT OR IN LAW AFTER AMALGAMATION. FOR THIS PROPOSITION, WE RELY ON THE HONBLE SUPREME COURT DECISION IN MCDOWELL & COMPANY LTD VS.CIT, KARNATAKA (2017) 393 ITR 570 (S C). SO, IN THE PRESENT ASSESSMENT YEAR BEFORE US, THE ASSESSEE HAS CLAIMED DEPRECIATION ON ITS ASSETS, BECAUSE BY AMALGAMATION, THE ASSETS OF AMALGAMATED COMPANY (MSL) GETS VESTED WITH ASSES SEE AND HAVE BECOME PART OF BLOCK OF ASSETS OF THE ASSESSEE COMPANY. WE NOTE THAT AFTER THE A MENDMENT OF SEC.32 BY THE TAXATION LAWS (AMENDMENT) ACT, 1986, MAJOR CHANGE HAPPENED IN RES PECT TO THE MANNER IN WHICH THE DEPRECIATION IS TO BE ALLOWED AFTER THE CONCEPT OF BLOCK OF ASS ETS WAS INTRODUCED. LET US LOOK INTO THE DEFINITIO N OF BLOCK OF ASSETS GIVEN IN SUB-CLAUSE (II) TO SE C.2 OF THE ACT. 26. SECTION 2 (11) OF THE ACT DEFINES THE TERM BLOCK OF ASSETS AS UNDER: 2(11) BLOCK OF ASSETS MEANS A GROUP OF ASSETS F ALLING WITHIN A CLASS OF ASSETS COMPRISING (A TANGIBLE ASSETS, BEING BUILDINGS, MAC HINERY, PLANT OR FURNITURE; (B) INTANGIBLE ASSETS, BEING KNOW-HOW, PATENTS, COP YRIGHTS, TRADE-MARKS, LICENSES, FRANCHISES OR ANY OTHER BUSINESS OR COMMERCIAL RIGHTS OF SIMIL AR NATURE, IN RESPECT OF WHICH THE SAME PERCENTAGE OF DEPRECIATION IS PRESCRIBED; 27. ALONG WITH THE AFORESAID AMENDMENT, DEFINITION OF WRITTEN DOWN VALUE AS CONTAINED IN SECTION 43(6) HAS ALSO BEEN AMENDED AND THE AM, WENDED PROVISIONS READ AS UNDER: 43(6) WRITTEN DOWN VALUE MEANS- (A) ** ** ** (B) ** ** ** (C) IN THE CASE OF ANY BLOCK OF ASSETS,- (I) IN RESPECT OF ANY PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR COMMENCING ON THE 1 ST DAY OF APRIL, 1988, THE AGGREGATE OF THE WRITTEN D OWN VALUES OF ALL THE ASSETS FALLING WITHIN THAT BLOCK OF ASSETS AT THE BEGINNING OF THE PREVIOUS YEAR AND ADJUSTED. (A) BY THE INCREASE BY THE ACTUAL COST OF ANY ASSET FALLING WITHIN THAT BLOCK, ACQUIRED DURING THE PREVIOUS YEAR; AND (B) BY THE REDUCTION OF THE MONEYS PAYABLE IN RESPECT OF ANY ASSET 14 IT(SS)A NOS.146 TO 152/KOL/2017 HINDUSTHAN ENGINEERING & IND. LTD., AY 2009-10 TO 2015-16 FALLING WITHIN THAT BLOCK ,WHICH IS SOLD OR DISCARD ED OR DEMOLISHED OR DESTROYED DURING THAT PREVIOUS YEAR TOGETHER WITH THE AMOUNT OF THE SCRAP VALUE, IF ANY, SO, HOWEVER, THAT THE AMOUNT OF SUCH REDUCTION DOES NOT EXCEED THE WRITTE N DOWN VALUE AS SO INCREASED; AND (II) IN RESPECT OF ANY PREVIOUS YEAR RELEVANT TO TH E ASSESSMENT YEAR COMMENCING ON OR AFTER THE 1 ST DAY OF APRIL, 1989, THE WRITTEN DOWN VALUE OF THE BLOCK OF ASSES IN THE IMMEDIATELY PRECEDING PREVIOUS YEAR AS REDUCED BY THE DEPRECIAT ION ACTUALLY ALLOWED IN RESPECT OF THAT BLOCK OF ASSETS IN RELATION TO THE SAID PRECEDING P REVIOUS YEAR AND AS FURTHER ADJUSTED BY THE INCREASE OR THE REDUCTION REFERRED TO IN ITEM(I). 18 THUS, IN THE PRESENT CASE BEFORE US FOR THE ASSE SSMENT YEAR I.E. 2012-13, THE W.D.V. OF ANY BLOCK OF ASSETS SHALL BE THE AGGREGATE OF THE W.D.V OF ALL THE ASSETS FALLING WITHIN THAT BLOCK OF ASSETS AT THE BEGINNING OF THE PREVIOUS YEAR. FROM THIS, THE ADJUSTMENTS HAVE TO BE MADE FOR THE INCREASE OR REDUCTION IN THE BLOCK OF ASSETS DURING THE YEAR UNDER CONSIDERATION. THE DEDUCTION FROM THE BLOCK OF ASSETS HAS TO BE MADE IN RESPECT OF AN Y ASSET, SOLD DISCARDED OR DEMOLISHED OR DESTROYED DURING THE PREVIOUS YEAR. AS PER AMENDED SECTION 32 , DEDUCTION IS TO BE ALLOWED IN THE CASE OF ANY BLOCK OF ASSETS, SUCH PERCENTAGE ON THE WRITTEN DOWN VALUE THEREOF AS MAY BE PRESCRIBED. THUS, THE DEPRECIATION IS ALLOWED ON BLOCK OF ASSETS, AND THE REVENUE CANNOT SEGREGATE A PARTICULAR ASSET THERE FROM ON THE GROUND THAT IT WAS NOT PUT TO USE . WITH THE AFORESAID AMENDMENT, THE DEPRECIATION IS NOW TO BE ALLOWED ON THE WRITTEN DOWN VALUE OF T HE BLOCK OF ASSETS AT SUCH PERCENTAGE AS MAY BE PRESCRIBED. WITH THIS AMENDMENT, INDIVIDUAL ASSE TS HAVE LOST THEIR IDENTITY AND CONCEPT OF BLOCK OF ASSETS HAS BEEN INTRODUCED, WHICH IS RELEVANT F OR CALCULATING THE DEPRECIATION. WE TAKE NOTE OF THE CIRCULAR ISSUED BY THE REVENUE ITSELF EXPLAININ G THE PURPOSE BEHIND THE AMENDED PROVISION. THE SAME IS CONTAINED IN CBDT CIRCULAR NO.469 DATED 23. 09.1986, WHEREIN THE RATIONALE BEHIND THE AFORESAID AMENDMENT IS DESCRIBED AS UNDER: 6.3 AS MENTIONED BY THE ECONOMIC ADMINISTRATION RE FORM COMMISSION (REPORT NO.12, PARA 20),THE EXISTING SYSTEM IN THIS REGARD REQUIRES THE CALCULATION OF DEPRECIATION IN RESPECT OF EACH CAPITAL ASSETS SEPA RATELY AND NOT IN RESPECT OF BLOCK OF ASSETS. THIS REQUIRES ELABORATE BOOK-KEEPING AND TH E PROCESS OF CHECKING BY THE ASSESSING OFFICER IS TIME CONSUMING. THE GREATER DI FFERENTIATION IN RATES, ACCORDING TO THE DATE OF PURCHASE, THE TYPE OF ASSET, THE INTEN SITY IF USE, ETC., THE MORE DISAGGREGATED HAS TO BE THE RECORD-KEEPING. MOREOVE R, THE PRACTICE OF GRANTING THE TERMINAL ALLOWANCE AS PER SECTION 32(1) (III) OR TA XING THE BALANCING CHARGE AS PER SECTION 41(2) OF THE INCOME-TAX ACT NECESSITATE TH E KEEPING OF RECORDS OF DEPRECIATION ALREADY AVAILED OF BY EACH ASSET ELIGIBLE FOR DEPRE CIATION. IN ORDER TO SIMPLIFY THE EXISTING CUMBERSOME PROVISIONS, THE AMENDING ACT HA S INTRODUCED A SYSTEM OF ALLOWING DEPRECIATION ON BLOCK OF ASSETS. THIS WIL L MEAN THE CALCULATION LUMP SUM AMOUNT OF DEPRECIATION FOR THE ENTIRE BLOCK OF DEPR ECIABLE ASSETS IN EACH OF THE YEAR CLASSES OF ASSETS, NAMELY, BUILDINGS, MACHINERY, PL ANT AND FURNITURE. 19 FROM A READING OF THE AFORESAID CIRCULAR IT IS C LEAR THAT THE LEGISLATURE FELT THAT KEEPING THE DETAILS WITH REGARDS TO EACH AND EVERY DEPRECIABLE ASSET WAS TIME CONSUMING FOR BOTH THE ASSESSEE 15 IT(SS)A NOS.146 TO 152/KOL/2017 HINDUSTHAN ENGINEERING & IND. LTD., AY 2009-10 TO 2015-16 AND THE ASSESSING OFFICER. THEREFORE, THE PARLIAMEN T IN ITS WISDOM AMENDED THE LAW TO PROVIDE FOR ALLOWING OF THE DEPRECIATION ON THE ENTIRE BLOCK OF ASSETS INSTEAD OF EACH INDIVIDUAL ASSET. THE BLOCK OF ASSETS HAS ALSO BEEN DEFINED TO INCLUDE THE GROU P OF ASSET FALLING WITHIN THE SAME CLASS OF ASSETS. 20 ALONG WITH THE AMENDMENT AS AFORESAID, THE PARLI AMENT IN ITS WISDOM HAS MADE ANOTHER SIGNIFICANT AND CONTEMPORANEOUS AMENDMENT HAS BEEN MADE, WHICH NEED TO BE TAKEN NOTE. THE PARLIAMENT HAS ALSO DELETED THE PROVISION FOR ALLOW ING TERMINAL DEPRECIATION IN RESPECT OF EACH ASSETS, WHICH WAS PREVIOUSLY ALLOWABLE UNDER SECTIO N 32(1) (III) AND ALSO TAXING OF BALANCING CHARGE UNDER SECTION 41(2) IN THE YEAR OF SALE. IN SUBSTITUTION OF THESE TWO PROVISIONS, NOW WHATEVER IS THE SALE-PROCEED OF SALE OF ANY DEPRECI ABLE ASSET, IT HAS TO BE REDUCED FROM THE BLOCK OF ASSETS. THIS AMENDMENT WAS MADE BECAUSE NOW THE ASS ESSEE ARE NOT REQUIRED TO MAINTAIN PARTICULARS OF EACH ASSET SEPARATELY AND IN THE ABSENCE OF SUCH PARTICULAR, IT CANNOT BE ASCERTAINED WHETHER ON SALE OF ANY ASSET, THERE WAS ANY PROFIT LIABLE TO BE TAXED UNDER SECTION 41(2) OR TERMINAL LOSS ALLOWABLE UNDER SECTION 32(1) (III). THIS AMENDMENT ALSO STRENGTHENED THE CLAIM THAT NOW ONLY DETAILS FOR BLOCK OF ASSETS HAS TO BE MAINTAINED AND NOT SEPARATELY FOR EACH ASSET. IN CIT VS.OSWAL AGRO MILLS LTD (2011) 341 ITR 467 (DEL) WHEREIN THE IR LORDSHIP JUSTICE A.K.SIKRI (HIS LORDSHIP THEN WAS ) HAS ANALYSED THE AFORESAID LAW IN DETAIL AND TOOK INTO CONSIDERATION THE LEGISLATIVE INTENT WHICH LED TO THE AFORESAID AMENDMENT. THEREFORE, HI S LORDSHIP DID NOT ACCEPT THE SUBMISSION OF THE REVENUE THAT FOR ALLOWING THE DEPRECIATION, USER OF EACH AN D EVERY ASSET IS ESSENTIAL EVEN WHEN A PARTICULAR ASSET FORMS PART OF BLOCK OF ASSETS REPELLING THIS ARGUMENT OF REVENUE, THEIR LORDSHI P IN HIS OWN WORDS HELD ACCEPTANCE OF THIS CONTENTION WOULD MEAN THAT THE A SSESSEE IS TO BE DIRECTED TO MAINTAIN THE DETAILS OF EACH ASSET SEPA RATELY AND THAT WOULD FRUSTRATE THE VERY PURPOSE FOR WHICH THE AMENDMENT WAS BROUGHT ABOUT. IT IS AL SO ESSENTIAL TO POINT OUT THAT THE REVENUE IS NOT PUT TO ANY LOSS BY ADOPTING SUCH METHOD AND ALLOWIN G DEPRECIATION ON A PARTICULAR ASSETS FORMING PART OF THE BLOCK OF ASSETS EVEN WHEN THAT PARTIC ULAR ASSET IS NOT USED IN THE RELEVANT ASSESSMENT YEAR. WHENEVER SUCH AN ASSET IS SOLD, IT WOULD RESU LT IN SHORT TERM CAPITAL GAIN, WHICH WOULD BE EXIGIBLE TO TAX AND FOR THIS REASON, WE SAY THAT TH ERE IS NOT LOSS TO REVENUE EITHER . 21 IT WOULD BE WORTHWHILE TO DISCUSS THE FACTS IN C IT VS. OSWAL AGRO MILLS LTD 341 ITR 467 (DEL) IN BRIEF:- FOR THE RELEVANT ASSESSMENT YEAR THE ASSESSEE CLAI MED DEPRECIATION ON ITS VARIOUS ASSETS WHICH INCLUDED THE CLAIM OF DEPRECIATION IN RESPECT OF A CLOSED UNIT AT BHOPAL. THE ASSESSING OFFICER ASKED THE ASSESSEE TO EXPLAIN THA T ON WHAT BASIS IT WAS CLAIMING DEPRECIATION ON THAT UNIT, WHICH REMAINED CLOSED. I N RESPONSE THE EXPLANATION OF THE ASSESSEE WAS THAT THE DEPRECIATION WAS TO BE ALLOW ED AS THE ASSETS OF THAT UNIT REMAINED PART OF THE BLOCK OF ASSETS AND WERE READY FOR PAS SIVE USE, WHICH WAS AS GOOD AS REAL USE. 16 IT(SS)A NOS.146 TO 152/KOL/2017 HINDUSTHAN ENGINEERING & IND. LTD., AY 2009-10 TO 2015-16 THE ASSESSING OFFICER, HOWEVER, WAS NOT IMPRESSED W ITH THE EXPLANATION OF THE ASSESSEE AND DISALLOWED THE DEPRECIATION ON THAT UNIT. THE COMM ISSIONER (APPEALS) DISMISSED THE ASSESSEES APPEAL. ON SECOND APPEAL, THE TRIBUNAL ALLOWED THE ASSESSEES CLAIM ON TWO GROUNDS, VIZ (1) THERE WAS A PASSIVE USER OF THE A SSETS AT BHOPAL UNIT, WHICH WOULD BE TREATED AS `USED FOR THE PURPOSE OF BUSINESS AND ( 2) AS IT WAS A CASE OF DEPRECIATION ON BLOCK OF ASSETS, THE ASSETS OF BHOPAL UNIT COULD NO T BE SEGREGATED FOR THE PURPOSE OF ALLOWING DEPRECIATION AND DEPRECIATION HAD TO BE ALLOWED ON ENTIRE BLOCK OF ASSETS. THE HEAD NOTES IN THIS CASE IS AS UNDER: THE POSITION CONCERNING THE MANNER IN WHICH THE DEP RECIATION IS TO BE ALLOWED, HAS GONE A SEA CHANGE AFTER THE AMENDMENT OF SECTION 32 BY TH E TAXATION LAWS (AMENDMENT) ACT, 1986. [PARA 25]. AS PER AMENDED SECTION 32, DEDUCTI ON IS TO BE ALLOWED - `IN THE CASE OF ANY BLOCK OF ASSETS AT SUCH PERCENTAGE ON THE WRIT TEN DOWN VALUE THEREOF AS MAYBE PRESCRIBED. THUS, THE DEPRECIATION IS ALLOWED ON B LOCK OF ASSETS, AND THE REVENUE CANNOT SEGREGATE A PARTICULAR ASSET THERE FROM ON THE GROU ND THAT IT WAS NOT PUT TO USE. [PARA 29]. WITH THE AFORESAID AMENDMENT, THE DEPRECIATION IS N OW TO BE ALLOWED ON THE WRITTEN DOWN VALUE OF THE `BLOCK OF ASSETS AT SUCH PERCENTAGE A S MAY BE PRESCRIBED. WITH THIS AMENDMENT, INDIVIDUAL ASSETS HAVE LOST THEIR IDENTI TY AND CONCEPT OF `BLOCK OF ASSETS HAS BEEN INTRODUCED, WHICH IS RELEVANT FOR CALCULATING THE DEPRECIATION. IT WOULD BE OF BENEFIT TO TAKE NOTE OF THE CIRCULAR ISSUED BY THE REVENUE ITS ELF EXPLAINING THE PURPOSE BEHIND THE AMENDED PROVISION. THE SAME IS CONTAINED IN CBDT CI RCULAR NO.469, DATED 23-9-1086, WHEREIN THE RATIONALE BEHIND THE AFORESAID AMENDMEN T IS DESCRIBED [PARA 30]. IT BECOMES MANIFEST FROM THE READING OF THE AFORESAID CIRCULAR THAT THE LEGISLATURE FELT THAT KEEPING THE DETAILS WITH REGARD TO EACH AND EVERY DEPRECIABLE ASSET WAS TIME CONSUMING BOTH FOR THE ASSESSEE AND THE ASSESSING OFFICER. THEREFORE, IT A MENDED THE LAW TO PROVIDE FOR ALLOWING OF THE DEPRECIATION ON THE ENTIRE BLOCK OF ASSETS INST EAD OF EACH INDIVIDUAL ASSET. THE BLOCK OF ASSETS HAS ALSO BEEN DEFINED TO INCLUDE THE GROUP O F ASSETS FALLING WITHIN THE SAME CLASS OF ASSETS [PARA 31]. ANOTHER SIGNIFICANT AND CONTEMPORANEOUS DEVELOPMENT , WHICH NEEDS TO BE NOTICED, IS THAT THE LEGISLATURE HAS ALSO DELETED THE PROVISION FOR ALLOWING TERMINAL DEPRECIATION IN RESPECT OF EACH ASSET, WHICH WAS PREVIOUSLY ALLOWABLE UNDE R SECTION 32(1)(III) AND ALSO TAXING OF BALANCING CHARGE UNDER SECTION 41(2) IN HE YEAR OF SALE. INSTEAD OF THESE TWO PROVISIONS, NOW WHATEVER IS THE SALE PROCEED OF SALE OF ANY DEP RECIABLE ASSET, IT HAS TO BE REDUCED FROM THE BLOCK OF ASSETS. THIS AMENDMENT WAS MADE BECAUS E NOW THE ASSESSES ARE NOT REQUIRED TO MAINTAIN PARTICULARS OF EACH ASSET SEPARATELY AND I N THE ABSENCE OF OF SUCH PARTICULAR, IT CANNOT BE ASCERTAINED WHETHER ON SALE OF ANY ASSET, THERE IS ANY PROFIT LIABLE TO BE TAXED UNDER SECTION 41(2) OR TERMINAL LOSSES ALLOWABLE UN DER SECTION 32(1)(III).THIS AMENDMENT ALSO STRENGTHENS THE CLAIM THAT NOW ONLY DETAIL FOR BLOCK OF ASSETS HAS TO BE MAINTAINED AND NOT SEPARATELY FOR EACH ASSET (PARA 32). 22. SO, WE RELY ON THE RATIO DECIDENDI OF THE DECIS ION RENDERED BY THE HONBLE DELHI HIGH COURT IN OSWAL AGRO MILLS LD (SUPRA) WHERE THE ASSESSEE I N THAT CASE CLAIMED DEPRECIATION ON ITS VARIOUS ASSETS WHICH INCLUDED THE CLAIM OF DEPRECIATION IN RESPECT OF A CLOSED UNIT AT BHOPAL (NON-USED FOR SIX YEARS) WAS DISALLOWED BY THE AO, WHICH WAS LATE R ALLOWED BY THE TRIBUNAL ON TWO GROUNDS (I) THERE WAS A PASSIVE USE OF THE ASSETS AT BHOPAL UNI T, WHICH WOULD BE TREATED AS USED FOR THE PURPOSE 17 IT(SS)A NOS.146 TO 152/KOL/2017 HINDUSTHAN ENGINEERING & IND. LTD., AY 2009-10 TO 2015-16 OF BUSINESS AND (II) AS IT WAS A CASE OF DEPRECIAT ION ON BLOCK OF ASSETS, THE ASSETS OF BHOPAL UNIT COULD NOT BE SEGREGATED FOR THE PURPOSE OF ALLOWING DEPRECIATION AND DEPRECIATION HAD TO BE ALLOWED ON ENTIRE BLOCK OF ASSETS. THE HONBLE HIGH COURT U PHELD THE ORDER OF THE TRIBUNAL ON THE 2 ND REASON STATED HEREIN AND AS DISCUSSED ABOVE. HOWEVER, THE FIRST REASON OF TRIBUNAL THAT PASSIVE USER OF PLANT AND MACHINERY WHICH THEORY IN THE FACTS AND C IRCUMSTANCES I.E. (SIX YEARS NON-USER OF UNIT AND NO SIGN OF THAT UNIT BECOMING FUNCTIONAL) DID NOT F IND FAVOUR WITH THE HONBLE HIGH COURT, WHEREIN THEIR LORDSHIP OBSERVED THAT THE PASSIVE USER, IN THOSE CIRCUMSTANCES, COULD NOT BE EXTENDED TO ABSURD LIMITS. IN ANY CASE, THE HONBLE HIGH COURT UPHELD THE ORDER OF TRIBUNAL AND ACCEPTED THAT THOUGH THE ASSETS OF THE BHOPAL UNIT WERE NOT FUNCT IONAL SINCE BEING PART OF BLOCK OF ASSETS THEY CANNOT BE SEGREGATED AND DEPRECIATION HAS TO BE ALL OWED 23 ALSO BOMBAY HIGH COURT IN THE CASE OF CIT V. M/S SONIC BIOCHEM EXTRACTIONS (P) LTD. ITA NO. 2088/2013 DATED 17.11.2015 WHILE DISMISSING THE APPEAL OF REVENUE WHEREBY DEPRECIATION WAS CLAIMED IN RESPECT OF PLANT AND MACHINERY OF DISCON TINUED BUSINESS WHICH IS NOT LIKELY TO BE REVIVED HAS HELD AS UNDER: C. ON FURTHER APPEAL TO THE TRIBUNAL THE IMPUGNED ORDER HELD THAT THE REFINING MACHINERY WAS A PART OF THE BLOCK OF ASSETS OF PLAN T AND MACHINERY. IN SUCH A CASE DEPRECIATION IS GRANTED TO THE ENTIRE BLOCK OF ASSE TS WHETHER OR NOT AN INDIVIDUAL ITEM THEREIN HAS BEEN USED DURING THE SUBJECT ASSESSMENT YEAR. IN SUPPORT THE IMPUGNED ORDER PLACED RELIANCE UPON ON ITS DECISION IN THE CASE OF DCIT VS. BOSKALIS DREDGING INDIA (P) LTD. 53 SOT 17 (MUM) WHEREIN IT HAS BEEN HELD THAT ONCE THE CONCEPT OF BLOCK OF ASSETS WAS BROUGHT INTO EFFECT FROM ASSESSMENT YEAR 1989-90 ON WARDS THEN THE AGGREGATE OF WRITTEN DOWN VALUE OF ALL THE ASSETS IN THE BLOCK AT THE BE GINNING OF THE PREVIOUS YEAR ALONG WITH ADDITIONS MADE TO THE ASSETS IN THE SUBJECT ASSESSM ENT YEAR DEPRECIATION IS ALLOWABLE. THE INDIVIDUAL ASSET LOOSES ITS IDENTITY FOR PURPOSES O F DEPRECIATION AND THE USER TEST IS TO BE SATISFIED AT THE TIME THE PURCHASED MACHINERY BECOM ES A PART OF THE BLOCK OF ASSETS FOR THE FIRST TIME. IN THE CIRCUMSTANCES THE RESPONDENTS APPEAL WAS ALLOWED AND THE DISALLOWANCE OF DEPRECIATION WAS DELETED. D. MRS. BHARUCHA, LEARNED COUNSEL FOR THE REVENUE F AIRLY STATES THAT THE ISSUE ARISING HEREIN IS IDENTICAL TO THE ISSUE WHICH AROSE BEFORE THE TRIBUNAL IN BOSKALIS DREDGING INDIA (SUPRA) WHERE ALSO THE DREDGER CONCERNED WAS A PART OF THE BLOCK OF ASSETS AND NOT PUT TO USE. ON INSTRUCTIONS, SHE FURTHER STATES THAT THE REVENUE HAS ACCEPTED THE DECISION OF THE TRIBUNAL IN BOSKALIS DREDGING INDIA (SUPRA) WHICH T HE IMPUGNED ORDER HAS MERELY FOLLOWED. NO DISTINGUISHING FEATURE IN THE PRESENT FACTS HAS BEEN POINTED OUT WHICH WOULD WARRANT TAKING A DIFFERENT VIEW. BESIDES THE TRIBUNAL IN I TS ORDER IN BOSKALIS DREDGING INDIA (SUPRA) PLACED RELIANCE UPON THE DECISION OF THIS C OURT RENDERED IN AN APPEAL FILED BY THE REVENUE IN G.R. SHIPPING LTD. BEING INCOME TAX APPE AL NO.598 OF 2009 WHICH WAS DISMISSED ON 20.07.2008 UPHOLDING THE VIEW OF THE T RIBUNAL ON IDENTICAL ISSUE. MOREOVER IT IS CLARIFIED BY THE COUNSEL THAT THE REFINING MACHI NERY HAS ITSELF BEEN SOLD DURING THE NEXT YEAR. E. IN THE ABOVE VIEW QUESTION NOS.(A) & (B) FORMULA TED DO NOT GIVE RISE TO ANY SUBSTANTIAL QUESTIONS OF LAW. ACCORDINGLY NOT ENT ERTAINED. 18 IT(SS)A NOS.146 TO 152/KOL/2017 HINDUSTHAN ENGINEERING & IND. LTD., AY 2009-10 TO 2015-16 24 LIKEWISE GUJARAT HIGH COURT IN THE CASE OF NIRMA CREDIT AND CAPITAL LTD. V. ACIT REPORTED IN 390 ITR 302 HAS HELD AS UNDER: 8. THE RECORD REVEALS THAT THE REASON ASSIGNED BY THE ASSESSING OFFICER FOR REJECTING THE DEPRECIATION IS THAT THE ASSESSEE HAD STOPPED THE M ANUFACTURING ACTIVITY AND THEREFORE, THE QUESTION OF USE OF MACHINERY DOES NOT ARISE. HOWEVE R, THE CIT(A) REVERSED THE FINDINGS OF THE ASSESSING OFFICER ON THE PREMISE THAT INDIVIDUA L ITEMS INCLUDED IN THE BLOCK ARE NOT TO BE CONSIDERED SEPARATELY FOR THE PURPOSES OF GRANTING DEPRECIATION IN LIGHT OF THE AMENDED PROVISIONS. WE DO NOT FIND ANY LEGAL INFIRMITY IN T HE AFORESAID VIEW ADOPTED BY THE FIRST APPELLATE AUTHORITY SINCE THE ASSESSMENT ORDER ITSE LF REVEALS THAT IT IS NOT THE CASE OF ASSESSING OFFICER THAT THE ASSETS WERE NOT PUT TO U SE AT ALL. ONCE THE FACTORY BUILDING IS PUT TO USE, IT IS NOT POSSIBLE TO RESTRICT THE DEPRECIA TION ON THE SAID BUILDING BY STATING THAT ONLY A PORTION THEREOF HAS BEEN PUT TO USE. SIMILARLY, I N RELATION TO BLOCK OF ASSETS, IT IS NOT POSSIBLE TO SEGREGATE ITEMS FALLING WITHIN THE BLOC K FOR THE PURPOSES OF GRANTING DEPRECIATION OR RESTRICTING THE CLAIM THEREOF. ONCE IT IS FOUND THAT THE ASSETS ARE USED FOR BUSINESS, IT IS NOT NECESSARY THAT ALL THE ITEMS FALLING WITHIN PLA NT AND MACHINERY HAVE TO BE SIMULTANEOUSLY USED FOR BEING ENTITLED TO DEPRECIATION. 25. THEREFORE, FOLLOWING THE AFORESAID JUDGMENTS SI NCE THE ASSETS OF M/S.MSL AFTER AMALGAMATION HAVE BECOME ASSETS OF ASSESSEE COMPANY BY OPERATION OF LAW IT FALLS IN TO THE BLOCK OF ASSETS OF THE ASSESSEE COMPANY FROM 01.04.2009 AND THOUGH SUCH ASSETS, NON-FUNCTIONAL, YET THEY CANNOT BE SEGREGATED AND DEPRECIATION HAS TO B E ALLOWED TAKING THE FIRST YEAR AS AY 2010-11 ONWARDS AND WDV TO BE CALCULATED FOR AY 2012-13 AS DISCUSSED ABOVE AND WE ORDER THE AO TO CALCULATE THE WDV ACCORDINGLY AND ALLOW THE SAME IN ACCORDANCE TO LAW. GROUNDS 6, 7 AND 8 FOR AY 2012-13 ARE THEREFORE STANDS ALLOWED. 26 GROUND NO. 9 OF AY 2012-13 IS REGARDING THE ACTI ON OF AO/LD. CIT(A) IN DISALLOWING THE CLAIM OF ASSESSEE IN RESPECT TO BROUGHT FORWARD LOS S AND CLAIM OF ALLOWANCE OF UNABSORBED DEPRECIATION IN THE LIGHT OF BIFR SANCTIONED SCHEME . BRIEF HISTORY OF M/S. MSL CAN BE TAKEN NOTE FROM THE CHART GIVEN BELOW, WHICH SHOWS THAT M/S. M SL WAS INITIALLY INCORPORATED IN THE YEAR 1989 IN THE NAME OF MADHYA PRADESH IRON STEEL (MPIS) AS A STEEL DIVISION OF HINDUSTAN DEVELOPMENT CORPORATION LTD. (HDCL) WHICH WAS PUBLIC LIMITED CO MPANY INCORPORATED AS EARLY AS IN YEAR 1944. DUE TO A MAJOR FIRE AT ITS SUB STATIONS ON 1 5.10.1998, COMPANY (NOW MSL) DECLARED LAY OFF, WHICH ACTION OF IT WAS LATER HELD BY HONBLE MP HIG H COURT AS ILLEGAL; AND ON 04.03.2000, THE LABOUR DEPARTMENT OF GOVT. OF MP CLOSED DOWN THE FA CTORY. THEREAFTER, THE COMPANY FILED A REFERENCE TO BIFR AND THE COMPANY WAS DECLARED SICK BY BIFR ON 03.08.2005. BIFR AFTER CIRCULATING DEBT REHABILITATION SCHEME (DRS) ON 20. 04.2012 TO THE NODAL AGENT OF THE REVENUE (INCOME TAX DEPARTMENT) I.E. THE DIRECTOR GENERAL O F INCOME TAX (ADMN) AND DIRECTOR OF INCOME TAX (RECOVERY) AND TAKING NOTE OF THEIR VIEWS/OBJEC TIONS SUBMITTED BY IT (REVENUE) ON 16.07.2012, THE BIFR PASSED SANCTIONED SCHEME (SS-12). A TABULA TION OF THE HISTORY, DATES AND EVENTS 19 IT(SS)A NOS.146 TO 152/KOL/2017 HINDUSTHAN ENGINEERING & IND. LTD., AY 2009-10 TO 2015-16 PARTICULARLY GIVING THE DETAILS OF INCOME TAX DEPAR TMENTS PARTICIPATION IN BIFR AND AAIFR PROCEEDINGS IS AS BELOW: 1. 11.09.1944 HINDUSTAN DEVELOPMENT CORPORATION LTD . (HDCL) WAS INCORPORATED 2. 1989 MP IRON & STEEL CO. (MPISC) AS STEEL DIVISI ON OF HDCL WAS FORMED (STEEL DIVISION, UNIT OF HDCL) LATER NAME CHANGED TO M/S M SL 3. 03.1993 MPISC (LATER MALANPUR STEELS LTD. (MSL) COMPANYS PERFORMANCE REMAINED UNSATISFACTORY SINCE THEN. 4. 15.10.1998 MAJOR FIRE IN THE SUB-STATION, OPERAT ION SUSPENDED (MPISC LATER MSL) 5. 20.10.1998 DECLARED LAY OFF, HELD BY M P HIGH CO URT AS ILLEGAL 6. 04.03.2000 THE UNIT CLOSED BY THE SECRETARY, LAB OUR DPTT. (GOVT. OF MP) 7. 04.2000 HDCL LATER NAME CHANGE TO MALANPUR STEEL LTD. (MSL) . WHICH WAS A PUBLIC LTD. COMPANY TRANSFERRED ALL ITS DIVISIONS ( ENGINEERING, CHEMICAL, HIGH-TENSION INSULATED) IN VARIOUS PLACES TO HEIL ( ASSESSEE) WHICH WAS SANCTIONED BY HONBLE CALCUTTA HIGH COURT EXCEPT TH E STEEL DIVISION M/S MPISC (LATER MSL) 8. 16.04.2001 THE NAME OF HDCL WAS CHANGED TO MSL 9. 14.06.2002 / 11.03.2003 MSL COMPANY FILED REFERENCE IN BIFR AS A SICK COMPA NY AND REGISTERED AS BIFR CASE NO. 158/2001 10. 03.08.2005 COMPANY DECLARED SICK IN TERMS OF SECTIO N 3(1)(0) OF SICA AMD PNB APPOINTED AS OPERATING AGENCY TO FORMULATE SCHEME U /S. 17(3) OF SICA 11. 20.04.2012 BIFR CIRCULATED DRS WHICH WAS RECEIVED B Y DIT(R) ON 10.05.2012. THE IT RELIEFS IN THE DRS WERE PROVIDED IN PARA 15.8 12. 10.05.2012 DIT (R) SENT LETTER TO COMPANY TO FILE R ELEVANT DETAILS IN SUPPORT OF THE RELIEFS. 13. 08.06.2012 DIT (R) SENT COMMENTS/OBJECTIONS TO BIFR U/S. 19(2) OF SICA WITHIN STATUTORY TIME LIMIT OF 60 DAYS OPPOSING THE GRANTI NG THE IT RELIEFS IN DRS. 14. 21.06.2012 COMPANY SENT LETTER DATED 04.06.2012 TO THE DIT (R) ALONG WITH SOME DETAILS. 15. 13.07.2012 DIT(R) SENT COMMENTS TO BIFR AFTER TAKIN G INTO CONSIDERATION THE COMPANYS REPLY DATED 04.06.2012 AND ASKED TO RETAI N U/S 72(3) AND 72A FOR CONSIDERATION OF THE DEPARTMENT BY PREFIXING THE WO RD TO CONSIDER AND OPPOSING ALL OTHER IT RELIEFS PROVIDED IN PARA 15.8 OF DRS. 16. 16.07.2012 HEARING HELD BEFORE BIFR TO HEAR COMMENT S. HEARING ATTENDED BY THE COUNSEL OF THE DEPARTMENT AND OBJECTION/SUGGESTIONS TO ALL THE RELIEFS AS PER LETTER DATED 08.06.2012 AND 13.07.2012. BIFR DIRECT ED THAT EXCEPT SUB PARA (G) OF PARA 15.8, ALL OTHER SUB PARAS (A) TO (F) AN D (H) OF PARA 15.8 BE PREFIXED WITH WORD TO CONSIDER. V SUB PARA (G) OF PARA 15.8 BE RETAINED WITHOUT ANY CHANGE AND SANCTION THE SCHEME. BIFRS SOP/ORDER DA TED 16.07.2012 RECEIVED IN THIS DIRECTORATE ON 09.08.2012. 17. 04.09.2012 BIFR SANCTIONED A SCHEME ( SS-12 ), COPY RECEIVED IN THIS DIRECTORATE ON 12.09.2012. AS PER PARA 15.8 UNDER THE HEAD CBDT, IT RELIEFS ARE FOR CONSIDERATION [EXCEPT SUB PARA (G) ]. ACCORDINGLY, THE RELIEFS ARE PROVIDED IN SUB PARA (A) TO (F) AND (H) PF 15.8 WITH THE WORD TO CONSIDER AND RELIEF AS PER SUB PARA- (G) OF PARA 15.8 IN SS RETAINED WITHO UT ANY CHANGE. HENCE THE PRESENT APPEAL. 20 IT(SS)A NOS.146 TO 152/KOL/2017 HINDUSTHAN ENGINEERING & IND. LTD., AY 2009-10 TO 2015-16 27. WE NOTICE THAT IN THE IMPUGNED ORDER OF ASSESSM ENT, AO DIRECTED THE APPELLANT TO EXPLAIN THE ALLOWABILITY OF CARRY FORWARD AND SET OFF OF BR OUGHT FORWARD BUSINESS LOSS/DEPRECIATION AS PER THE PROVISIONS OF THE ACT. IT HAS BEEN NOTED AGAINST TH E ABOVE THE ASSESSEE SUBMITTED A LETTER DATED 29.12.2016, WHERE RELIANCE WAS PLACED ON THE ORDER DATED 4.9.2012 OF BIFR AND STATED THAT THE SAID AUTHORITY HAD DIRECTED FOR GRANT OF RELIEF AND CONC ESSIONS AS ENUMERATED IN PARA 15.8 PAGE 26 OF THE SAID ORDER. THE AO ON CONSIDERATION OF THE ABOVE P LEA HELD AS UNDER: ON THE BASIS OF THE ABOVE CONCESSIONS SOUGHT BY MS L, THE HONBLE BIFR, HAS PROVIDED TWO TYPES OF CONCESSIONS- I) CONCESSIONS INDICATED FOR THE AUTHORITIES/AGENCIES AS IN PARA 15.1, 15.2, 15.6, 15.9, 15.11, 15.12, 15.13, 15.14, 15.15 FOR THEM TO FOLLOW. II) CONCESSIONS INDICATED FOR THE AUTHORITIES/AGENCIES AS IN PARA 15.3, 15.4, 15.5, 15.8 {EXCEPT SUB-PARA(G)}, 15.10 FOR THEM TO CONSID ER. THEREFORE OSTENSIBLY, THERE IS A DIFFERENCE IN THES E TWO VARIETIES OF CONCESSIONS INDICATED BY THE HONBLE BIFR WHICH IS EVIDENT FROM THE INSERTION OF WORD TO CONSIDER, IN THE SECOND VARIETY AS INDICATED ABOVE . THIS IS FURTHER CORROBORATED BY THE READING OF CLAUSE (XIX) UNDER GENERAL TERMS AND CONDITIONS, AS IS PROVIDED BELOW:- 17. GENERAL TERMS AND CONDITIONS XIX) NOTWITHSTANDING ANYTHING CONTAINED HEREINABOVE , THE RELIEFS AND CONCESSIONS TO THE ALLOWED TO THE COMPANY SHALL WITH WITHIN THE POLICY GUIDELINES OF THE CONCERNED STATE/CENTRAL GOVT/OTHER GOVT AGENCIES. 11. THUS, IT IS CLEAR THAT FOR STATE/CENTRAL GOVT. AGENCIES THE CONCESSIONS INDICATED ARE OF THE NATURE OF GUIDELINES AND NOT D IRECTIVES, TO BE CONSIDERED BY THE CONCERNED AUTHORITIES AND TO BE ALLOWED ONLY WITHIN THE FOUR CONCERNS OF THE LAW. THIS FACT, FINDS FORCE FROM THE ORDER OF HONBLE AAIFR WHEREIN IT HAS CLARIFIED THE EXCEPTION PROVIDED BY HONBLE BIFR IN SUB-PARA (G) OF PARA 15.8 . THE HONBLE AAIFR VIDE ITS ORDER DATED 22.03.2013, AN APPEAL NO .180/12 (A/W MA NO.350/12) HAS OBSERVED THAT:- HEARD THAT LD. COUNSEL FOR THE APPELLANT AS WELL A S THE CAVEATOR. AFTER CONSIDERING THE SUBMISSIONS AND PERUSAL OF PARA 15.8(G) OF THE SANCTIONED SCHEME, THIS AUTHORITY IS OF THE VIEW THAT THE RELIEF GRANTED UNDER THE SA ID PARA DOES NOT OVERRIDE THE PROVISIONS OF SECTION 72A OF THE INCOME TAX ACT OR ANY OTHER STATUTORY PROVISION FOR THE TIME BEING IN FORCE. AS SUCH, THE CONTENTION A ND APPREHENSIONS OF THE APPELLANT ARE COMPLETELY MISPLACE. THERE IS NO MERIT IN THE APPEAL. THE APPEAL IS DISMISSED ACCORDINGLY. IN FACT IN THE SAID SUB-PARA (G( OF PARA 15.8 OF HO NBLE BIFR, IT IS CLEARLY STATED THAT THE EFFECT OF THIS PROVISION SHALL BE GIVEN IN THE MANNER AS IS PROVIDED UNDER SECTION 72A OF THE INCOME TAX ACT, 1961 OR OTHERWISE ANY ST ATUTORY PROVISIONS FOR THE TIME BEING IS ENFORCED. THE ORDER OF THE HONBLE AAIFR LENDS CREDENCE TO TH E DISCUSSIONS MADE IN VARIOUS PARAGRAPHS OF THIS ORDER IN CONNECTION WITH ALLOWAB ILITY OF BROUGHT FORWARD BUSINESS AND DEPRECIATION LOSS OF MSL IN THE HANDS OF THE AS SESSEE COMPANY AFTER MERGER. 28 THE APPELLANT IN RESPECT OF ABOVE CLAIM IN FIRST APPEAL BEFORE CIT(A) SUBMITTED AS UNDER: 21 IT(SS)A NOS.146 TO 152/KOL/2017 HINDUSTHAN ENGINEERING & IND. LTD., AY 2009-10 TO 2015-16 THE APPELLANT HAD CLAIMED SET OFF OF BROUGHT FORWA RD LOSS OF MSL AT RS.1,21,06,26,360/- FROM A.Y 2000-2001 ONWARDS WHIC H THE AO DENIED ON THE GROUND THAT AS PER PROVISIONS OF SEC. 72, BUSINESS LOSS OF SUCH YEARS WHICH HAVE EXCEEDED TIME PERIOD OF 8 YEARS AND AS SUCH COULD NOT HAVE BEEN C ARRIED FORWARD AND SET OFF BEYOND 8 YEARS. THE AO FAILED TO APPRECIATE THE FACT THAT THE ORDER OF BIFR IN SUCH REGARD CLEARLY AND SPECIFICALLY DIRECTED THE ALLOWANCE OF ANY LAPSED LOSSES. THE ALLOWANCE OF SET OFF OF LAPSES LOSSES BY THE BIFR CLEARLY MADE THAT THE PROVISION OF SEC. 72 WERE NOT AT ALL APPLICABLE AND SUCH LOSSES WERE ELI GIBLE FOR SET OFF BY THE AMALGAMATED CONCERN I.E. APPELLANT COMPANY. THE AO HAS CHOSEN TO APPLY THE DIRECTION OF BIFR AS PER ITS OWN SWEET WILL AND HAS IGNORED SUCH ORDER O F BIFR ALTHOUGH THEY WERE BINDING ON IT AND AS SUCH THE ACTION OF THE AO IN NOT GRANT ING THE ALLOWANCE OF BROUGHT FORWARD BUSINESS LOSS OF RS.1,21,06,26,360/- IN THE IMPUGNED ASSESSMENT YEAR I.E. A.Y 2012-13 IS WHOLLY BAD AND ILLEGAL AND IT MAY KINDLY BE HELD ACCORDINGLY. 29 THE CIT(A) CONSIDERATION OF THE ABOVE HAS HELD A S UNDER: I HAVE CONSIDERED FINDINGS OF THE AO IN THE ASSESS MENT ORDER AND THE WRITTEN SUBMISSION FILED BY THE AR DURING THE APPELLANT PRO CEEDINGS. REGARDING BROUGHT FORWARD DEPRECIATION AND BUSINESS LOSS I THINK THE AO HAS VERY CLEARLY BROUGHT IT ON RECORD FROM THE RECORDS OF THE ASSESSEE ITSELF THAT THE STEEL PLANT OF THE ASSESSEE IS CLOSED SINCE 28-10-1998. AS THE ASSESSEE DOES NOT INTEND TO REOPEN THIS PLANT FURTHER IN THE FUTURE AND THE ASSESSEE FURTHER WANTS TO EXI T FROM THIS BUSINESS, THERE IS NO QUESTION OF ALLOW-ABILITY OF CARRIED FORWARD BUSINE SS LOSS OR DEPRECIATION FOR THE STEEL PLANT. FURTHER REGARDING DISALLOWANCE OF DEPRECIAT ION ON PLANT AND MACHINERY IN THE CASE OF M/S MSL, THE ASSESSEE HAD PREFERRED AN APPE AL ON THE SAME ISSUE BEFORE MY PREDECESSOR AND HE HAS GIVEN A SPEAKING ORDER VIDE APPEAL NO.227/CC- XXV/CIT(A)C-III/08-09 DATED 30-11-2010. IN THIS OR DER MY PREDECESSOR HAS CONFIRMED THE DISALLOWANCE OF DEPRECIATION AND I FI ND NO REASON TO INTERFERE IN FINDINGS GIVEN MY PREDECESSOR ON THE SAME ISSUE IN ASSESSEES OWN CASE, THEREFORE ASSESSEES APPEAL ON THIS ISSUE IS ALSO DISMISSED. THE AR HAS FILED A LETTER ALONG WITH OR ORDER OF HO NBLE BIFR DT.06-09-2012 STATING THAT THE HONBLE BIFR HAS GRANTED RELIEFS A ND CONCESSION TO THE ASSESSEE. DURING THE APPELLATE PROCEEDINGS THE AR HAS ALSO BR OUGHT IT ON RECORD THAT THE ASSESSEE HAS WRITTEN A LETTER TO THE CBDT IN THIS R EGARD. BUT SO FAR NO COMMUNICATION HAS BEEN RECEIVED FROM THE CBDT. AS PER THE DIRECT ION OF THE HONBLE CALCUTTA HIGH COURT TO DECIDE THIS CASE AND PASS AN APPEAL ORDER PREFERABLY WITHIN SIX WEEKS FROM THE DATE OF RECEIPT OF THE HONBLE HIGH COURTS DIR ECTION, THIS CASE IS BEING DECIDED ON THE BASIS OF MATERIAL AVAILABLE ON RECORD AND AS PE R THE PROVISIONS OF THE INCOME TAX ACT, 1961. I THINK AS PER PROVISION OF SECTION 72 OF THE I T ACT, 1961, BUSINESS LOSS CAN BE CARRIED FORWARD TO THE FOLLOWING ASSESSMENT YEAR AND SO ON FOR SEVEN ASSESSMENT YEARS IMMEDIATELY SUCCEEDING ONLY. IN THIS CONTEXT THE ASSESSEES CLAIM THAT AS PER HONBLE BIFRS ORDER OF MERGER THE ASSESSEE IS ENTI TLED TO CARRY FORWARD AND SET OFF OF LAPSED LOSSES, DOES NOT HOLD GOOD AS PER THE EXISTI NG PROVISIONS FOR CARRY FORWARD OF BUSINESS LOSS IN THE I T ACT. 1961. ACCORDINGLY, I THINK THE AO IS VERY MUCH JUSTIFIED IN DISALLOWING THE CLAIM OF THE CARRY FORWARD OF BUSIN ESS LOSS OF RS.1886371316/- FROM THE ASSESSMENT YEAR 2000-01. THUS, ASSESSEES APPE AL ON THIS ISSUE IS ALSO DISMISSED. IN THE RESULT, ASSESSEES APPEAL ON GROUNDS ON 7,8, 9 AND 10 ARE DISMISSED. 22 IT(SS)A NOS.146 TO 152/KOL/2017 HINDUSTHAN ENGINEERING & IND. LTD., AY 2009-10 TO 2015-16 30 THE LD. AR BEFORE US SUBMITTED THAT THE APPELLAN T HAD CLAIMED THE FOLLOWING LOSSES OF THE MERGED UNIT I.E. MALANPUR STEEL LTD. AGGREGATING TO RS. 2,13,01,09,473/- (BUSINESS LOSS-RS. 1,40,44,64,925/- AND UNABSORBED DEPRECATION RS. 7 2,56,44,548/-) INCLUDING THE LOSSES FOR AYS 2000-01, 2001-02 AND 202-03. HE SUBMITTED THAT THE AO WHILE GIVING EFFECT TO THE ORDER OF HONBLE BIFR IN A.YS 2009-10, 2010-11, 2011-12, 201 2-13 & 2013-14 DID NOT GRANT THE BENEFIT OF UNABSORBED DEPRECIATION OF RS.72,56,44,548/0 ON THE GROUND THAT SINCE THE FACTORY AT MALANPUR IS CLOSED DOWN AND HENCE SET OFF OF UNABSORBED DEPRECI ATION WAS DENIED. AS REGARDS BUSINESS LOSS OF RS.1,40,44,64,925/- AO GRANTED SET OFF OF ONLY RS.9 1,70,02,240/- AND DENIED THE BROUGHT FORWARD LOSS SO GRANTED BY THE HONBLE BIFR ON THE GROUND T HAT IT INCLUDES LAPSED LOSSES AND THE SAME CANNOT BE CONSIDERED AS PER PROVISIONS OF INCOME TA X ACT BEYOND 8 YEARS AND HENCE REDUCED THE AVAILABILITY OF SUCH BROUGHT FORWARD LOSS AND UNABS ORBED DEPRECIATION TO ASSESSEE COMPANY. 31 IT WAS SUBMITTED THAT THE RELIEF SO GRANTED BY T HE HONBLE BIFR AT PARA 15.8 OF ITS ORDER CONTAINED THE FOLLOWING RECOMMENDATIONS. A DIRECTION:- CLAUSE G: HINDUSTAN ENGINEERING & INDUSTRIES L TD. (HEIL) SHALL BE ENTITLED TO CARRY FORWARD AND SET OFF OF THE ACCUMULATED LOSSES (INCLUDING LAPSES LOSSES) AND UNABSORBED DEPRECIATION AS PER INCOME-TAX ACT, 1961 TILL SUCH LOSSES ARE SET OFF AND FULLY AGAINST THE INCOME IN ASSESSMENT YEAR SUBSEQU ENT TO ASSESSMENT YEAR DURING WHICH THE MERGER OF MALANPUR STEEL LTD AS ABOVE SHALL TAK E PLACE. THE EFFECT OF THIS PROVISION SHALL BE PROVIDED IN THE MANNER AS PROVIDED U/S 72A OF THE IT ACT, 1961 OR OTHERWISE FOR A STATUTORY PROVISION FOR THE TIME BEING IS ENFORCE D. 32 FURTHER RELIANCE WAS PLACED ON FOLLOWING JUDGMEN TS: A) CIT V. J.K. CORPORATION LTD. (2011) 331 ITR 303 (KOL) [PG 153) : JURISDICTIONAL HIGH COURT EVEN OBSERVED AT PARA 28, 29 WHEN THE B OARD IS SATISFIED THAT ALL CONDITIONS ARE FULFILLED FOR GIVING CONSENT FOR TA KING REHABILITATION MEASURES BY AMALGAMATION, SEPARATE CONSENT BY CBDT NOT REQUIRED . B) INDIAN SHAVING PRODUCTS V. BIFR (1996) 218 ITR 1 40 (SC) [PG 164] C) CIT V. TUBE INVESTMENT INDIA LTD. (MADRAS HC) [PG 1 76] D) DCIT V. SREE JANADAN MILLS (MADRAS HC) [PG. 179] 33 THE LD. DR DREW SUPPORT FROM THE ORDERS OF AO AN D CIT(A) AND VEHEMENTLY OPPOSED THE CONTENTION OF THE ASSESSEE THAT LAPSED LOSSES AFTER EIGHT YEARS CAN BE CLAIMED BECAUSE OF BIFR ORDER. ACCORDING TO THE LD. DR, CONDITION STIPULATED IN SU B-SECTION (2) OF SEC. 72A HAVE TO BE COMPLIED WITH BEFORE GRANT OF CARRY FORWARD LOSSES CLAIMED BY ASSESSEE COMPANY AND SINCE MSL HAS NOT 23 IT(SS)A NOS.146 TO 152/KOL/2017 HINDUSTHAN ENGINEERING & IND. LTD., AY 2009-10 TO 2015-16 STARTED FUNCTIONAL, THE AO RIGHTLY DID NOT ALLOW TH E CLAIM AND HE DOES NOT WANT US TO INTERFERE IN THE ORDER OF THE AUTHORITIES BELOW. 34 WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULL Y PERUSED THE RECORDS AND JUDICIAL PRECEDENTS CITED BEFORE US. IN ORDER TO APPRECIATE THE CLAIM OF THE ASSESSEE AND ITS PRAYER TO GIVE EFFECT TO THE BIFR ORDER PASSED ON 04.09.2012, WE N EED TO EXAMINE THE SCOPE AND POWER OF SANCTIONED SCHEME OF BIFR AND FOR THAT WE NEED TO R EFER THE SICK INDUSTRIAL COMPANIES (SPECIAL PROVISIONS) ACT, 1985 (HEREINAFTER REFERRED TO AS SICA ACT). 35 THE PREAMBLE TO SICA ACT STATES THAT SICA WAS IN TRODUCED IN THE PUBLIC INTEREST TO MAKE SPECIAL PROVISIONS FOR DETECTION OF SICK UNITS AND EXPEDITIOUS ENFORCEMENT OF THE MEASURES DETERMINED BY AN EXPERT BOARD (I.E. BIFR) TO REVIVE SUCH SICK UNIT, WE THEREFORE, HAS TO KEEP THIS OBJECT OF THE SICA ACT IN MIND WHILE DECIDING THE P RAYER OF THE ASSESSEE TO GIVE EFFECT TO BIFR ORDER. 36 WE NOTE THAT SICA ACT WAS ENACTED IN THE PUBLIC INTEREST, WITH SPECIAL PROVISIONS ENACTED WITH A VIEW TO SECURING THE TIMELY DETECTION OF SIC K AND POTENTIALLY SICK COMPANIES OWING INDUSTRIAL UNDERTAKINGS, THE SPEEDY DETERMINATION BY A BOARD O F EXPERTS OF THE PREVENTIVE, AMELIORATIVE, REMEDIAL AND OTHER MEASURES WHICH WERE NEEDED TO BE TAKEN WITH RESPECT TO SUCH COMPANIES AND THE EXPEDITIOUS ENFORCEMENT THEREOF. SECTION 4 CONSTITU TES THE BOARD FOR INDUSTRIAL AND FINANCIAL RECONSTRUCTION (BIFR/BOARD) AND SECTION 5 CONSTITUT ES THE APPELLATE AUTHORITY (AAIFR), CHAPTER III DEALS WITH REFERENCES, INQUIRIES AND SCHEMES. T HE PROVISIONS OF SECTION 15(1) STATE THAT THERE AN INDUSTRIAL COMPANY HAS BECOME A SICK INDUSTRIAL COM PANY, ITS BOARD OF DIRECTORS SHALL, WITHIN SIXTY DAYS FROM THE DATE OF FINALISATION OF THE DULY AUDI TED ACCOUNTS OF THE COMPANY FOR THE FINANCIAL YEAR AS AT THE END OF WHICH THE COMPANY HAS BECOME A SIC K INDUSTRIAL COMPANY, MAKE A REFERENCE TO THE BIFR FOR DETERMINATION OF THE MEASURES WHICH SHOULD BE ADOPTED WITH RESPECT TO THE COMPANY. A SICK INDUSTRIAL COMPANY AS DEFINED BY SECTION 3(1 )(O) MEANS AN INDUSTRIAL COMPANY (BEING A COMPANY REGISTERED FOR NOT LESS THAN FIVE YEARS) WH ICH HAS AT THE END OF ANY FINANCIAL YEAR ACCUMULATED LOSSES EQUAL TO OR EXCEEDING ITS ENTIRE NET WORTH. SECTION 16 REQUIRES THE BIFR TO MAKE SUCH INQUIRY AS IT MAY DEEM FIT FOR DETERMINING WHE THER ANY INDUSTRIAL COMPANY HAS BECOME A SICK INDUSTRIAL COMPANY, INTER ALIA, UPON RECEIPT OF A R EFERENCE WITH RESPECT TO SUCH COMPANY UNDER SECTION 15. THE BIFR MAY, FOR THE DISPOSAL OF SUCH INQUIRY, REQUIRE AN OPERATING AGENCY (OA) TO ENQUIRE INTO AND MAKE A REPORT WITH RESPECT TO SUC H MATTERS AS THE BIFR MAY SPECIFY (IN THIS CASE, PUNJAB NATIONAL BANK (PNB) WAS APPOINTED AS OPERA TING AGENCY (OA) BY BIFR BY ITS ORDER DATED 24 IT(SS)A NOS.146 TO 152/KOL/2017 HINDUSTHAN ENGINEERING & IND. LTD., AY 2009-10 TO 2015-16 03.08.2005). UNDER SECTION 17, THE BOARD PASSES A S UITABLE ORDER FOR COMPLETION OF THE ENQUIRY MADE BY OPERATING AGENCY. THE BOARD AS PER SEC.18 H AVING CONSIDERED EVERYTHING AS MENTIONED IN SEC.17 PREPARES AND SANCTIONS THE SCHEME FOR REVIVA L AND REHABILITATION WITH VARIOUS MEASURES, WHICH INCLUDES AMALGAMATION OF THE SICK COMPANY WIT H ANOTHER COMPANY. 37 WHERE AN ORDER HAS BEEN MADE UNDER SECTION 17(3) IN RELATION TO ANY SICK INDUSTRIAL COMPANY, THE OPERATING AGENCY SPECIFIED IN THE ORDE R SHALL PREPARE A SCHEME WITH RESPECT TO SUCH COMPANY PROVIDING FOR THE MEASURES SET OUT THEREIN. THE FOLLOWING MEASURES IS REFERRED TO IN SECTION 18 INCLUDES CLAUSE (C ) (I), NAMELY, THE AMALGAMATION OF THE SICK INDUSTRIAL COMPANY WITH ANY OTHER COMPANY. THE SCHEME PREPARED BY THE OPER ATING AGENCY IS REQUIRED TO BE EXAMINED BY THE BIFR AND ITS COPIES SENT WITH SUCH MODIFICATI ONS, IF ANY, AS MAY HAVE BEEN MADE BY THE BIFR TO THE SICK INDUSTRIAL COMPANY, THE OPERATING AGENC Y AND TO THE OTHER COMPANY CONCERNED IN THE PROPOSED AMALGAMATION AND, AFTER CONSIDERATION OF O BJECTIONS, THE BIFR IS REQUIRED TO SANCTION THE SCHEME, WHICH WOULD COME INTO FORCE ON SUCH DATE AS IT MIGHT SPECIFY AS PER SUBSECTION (4) OF SECTION 18 OF THE SAID ACT WHICH PROVIDES AS FOLLOW S: (4) THE SCHEME SHALL THEREAFTER BE SANCTIONED, AS SOON AS MAY BE, BY THE BOARD (HEREINAFTER REFERRED TO AS THE `SANCTIONED SCHEME ) AND SHALL COME INTO FORCE ON SUCH DATE AS THE BOARD MAY SPECIFY IN THIS BEHALF. 38 THUS, IT IS PLAIN THAT DATE OF OPERATION OF THE SCHEME MAY BE PROSPECTIVE OR MAY BE RETROSPECTIVE AS THE SITUATION WILL DEMAND AND AS P ER THE DECISION OF THE BOARD, SUB-SECTION (5) OF THE SAID SECTION ALSO PROVIDES FOR REVIEW, MODIFICA TION OF ANY SANCTIONED SCHEME AT THE INSTANCE OF THE OPERATING AGENCY. SUB-SECTION 7 AND SUB-SECTION 8 PROVIDES AS FOLLOWS: SUB-S (7) THE SANCTION ACCORDED BY THE BOARD UND ER SUB-S (4) SHALL BE CONCLUSIVE EVIDENCE THAT ALL THE REQUIREMENTS OF THIS SCHEME R ELATING TO THE RECONSTRUCTION OR AMALGAMATION, OR ANY OTHER MEASURE SPECIFIED THEREI N HAVE BEEN COMPLIED WITH AND A COPY OF THE SANCTIONED SCHEME CERTIFIED IN WRITIN G BY AN OFFICER OF THE BOARD TO BE A TRUE COPY THEREOF SHALL, IN ALL LEGAL PROCEEDINGS(W HETHER IN APPEAL OR OTHERWISE) BE ADMITTED AS EVIDENCE. SUB-S(8) ON AD FROM THE DATE OF THE COMING INTO O PERATION OF THE SANCTIONED SCHEME OR ANY PROVISION THEREOF, THE SCHEME OR SUCH PROVISION SHALL BE BINDING ON THE SICK INDUSTRIAL COMPANY AND THE TRANSFEREE COM PANY OR, AS THE CASE MAY BE, THE OTHER COMPANY AND ALSO ON HE SHAREHOLDERS, CREDITOR S AND GUARANTORS AND EMPLOYEES OF THE SAID COMPANIES. SECTION 19 OF THE SAID ACT PROVIDES FOR REHABILITAT ION ARRANGING FINANCIAL ASSISTANCE AND CONCERNED FINANCIAL INSTITUTIONS WHO HAVE STAKE IN THE SICK INDUSTRIAL COMPANY ARE NOTIFIED FOR CONSENTING AND IF NO CONSENT IS RE CEIVED WITHIN A PARTICULAR PERIOD THEN THE BOAR IS TO ADOPT SUCH OTHER MEASURES. FOR READY REFERENCE SEC.19 OF SICA ACT IS GIVE BELOW: 19. REHABILITATION BY GIVING FINANCIAL ASSISTANCE (1) WHERE THE SCHEME RELATES TO PREVENTIVE, AMELIORATIVE, REMEDIAL AND OTHER MEASUR ES WITH RESPECT TO ANY SICK 25 IT(SS)A NOS.146 TO 152/KOL/2017 HINDUSTHAN ENGINEERING & IND. LTD., AY 2009-10 TO 2015-16 INDUSTRIAL COMPANY, THE SCHEME MAY PROVIDE FOR FI NANCIAL ASSISTANCE BY WAY OF LOANS, ADVANCES OR GUARANTEES OR RELIEFS OR CONCES SIONS OR SACRIFICES FROM THE CENTRAL GOVERNMENT, A STATE GOVERNMENT ANY SCHEDULE D BANK OR OTHER BANK A PUBLIC FINANCIAL INSTITUTION OR STATE LEVEL INSTITUTION O R ANY INSTITUTION OR OTHER AUTHORITY REQUIRED BY A SCHEME TO PROVIDE FOR SUCH FINANCIAL ASSISTANCE BEING HEREAFTER IN THIS SECTION REFERRED TO AS THE PERSON REQUIRED BY THE S CHEME TO PROVIDE FINANCIAL ASSISTANCE) TO THE SICK INDUSTRIAL COMPANY. (2) EVERY SCHEME REFERRED TO IN SUB-SECTION (1) SH ALL BE CIRCULATED TO EVERY PERSON REQUIRED BY THE SCHEME TO PROVIDE FINANCIAL ASSISTANCE FOR HIS CONSENT WITHIN A PERIOD OF SIXTY DAYS FROM THE DATE OF SUCH CIRCU LATION FOR WITHIN SUCH FURTHER PERIOD, NOT EXCEEDING SIXTY DAYS, AS MAY BE ALLOWE D BY THE BOARD, AND IF NO CONSENT IS RECEIVED WITHIN SUCH PERIOD OR FURTHER PERIOD, IT SHALL BE DEEMED THAT CONSENT HAS BEEN GIVEN]. (3) WHERE IN RESPECT OF ANY SCHEME THE CONSENT REFE RRED TO IN SUB-SECTION (2) IS GIVEN BY EVERY PERSON REQUIRED BY THE SCHEME TO PROVIDE FINANCIAL ASSISTANCES, THE BOARD MAY, AS SOON AS MAY BE, SANCTION THE SCHEME AND ON AND FROM THE DATE OF SUCH SANCTION THE SCHEME SHALL BE BINDING ON ALL CONCERN ED., 39 FROM A BARE PERUSAL OF SEC.19 OF THE SICA ACT RE VEALS THE SCHEME BY WHICH REHABILITATION HAS TO BE GIVEN TO THE SICK INDUSTRIAL COMPANY AS A PREVENTIVE MEASURE, AMELIORATIVE REMEDIAL AND OTHER MEASURES FOR WHICH THE SCHEME RELATES AND TH E SCHEME BY THE BIFR TO PROVIDE FOR FINANCIAL ASSISTANCE BY WAY LOANS, ADVANCES OR GUARANTEES OR RELIEFS OR CONCESSIONS OR SACRIFICES FROM THE CENTRAL GOVERNMENT, STATE GOVERNMENT, ANY SCHEDULED BANK OR OTHER BANK, A PUBLIC FINANCIAL INTUITION OR STATE LEVEL INTUITION OR ANY INSTITUT ION OR OTHER AUTHORITY TO THE SICK INDUSTRIAL COMPA NY. SEC 19 REFERS TO THE AFORESAID PERSONS INCLUDING CE NTRAL GOVERNMENT WHO IS REQUIRED BY THE SCHEME TO PROVIDE FINANCIAL ASSISTANCE. SUB-SECTION (2) OF SECTION 19 REQUIRES EVERY SCHEME PREPARED UNDER SUB-SECTION (1) BY THE BIFR SHALL BE CIRCULATED TO EVERY PERSON REQUIRED FROM THE DATE OF SUCH CIRCULATION AND IF NO CONSENT IS RECEIVED THEN SUCH PERIOD IT SHALL BE DEEMED THAT CONSENT HAS BEEN GIVEN. AS PER SUB-SECTION (3) OF SEC.19 CONSENT REF ERS IN SUB-SECTION (2) IS GIVEN THEN THE BOARD SHOULD SANCTION THE SCHEME ON AND FROM THE DATE OF SUCH SANCTION THE SCHEME SHALL BE BINDING ON ALL CONCERNED. 40 SECTION 25 PROVIDES FOR APPEAL BY ANY PERSON AGG RIEVED BY AN ORDER OF THE BOARD. IN THIS CASE, THERE HAS BEEN AN APPEAL PREFERRED BY THE CBD T AGAINST THE ORDER SANCTIONING THE SCHEME (WHICH WE WILL DISCUSS LATER, BUT THE APPEAL HAS BE EN DISMISSED). SECTION 26 OF THE SAID ACT PROVIDES BAR OF JURISDICTION WITH REGARD TO ENTERTAINMENT OF ANY CHALLENGE AGAINST THE ORDER PASSED BY THE BIFR EXCEPT AS PROVIDED IN THE ACT. THE SAID SECTIO N 26 PROVIDES AS FOLLOWS: 26. BAR OF JURISDICTION NO ORDER PASSED OR PROPOS ED MADE UNDER THIS ACT SHALL BE APPEALABLE EXCEPT AS PROVIDED THEREIN AND NO CIVIL COURT SHALL HAVE JURISDICTION IN RESPECT OF ANY MATTER WHICH THE APPEAL LATE AUTHORI TY OR THE BOARD IS EMPOWERED BY, OR UNDER, THIS ACT TO DETERMINE AND NO INJUNCTION S HALL BE GRANTED BY ANY COURT OR 26 IT(SS)A NOS.146 TO 152/KOL/2017 HINDUSTHAN ENGINEERING & IND. LTD., AY 2009-10 TO 2015-16 OTHER AUTHORITY IN RESPECT OF ANY ACTION TAKEN OR TO BE TAKEN IN PURSUANCE OF ANY POWER CONFERRED BY OR UNDER THIS ACT.. 41 MOST IMPORTANT PROVISION IN THIS ACT WHICH SPELL S OUT THE EFFECT OF THE ACT ON OTHER LAWS CAN BE SEEN FROM A PERUSAL OF SECTION 32, WHICH READS A S UNDER:- 32 EFFECT OF THE ACT ON OTHER LAWS- (1) THE PROVISIONS OF THIS ACT AND OF ANY RULES OR SCHEME MADE THERE UNDER SHALL HAVE EFFECT NOTWITHSTANDING ANYTHING INCONSISTENT THERE WITH CONTAINED IN ANY OTHER LAW EXCEPT THE PROVISIONS OF THE (I) FOREIGN EXCHANGE R EGULATION ACT, 1973 (46 OF 1973 AND (II) THE URBAN LAND (CEILING AND REGULATION) AC T, 1976 (33 OF 1976) FOR THE TIME BEING IN FORCE OR IN THE MEMORANDUM OR ARTICLES OF ASSOCIATION OF AN INDUSTRIAL COMPANY OR IN ANY OTHER INSTRUMENT HAVING EFFECT BY VIRTUE OF ANY LAW OTHER THAN THIS ACT. (2) WHERE THERE HAS BEEN UNDER ANY SCHEME UNDER T HIS ACT AN AMALGAMATION OF A SICK INDUSTRIAL COMPANY WITH ANOTHER COMPANY, THE P ROVISIONS OF SECTION 72A OF THE INCOME-TAX ACT, 1961 (43 OF 1961), SHALL SUBJECT T O THE MODIFICATION THAT THE POWER OF THE CENTRAL GOVERNMENT UNDER THAT SECTION MAY BE E XERCISED BY THE BOARD WITHOUT ANY RECOMMENDATION BY THE SPECIFIED AUTHORITY REFER RED TO IN THAT SECTION, APPLY IN RELATION TO SUCH AMALGAMATION AS THEY APPLY IN RELA TION TO THE AMALGAMATION OF A COMPANY OWNING AN INDUSTRIAL UNDERTAKING WITH ANOTH ER COMPANY. FROM A READING OF THE ABOVE PROVISION OF LAW CLEARL Y INDICATES THE PARLIAMENTS INTENTION THAT THIS ACT WILL PREVAIL OVER OTHER ACTS IN CASE THERE ARE INCONSISTENCY WITH THEM. THE ONLY LAWS WHICH HAVE BEEN SPECIFICALLY EXCLUDED FROM THIS FEA TURE OF THIS ACT IS (I) FOREIGN EXCHANGE REGULATION ACT, 1973 (46 OF 1973) AND (II) THE URBA N LAND (CEILING AND REGULATION) ACT, 1976 (33 OF 1976). 42 IN ORDER TO INTERPRET THE INTENTION OF THE PARLI AMENT WHEN ONLY TWO STATUTES ARE SPECIFICALLY EXCLUDED IF THERE IS ANY INCONSISTENCY WHEN GIVING EFFECT TO ANY ORDERS PASSED BY VIRTUE OF THE POWER CONTEMPLATED IN THIS ACT, WE MAY TAKE THE AID OF THIS MAXIMUM WHICH IS EXPLAINED BY MAXWELL ON THE INTERPRETATION OF STATUTES EXPRESSIO UNIUS EXCLUSION ALTERIUS . 43 BY THE RULE USUALLY KNOWN IN THE FORM OF THIS LA TIN MAXIM, MENTION OF ONE OR MORE THINGS OF A PARTICULAR CLASS MAYBE REGARDED AS SILENTLY EXCLU DING ALL OTHER MEMBERS OF THE CLASS: EXPRESSUM FACIT CESSARE TACITUM. FURTHER, WHERE A STATUE USED TWO WORDS OR EXPRESSIONS, ONE OF WHICH GENERALLY INCLUDES THE OTHER, THE MORE GENERAL TERM IS TAKEN IN A SENSE EXCLUDING THE LESS GENERAL ONE: OTHERWISE THERE WOULD HAVE BEEN LITTLE POINT IN USI NG THE LATTER AS WELL AS THE FORMER. AN ILLUSTRATI ON IS GIVEN BELOW: IN THE POOR RELIEF ACT, 1601, S.1. WHICH IMPOSED A POOR RATE ON THE OCCUPIERS OF LANDS, HOUSES, TITHES AND COAL MINES, THE SAME WORD WAS SIMILARLY LIMITED AS NOT INCLUDING MINES OTHER THAN COAL MINES; THE MENTION OF ONE KIND OF MINE SHOWED THAT 27 IT(SS)A NOS.146 TO 152/KOL/2017 HINDUSTHAN ENGINEERING & IND. LTD., AY 2009-10 TO 2015-16 THE LEGISLATURE UNDERSTOOD THE WORD LAND, WHICH W OULD USUALLY COMPREHEND ALL KIND OF MINE, AS HERE NOT INCLUDING ANY. 44 BY APPLYING THE AFORESAID MAXIM, THE EXPRESS MEN TION OF TWO ACTS I.E. FERA (46 OF 1993) AND UL (C&R) ACT 1976 (33 OF 1976) IN SEC.32 OF SIC A CLEARLY EXCLUDES OTHER STATUES WHEN GIVING EFFECT TO THE SCHEME AS ENVISAGED/EMPOWERED BY THIS STATUTE, ALL OTHER STATUTES INCONSISTENT WITH THE SCHEME PASSED BY THE BOARD UNDER SICA WOULD PREVAIL AND SO IS OVERRIDING STATUTE. THE VIEW EXPRESSED BY US HAS BEEN UPHELD BY THE HONBLE JURI SDICTIONAL HIGH COURT IN CIT VS. J. K. CORPORATION LTD (2011) 331 ITR 303 (KOL), WHEREIN T HE HONBLE HIGH COURT HELD AS UNDER: 39. IN THIS CASE, IT APPEARS THAT THE ASSESSING O FFICER HAS ALTOGETHER IGNORED THE LEGAL EFFECT OF THE SCHEME TAKING NOTE OF CIRCULAR NO. 683 DATED JUNE 8, 1994 AS THE CONSENT WAS NOT ACCORDED BY THE CENTRAL GOVERNMENT. IN OTHER WORDS, THE ASSESSING OFFICER THOUGHT THAT THE CIRCULAR IS HAVING OVERRID ING EFFECT OVER THE SAID PROVISION OF THE SANCTIONED SCHEME. THE APPELLATE AUTHORITY, HOW EVER, DID NOT CHOOSE TO FOLLOW THE SAME COURSE OF ACTION BUT RECOGNIZED THE EFFECT OF THE SCHEME BUT ON THE FACTS IT DID NOT MAKE THE SAID SCHEME APPLICABLE ON VARIOUS GROUNDS MENTIONED THEREIN. 40. IN THE CONTEXT AS AFORESAID, WE NOW EXAMINE THE LEGAL EFFECT OF THE SCHEME SANCTIONED BY THE BIFR WHICH REMAINS UNCHALLENGED. THE SICA IS A SPECIAL ACT AND THE SCHEME FRAMED THEREUNDER IS OF TREMENDOUS IMPLI CATION. SO, IT IS BINDING UPON EVERYONE, AS IT HAS ASSUMED THE CHARACTER OF CONCLU SIVENESS BY VIRTUE OF SECTION 18 SUB-SECTION (4) AND ALSO SUB-SECTION (8). THE SCHEM E HAS MENTIONED THE DATE ON WHICH IT WILL BECOME OPERATIVE. IT HAS BEEN SPECIFICALLY MENTIONED THAT THE SAID SCHEME WOULD BE OPERATIVE FROM FEBRUARY 1, 1992, THOUGH TH E SAME WAS SANCTIONED ON JANUARY 25, 1994. 41. WE ARE OF THE OPINION THAT THE BOARD HAS AMPLE POWER TO FIX THE DATE TO MAKE THE SCHEME OPERATIVE FROM ANY DAY AND WE HAVE QUOTE D ITS AUTHORITY UNDER THE SAID ACT. BEFORE THE SCHEME HAD BEEN PREPARED THE DRAFT WAS CIRCULATED BY ADVERTISEMENT IN THE NEWSPAPER AND NO ONE HAD RAISED ANY OBJECTIO N. ACCORDING TO US THE RIGHT OF OBJECTION HAS BEEN WAIVED AS BY AND UNDER SECTION 3 2(2) OF THE ACT ON BEHALF OF THE CENTRAL GOVERNMENT THE BOARD HAS BEEN EMPOWERED TO GIVE CONSENT AS IS REQUIRED TO BE DONE UNDER THE PROVISIONS OF SECTION 72A OF THE INCOME-TAX ACT, 1961. UNDER THE AFORESAID SUB-SECTION ALL THE POWERS OF THE CENTRAL GOVERNMENT CAN BE EXERCISED BY THE BOARD WITHOUT ANY INTERFERENCE OR INTERVENTION OF THE AUTHORITY REFERRED TO THEREIN. THEREFORE, IN THIS CASE, THE BOARD REALLY ACTS ON B EHALF OF THE CENTRAL GOVERNMENT AND WHEN THE BOARD IS SATISFIED THAT ALL THE CONDITIONS ARE FULFILLED FOR GIVING CONSENT FOR TAKING REHABILITATION MEASURES BY WAY OF AMALGAMATI ON SEPARATE CONSENT BY NOTIFICATION BY THE CENTRAL BOARD OF DIRECT TAXES I S NOT REQUIRED. 42. WE COULD FIND THIS LEGAL POSITION FROM THE DEC ISION OF THE SUPREME COURT IN CASE OF INDIAN SHAVING PRODUCTS LTD. V. BOARD FOR I NDUSTRIAL AND FINANCIAL RECONSTRUCTION REPORTED IN [1996] 218 ITR 140. IN PARAGRAPH 28 OF PAGE 148 OF THE REPORT JUSTICE BHARUCHA FOR THE BENCH SPOKE LEGAL P OSITION IN THIS CONTEXT AS FOLLOWS (HEADNOTE) : 28 IT(SS)A NOS.146 TO 152/KOL/2017 HINDUSTHAN ENGINEERING & IND. LTD., AY 2009-10 TO 2015-16 'BY REASON OF SECTION 32(2) OF THE SAID ACT, WHERE THERE HAS BEEN UNDER ANY SCHEME THEREUNDER AN AMALGAMATION OF A SICK INDUSTRIAL COM PANY WITH ANOTHER COMPANY, THE PROVISIONS OF SECTION 72A OF THE INCOME-TAX ACT SHA LL APPLY IN RELATION TO SUCH AMALGAMATION, SUBJECT TO THIS MODIFICATION THAT THE POWER OF THE CENTRAL GOVERNMENT IS TO BE EXERCISED BY THE BIFR WITHOUT THE NECESSIT Y OF A RECOMMENDATION BY THE SPECIFIED AUTHORITY MENTIONED IN SECTION 72A OF THE INCOME-TAX ACT. THIS IS BECAUSE, FOR THE PURPOSES OF ACCORDING SANCTION TO A SCHEME OF AMALGAMATION OF A SICK INDUSTRIAL UNDERTAKING WITH ANY OTHER COMPANY UNDER SECTION 18 OF THE SAID ACT, THE BIFR HAS TO BE SATISFIED THAT THE AMALGAMATING COMP ANY IS NOT FINANCIALLY VIABLE, WHICH IS THE EFFECT OF SECTION 3(1)(O) OF THE SAID ACT, AND THAT THE AMALGAMATION IS NECESSARY OR EXPEDIENT IN THE PUBLIC INTEREST, WHIC H IS THE EFFECT OF SECTIONS 17 AND 18 OF THE SAID ACT READ TOGETHER. SANCTION OF A SCHEME OF AMALGAMATION UNDER SECTION 18 OF THE SAID ACT NECESSARILY IMPLIES THAT THE REQUIR EMENTS OF SECTION 72A OF THE INCOME- TAX ACT HAVE BEEN MET AND THE BIFR MUST EXERCISE TH E POWER CONFERRED UPON IT BY SECTION 32(2) OF THE SAID ACT AND MAKE THE DECLARAT ION CONTEMPLATED BY SECTION 72A OF THE INCOME-TAX ACT.' 43. IN OTHER WORDS, ONCE THE SCHEME IS FRAMED BY V IRTUE OF SECTION 32 SUB-SECTION (1) THE SAME OVERRIDES ALL OTHER PROVISIONS OF LAW INCLUDING THE INCOME-TAX ACT 1961 AND ALSO OTHER INSTRUMENT OR DOCUMENT HAVING EFFECT BY VIRTUE OF ANY LAW. THE BOARD DERIVES AUTHORITY UNDER SECTION 120(6) OF SAID ACT WHICH ITSELF IS OVERRIDDEN. 44. IT APPEARS THAT THE TEXT OF THE SAID CIRCULAR DATED JUNE 8, 1994 RELIED ON BY THE ASSESSING OFFICER IS CLEARLY INCONSISTENT WITH THE PROVISION OF THE SAID SECTION 32(2). 45. HAVING REGARD TO THE LANGUAGE USED IN SECTION 26 IT IS CLEAR THAT NEITHER THE CIVIL COURT NOR ANY OTHER AUTHORITY INCLUDING THE Q UASI-JUDICIAL AUTHORITY CAN PASS ANY ORDER WHICH WOULD IMPEDE THE OPERATION OF THE SAID SCHEME. IN OTHER WORDS, THE SCHEME CAN BE SET AT NAUGHT ONLY BY THE BIFR OR THE AAIFR UNDER THE SAID ACT ITSELF AND NOT OTHERWISE EXCEPT BY THE CONSTITUTIONAL PROV ISION. 46. IN VIEW OF THE AFORESAID PROVISIONS OF THE SAI D ACT WHICH IS A SPECIAL ONE THE INCOME-TAX AUTHORITY CANNOT HAVE ANY JURISDICTION T O RENDER THE OPERATION OF THE SAID SCHEME NUGATORY. 47. IT IS RIGHTLY ARGUED BY MR. BAJORIA WITH THE A UTHORITY OF THE SUPREME COURT DECISION REPORTED IN MARSHALL SONS AND CO. (INDIA) LTD. V. ITO REPORTED IN [1997] 22 ITR 809 THAT DATE OF EFFECT OF THE SCHEME IS THE DATE AS ME NTIONED THEREIN. 48. IT IS APPROPRIATE TO QUOTE THE RELEVANT PORTIO N OF THE JUDGMENT AS FOLLOWS (HEADNOTE) : 'EVERY SCHEME OF AMALGAMATION OF COMPANIES HAS NECE SSARILY TO PROVIDE A DATE WITH EFFECT FROM WHICH THE AMALGAMATION/TRANSFER SHALL T AKE PLACE. IT IS TRUE THAT WHILE SANCTIONING THE SCHEME, IT IS OPEN TO THE COMPANY C OURT TO MODIFY THE SAID DATE AND PRESCRIBE SUCH DATE OF AMALGAMATION/TRANSFER AS IT THINKS APPROPRIATE IN THE FACTS AND CIRCUMSTANCES OF THE CASE. IF THE COURT SO SPECIFIE S A DATE, SUCH DATE WOULD BE THE DATE OF AMALGAMATION/DATE OF TRANSFER. BUT WHERE THE COU RT DOES NOT PRESCRIBE ANY SPECIFIC DATE BUT MERELY SANCTIONS THE SCHEME PRESENTED TO I T, THE DATE OF AMALGAMATION/DATE OF 29 IT(SS)A NOS.146 TO 152/KOL/2017 HINDUSTHAN ENGINEERING & IND. LTD., AY 2009-10 TO 2015-16 TRANSFER IS THE DATE SPECIFIED IN THE SCHEME AS `TH E TRANSFER DATE'. IT CANNOT BE OTHERWISE.' 49. HENCE, THE INCOME-TAX AUTHORITY HAS NO COMPETE NCE TO READ THE SCHEME DIFFERENTLY AS FAR AS DATE OF EFFECT IS CONCERNED F OR ANY PURPOSE . 50. UNDER THOSE CIRCUMSTANCES, WE, THEREFORE, ARE OF THE VIEW THAT WHILE ANSWERING QUESTION (A), THAT THE TRIBUNAL WAS CORRECT IN LAW IN HOLDING THAT THE SANCTIONED SCHEME SHALL BE CONCLUSIVE EVIDENCE OF FULFILLING O F REQUIREMENTS REGARDING CONSENT OF THE CENTRAL GOVERNMENT/CENTRAL BOARD OF DIRECT TAXE S CIRCULAR NO. 683 DATED JUNE 8, 1994. 51. WHILE ANSWERING QUESTION (B) WE EXPRESS OUR OP INION THAT THE TRIBUNAL WAS CORRECT IN LAW, ON INTERPRETATION OF THE SCOPE AND PURPORT OF SECTION 32(1) OF THE SICA, 1985 IN HOLDING THAT ONCE A SCHEME HAVING BEEN SANC TIONED UNDER THIS ACT, THE PROVISIONS OF THE SCHEME WILL HAVE THE OVERRIDING E FFECT OVER ANY OTHER LAWS EXCEPT THE FERA AND THE ULCRA. 52. WHILE RESPONDING TO QUESTION (C) WE STATE THAT THE TRIBUNAL WAS NOT RIGHT IN HOLDING FOR THE SCHEME SANCTIONED BY THE BIFR ON JA NUARY 25, 1994 APPROVAL/CONSENT OF THE CENTRAL GOVERNMENT/CENTRAL BOARD OF DIRECT T AXES WAS NECESSARY IN VIEW OF THE PROVISION OF THE SAID ACT. 53. AS FAR AS QUESTION BEING GROUND (D) IS CONCERN ED IN OUR VIEW NO SEPARATE OPINION NEED BE EXPRESSED AND HOWEVER, WE ADD THAT THE ASSESSEE IS EXEMPTED FROM FULFILLING THE PROVISIONS OF SECTIONS 80 AND 139 OF THE INCOME-TAX ACT, 1961, IN VIEW OF THE BIFR'S ORDER DATED MARCH 17, 1994, IT MUST BE H ELD THAT THE REVISED RETURN OF LOSS FILED BY THE ASSESSEE SHALL BE TREATED TO HAVE BEEN VALIDLY FILED. 54. WHILE ANSWERING QUESTION (E) WE ARE OF THE VIE W THAT THE TRIBUNAL WAS NOT RIGHT AND JUSTIFIED IN LAW NOT CONSIDERING AND DECI DING THE ALTERNATIVE CONTENTION RAISED ON BEHALF OF THE ASSESSEE THAT WHEN THE ORIG INAL RETURN HAVING BEEN FILED WITHIN THE TIME ALLOWED UNDER SECTION 139(1) THE REVISED R ETURN FILED ON MARCH 31, 1994, CLAIMING LOSS WAS NOT BEYOND THE TIME AS CONTEMPLAT ED IN THE PROVISION OF SECTION 139 SUB-SECTION (3) AND SECTION 80. 55. THUS THE AFORESAID REFERENCE IS DISPOSED OF IN THE ABOVE LINES.( EMPHASIS GIVEN BY US) 45 IN VIEW OF THE HONBLE JURISDICTIONAL HIGH COURT S ORDER IN CIT VS. J.K. CORPORATION (SUPRA), WE HOLD THAT PROVISIONS OF SICA ACT AND TH E SCHEME SANCTIONED BY THE BOARD WILL OVERRIDE THE INCOME TAX ACT. MOREOVER, WE NOTE THAT IN MORGA N SECURITIES AND CREDIT PVT. LTD. JT 2007(1) SC 432, THE HONBLE SUPREME COURT ANSWERED TO THE Q UESTION AS TO WHETHER THE PROVISION OF ARBITRATION ACT WOULD PREVAIL OVER THE PROVISION OF SICK INDUSTRIAL COMPANY (SPECIAL PROVISIONS) ACT, 1985 (SICA). IT WAS HELD THAT WHEN THERE IS A CONFLICT BETWEEN ARBITRATION ACT AND THE SICA, 30 IT(SS)A NOS.146 TO 152/KOL/2017 HINDUSTHAN ENGINEERING & IND. LTD., AY 2009-10 TO 2015-16 THE LATER WHICH HAVE BEEN MADE TO SEEK TO ACHIEVE T HE HIGHER GOAL WOULD BE APPLICABLE DESPITE NON- OBSTANTE CLAUSE CONTAINED IN SEC. 5 OF ARBITRATION ACT. 46 LET US NOW LOOK AT THE CBDT CIRCULAR WHICH HAS G IVEN INSTRUCTION TO THE OFFICERS UNDER IT, HOW TO GIVE EFFECT TO THE SANCTIONED SCHEME OF THE BIFR. THE ORDER U/S 119(2)(A) OF THE IT ACT, 1961 DATED 16-02-2000 ISSUED BY CBDT REPORTED IN 15 9 CTR 148 (ST.) READS AS UNDER: THE CBDT IN EXERCISE OF THE POWERS U/S.119(2) (A) OF THE IT ACT, 1961 VIDE ORDER DATED 22-04-1001 (F.NO.225/91/ITA II) HAD DIRECTED THAT EFFECT TO ALL ORDERS PASSED BY BOARD OF INDUSTRIAL & FINANCIAL RECONSTRUCTION ( BIFR) IN AN APPROVAL SCHEME OF RECONSTRUCTION/REHABILITATION BE GIVEN DURING THE C OURSE OF AN ASSESSMENT AFTER GRANTING ALL THE RELIEFS UNDER THE IT ACT, 1961 INC LUDING THOSE RELIEFS WERE THE BIFR HAD RECOMMENDED CONSIDERATION OF SUCH RELIEFS UNDER THE IT ACT BY THE CENTRAL GOVERNMENT. IN SUPERSESSION OF THIS, THE CBDT NOW DIRECTS THAT WHEREVER THE ORDER OF THE BIFR IN AN APPROVED SCHEME OF RECONSTRUCTION/REHABILITATION (A) DIRECTS THAT THE RELIEFS BE ALLOWED UNDER THE I.T. ACT, 1961 THE EFFECT TO SUCH ORDERS BE GIVEN IMMEDIATELY. RECOMMENDS THAT THE RELIEFS UNDER THE I.T. ACT, 196 1 MAY BE CONSIDERED BY THE CENTRAL GOVERNMENT, THE RELIEF BE ALLOWED TO THE ASSESSEE I F DURING COURSE OF THE PROCEEDINGS BEFORE THE BIFR, THE VIEWS OF THE I. TAX DEPARTMENT HAVE BEEN CONSIDERED BY THE BIFR. HOWEVER, IF THE ORDER OF BIFR HAS BEEN PASSED WITH OUT MAKING I. TAX DEPARTMENT A PARTY OR WITHOUT GIVING A CHANCE TO TH E I. TAX DEPARTMENT TO SUBMIT ITS VIEWS THE EFFECT OF BIFR RECOMMENDATIONS IS TO BE G IVEN ONLY AFTER SUCH RECOMMENDATIONS OF THE BIFR ARE CONSIDERED BY THE C BDT. 47 WE ALSO NOTE THAT VIDE CBDT CIRCULAR NO.683 DATE D 08.06.1994 - THE NODAL AGENCY FOR CO- ORDINATION BETWEEN THE BOARD FOR INDUSTRIAL AND FIN ANCIAL RECONSTRUCTION (BIFR) AND THE CENTRAL BOARD OF DIRECT TAXES AND APPELLATE AUTHORITY FOR I NDUSTRIAL AND FINANCIAL RECONSTRUCTION (AAIFR) AND THE CENTRAL BOARD OF DIRECTOR TAXES WIL L BE THE DIRECTOR GENERAL OF INCOME TAX (ADMN.), 7 TH FLOOR, MAYURBHAWAN, NEW DELHI -110 001. 48 THE POWER OF CBDT TO ISSUE SUCH CIRCULAR IS TRAC EABLE TO SECTION 119 OF THE INCOME TAX ACT, WHICH CONTEMPLATES THAT THE CBDT MAY FROM TIME TO T IME ISSUE SUCH ORDERS, INSTRUCTIONS AND DIRECTIONS TO OTHER INCOME TAX AUTHORITIES AS IT MA Y DEEM FIT FOR PROPER ADMINISTRATION OF THE ACT AND SUCH AUTHORITIES AND ALL OTHER PERSONS EMPLOYED IN THE EXECUTION OF THE SAID ACT SHALL OBSERVE AND FOLLOW SUCH ORDERS, INSTRUCTIONS AND DIRECTIONS OF THE CBDT. 49 THE JUDICIAL PRECEDENTS LAID BY HONBLE APEX COU RT AND OTHER HONBLE HIGH COURTS WHICH HELD THAT CBDT CIRCULAR IS BINDING ON THE AUTHORITI ES SERVING IN THE INCOME-TAX DEPARTMENT. 31 IT(SS)A NOS.146 TO 152/KOL/2017 HINDUSTHAN ENGINEERING & IND. LTD., AY 2009-10 TO 2015-16 50 IN NAVNIT LAL C. JHAVERI VS. K.K.SEN (1965) 56 I TR 198 (SC), THE HONBLE SUPREME COURT HAS AN OCCASION TO EXAMINE THE STATUTORY BASIS AND BACKGROUND OF THE CIRCULARS ISSUED BY THE CENTRAL BOARD OF REVENUE UNDER THE PROVISIONS OF THE INCOM E TAX ACT, AND THE SCOPE AND THE EFFECT OF SUCH CIRCULARS. IN THAT CASE, THE CBDT WAS EMPOWERED TO ISSUE CIRCULARS UNDER SECTION 5(8) OF THE INCOME TAX ACT, 1922 AND THE HONBLE SUPREME COURT OBSERVED THAT THE CIRCULAR ISSUED BY THE CBDT IS BINDING ON ALL OFFICERS AND PERSONS EMPLOYE D IN THE ADMINISTRATION OF THE ACT. 51 IN ELLERMAN LINES LTD., VS. CIT (1971) 82 ITR 91 3 (SC), THE OBSERVATION MADE IN NAVNIT LAL C. JHAVERI VS. K.K.SEN (1965) 56 ITR 198 (SC) WAS Q UOTED WITH APPROVED BY THE HONBLE SUPREME COURT. 52J IN STATE OF TRAVANCORE VS.CIT (1986) 158 ITR 10 2, THE HONBLE SUPREME COURT ONCE AGAIN REITERATED THE LAW THAT THE CIRCULARS, WHICH ARE IN THE NATURE OF CONCESSIONS, COULD ALWAYS BE WITHDRAWN ONLY PROSPECTIVELY. 53 IN KESHAVJIRAVJI& CO., VS.CIT (1990) 183 ITR 1 ( SC), A BENCH OF THREE JUDGES OF THE HONBLE SUPREME COURT HAD ALSO TAKEN THE VIEW THAT CIRCULARS BENEFICIAL TO THE ASSESSEE WHICH TONE DOWN THE RIGOUR OF THE LAW AND ARE ISSUED IN EXERCI SE OF THE STATUTORY POWERS UNDER SECTION 119 ARE BINDING ON THE AUTHORITIES IN THE ADMINISTRATION OF THE ACT RETROSPECTIVELY. 54 THE SAME VIEW WAS TAKEN BY THE HONBLE SUPREME C OURT IN CWT VS.VASUDEO V. DEMPO (1992) 196 ITR 216,THAT CIRCULARS ISSUED BY THE DEP ARTMENT ARE NORMALLY MEANT TO BE FOLLOWED AND ACCEPTED BY THE AUTHORITIES. 55. IN K.P.VARGHESE VS. ITO (1981) 131 ITR597 (SC) , THE HONBLE COURT HAD GONE ONE STEP FURTHER AND OBSERVED THAT CIRCULARS ISSUED BY THE C BDT ARE LEGALLY BINDING ON THE REVENUE AND THIS BINDING CHARACTER ATTACHES TO THE CIRCULARS EVEN IF THEY ARE FOUND NOT IN ACCORDANCE WITH THE CORRECT INTERPRETATION OF A STATUTORY PROVISION AND THEY DE PART OR DEVIATE FROM SUCH CONSTRUCTION. 56 THE ABOVE DICTUM OF LAW LAID DOWN BY THE SUPREME COURT SHOW THAT ALTHOUGH THE CIRCULARS ARE NOT BINDING ON THE COURTS OR AN ASSESSEE, THEY ARE CERTAINLY BINDING ON THE REVENUE AND IT IS NOT OPEN TO THE REVENUE TO ADVANCE AN ARGUMENT OR FILIN G AN APPEAL CONTRARY TO THE CIRCULARS. IN FACT, THE DEPARTMENT CANNOT EVEN TAKE CONTRARY STAND TO THE C IRCULARS AS WELL. 32 IT(SS)A NOS.146 TO 152/KOL/2017 HINDUSTHAN ENGINEERING & IND. LTD., AY 2009-10 TO 2015-16 57 IN UCO BANK VS. COMMISSIONER OF INCOME TAX (19 99) 237 ITR 889, THE HONBLE SUPREME COURT WHILE CONSIDERING THE CIRCULARS ISSUED IN EXE RCISE OF POWER UNDER SECTION 119 OF THE INCOME TAX ACT REGARDING THE INTEREST ON STICKY ADVANCES H AS HELD THAT THE CIRCULARS WERE IN THE NATURE OF CONCESSIONS, WHICH COULD ALWAYS BE PROSPECTIVELY W ITHDRAWN. 58 FROM THE READING OF THE AFORESAID JUDICIAL PRECE DENTS IT IS VIVID THAT THE CBDT CIRCULAR IS BINDING ON AUTHORITIES OF INCOME TAX DEPARTMENT AND SHOULD BE FOLLOWED IN LETTER AND SPIRIT. 59 SO, FROM A READING OF THE EARLIER CIRCULAR DATED 22.4.1991 OF THE CBDT (SUPRA), IT IS CLEAR THAT EARLIER CBDT CIRCULAR DOES NOT MAKE ANY DISTIN CTION IN RESPECT OF BIFR ORDER, THAT MEANS IF THE BIFR SCHEME PURPOSES RECOMMENDATIONS I.E. FOR BEING CONSIDERED, THEN ALSO DURING THE COURSE OF AN ASSESSMENT, AO HAS TO GIVE EFFECT TO BOTH THE DIREC TION AS WELL AS THE RECOMMENDATION OF BIFR SHOULD BE GIVEN EFFECT AND RELIEF SHOULD BE GRANTED . WE NOTE THAT THE EARLIER CIRCULAR OF DATED 22.4.1991 WAS SUPERSEDED BY ANOTHER CBDT CIRCULAR D ATED 16.2.2000 WHICH CLEARLY SPELLS OUT THAT IF THE BIFR DIRECTS ANY SPECIFIC RELIEF THEN IT SHO ULD BE ALLOWED AND THE EFFECT OF SUCH ORDER MUST BE GIVEN IMMEDIATELY. HOWEVER, IN CASE, IF THE BIFR RE COMMENDS ANY RELIEF UNDER THE INCOME TAX ACT, THE RELIEF TO BE ALLOWED TO THE ASSESSEE, IF D URING THE COURSE OF PROCEEDINGS BEFORE THE BIFR, THE VIEWS OF THE INCOME TAX DEPARTMENT HAVE BEEN CONSIDERED BY THE BIFR. NOW, LET US SEE WHETHER THE VIEWS OF THE DEPARTMENT WERE TAKEN INTO CONSIDERATION BY THE BIFR BEFORE THE FINAL ORDER WAS PASSED. THE FACT THAT THE DEPARTMENTS VI EW WAS IN FACT CONSIDERED BY THE BIFR BEFORE THE ORDER WAS PASSED ON 04.09.2012 IS CLEAR FROM THE PL EADINGS OF DEPARTMENT IN ITS APPEAL AGAINST BIFR ORDER BEFORE THE AAIFR WHEREIN WE NOTE THAT TH E NODAL OFFICER OF THE DEPARTMENT DIRECTOR GENERAL OF INCOME TAX (ADMIN.) AND DIRECTOR INCOME TAX (RECOVERY)S VIEWS OF THE INCOME TAX DEPARTMENT HAVE BEEN CONSIDERED BY THE BIFR IS CLEA RLY DISCERNED AND CERTAIN SUBMISSION OF THE DEPARTMENT BEFORE THE AAIFR WHICH THROWS LIGHT ON T HIS FACT IS REPRODUCED BELOW :- (2) THE APPLICANT NO.1 IS THE DIRECTOR GENERAL OF INCOME TAX (ADMN.) IS THE NODAL AGENCY ON BEHALF OF THE CBDT AS PER THE CBDT CIRCUL AR NO.683 DARED 08.06.1994 AND ANOTHER CIRCULAR NO.5/2009 DATED 02.07.2009. THE AP PLICANT NO.2 IS THE DIRECTOR OF INCOME TAX (RECOVERY) AND IS FUNCTIONING UNDER THE CHARGE OF APPLICANT NNO.1 AND WAS ALSO PARTY TO THE ORDER DATED 16.07.2012 PASSED BY BIFR AND SS-12 DATED 04.09.2012. (3) A REFERENCE WAS FILED BY M/S MALANPUR STEEL LIM ITED (MSL), FORMERLY KNOWN AS HINDUSTAN DEVELOPMENT CORPORATION LTD (HDCL), IN TE RMS OF SECTION 15(1) OF SICK INDUSTRIAL COMPANIES )SPECIAL). PROVISIONS) ACT, 185 (SICA) AND THE SAME WAS CONSID ERED BY HONBLE BIFR IN THE HEARINGS HELD ON 14.06.2002 AND 11.03.2003. THE BI FR ACCORDINGLY DECLARED MSL TO BE A SICK INDUSTRIAL COMPANY IN TERMS OF SECTION 3( 1)(0) OF SICA. 33 IT(SS)A NOS.146 TO 152/KOL/2017 HINDUSTHAN ENGINEERING & IND. LTD., AY 2009-10 TO 2015-16 (4) HONBLE BIFR CIRCULATED A DRAFT REHABILITATION SCHEME (DRS) VIDE ORDER DATED 20.04.2012, WHICH WAS RECEIVED IN THIS DIRECT ORATE ON 10.05.2012. THE INCOME TAX RELIEFS SOUGHT IN THE SAID DRS IN PARA 15.08 AR E AS UNDER: A) TO EXEMPT/GRANT RELIEF TO THE COMPANY FROM THE P ROVISIONS OF SECTION 40A(3), 40(A)(IA), 41(1), 43B, 45, 56(2), 72A(2) 72(3), 79, 80 READ WITH 139, 115JB AND PROVISIONS OF CHAPTER XVII OF THE INCOME TAX ACT. B) TO ALLOW THE COMPANY TO CAPITALIZE AMOUNT OF RS. 245.80 CRORE, WHICH WAS DISALLOWED AS REVENUE EXPENDITURE IN THE ASSESSMENT FOR AY 2001-02 BY DEBITING THE CAPITAL WORK IN PROGRESS ACCOUNT AND CREDITING THE P & L A/C IN THE FY 2010-11. THIS AMOUNT OF CAPITAL WORK IN PROGRESS WILL BE TRE ATED AS PART OF THE COST OF THE ASSETS. C) TO EXEMPT THE COMPANY FROM CHARGEABILITY OF INTE REST AND PENALTIES FOR DEFAULTS COMMITTED TILL DATE OF PRODUCTION OF ROLLI NG MILL AND STEEL PLANT RESPECTIVELY. D) TO EXEMPT THE COMPANY FROM SECTION 72 & SECTION 32 OF THE INCOME TAX ACT SO AS TO ALLOW COMPANY TO CARRY FORWARD ITS ACCUMULATE D LOSSES AND ALLOWANCES BEYOND THE PERIOD OF EIGHT YEARS TILL IT IS FULLY ADJUSTED AGAINST THE PROFITS OF THE COMPANY IN THE SUBSEQUENT YEARS. E) TO EXEMPT THE COMPANY FROM THE LEVY OF MAT UNDER SECTION 115JB OF THE INCOME TAX ACT 1961 FOR THE PERIOD OF REHABILITATIO N FROM 01.04.2009 TO 31.03.2015. (F) TO EXEMPT/GRANT RELIEF UNDER SECTION 41(1) APAR T FROM OTHER LIABILITIES WRITTEN BACK FOR ALL LIABILITIES FOR WHICH RELIEF IF GRANTE D/SANCTIONED AS PER DRS. G) HINDUSTAN ENGINEERING & INDUSTRIES LTD. (HEIL) S HALL BE ENTITLED TO CARRY FORWARD AND SET OFF THE ACCUMULATED LOSSES (INCLUDI NG LAPSED LOSSES) AND UNABSORBED DEPRECIATION AS PER THE INCOME TAX ACT, 1961 TILL S UCH LOSSES ARE SET OFF FULLY AGAINST INCOME IN THE ASSESSMENT YEARS SUBSEQUENT TO THE AS SESSMENT YEAR DURING WHICH MERGER OF MSL AS ABOVE SHALL TAKE PLACE. THE EFFEC T OF THIS PROVISION SHALL BE GIVEN IN THE MANNER AS IS PROVIDED UNDER SECTION 72A OF THE INCOME TAX ACT, 1961 OR OTHERWISE ANY STATUTORY PROVISIONS FOR THE TIME BEI NG IS ENFORCED. H) TO ALL DEPRECIATION ON PLANT & MACHINERIES OF MI SC UNIT OF MALANPUR STEEL LTD. FOR THE PERIOD WHEN THE STEEL PLANT WAS UNDER SUSPENSION OF OPERATION/CLOSED/SHUT DOWN (FROM OCTOBER, 1998 TO THE DATE OF RESTART). (5) THE APPLICANT DEPARTMENT FILED ITS FIRST REPLY WITHIN STIPULATED TIME LIMIT VIDE ITS LETTER DATED 08-06-2012 TO BIFR STATING THEREIN IN PARA 3 & 6, RELEVANT PORTION IS REPRODUCED BELOW: . 3. FURTHER IN THE SAME DECISION OF THE HONBLE DELH I HIGH COURT, IT IS ALSO OBSERVED THAT DRS SHOULD QUANTIFY THE EXTENT OF RELIEFS AND CONCESSIONS TO BE PROVIDED TO THE SICK INDUSTRIAL COMPANY. 6. HENCE, THE COMPANY MAY BE DIRECTED TO FURNISH TH E SAME AND THE WORD TO CONSIDER SHOULD BE PREFIXED BEFORE IT RELIEFS SOUGHT IN PARA 15.8(A) TO (H) OF THE DRS. IN ABSENCE OF WHICH NO COMMENT CAN BE OFFERED AND IF T HE COMPANY FAILS TO GIVE THE QUANTIFICATION OF TAX IMPLICATION, WE OBJECT TO THE INCOME TAX RELIEFS PROPOSED IN THE DRAFT SCHEME. SUBSEQUENTLY THE APPLICANT DEPARTMENT RECEIVED A RE PLY ON 21.06.2012 FILED BY THE RESPONDENT COMPANY VIDE ITS LETTER DATED 04.06.2012 . THE DEPARTMENT CONSIDERED THE RESPONDENT COMPANYS REPLY AND FILED ITS DETAILED R EPLY VIDE LETTER DATED 13.07.2012 TO BIFR/OA. VIDE THE SAID REPLY THE DEPARTMENT REQUES TED THAT ONLY RELIEF U/S. 72(3) AND 72A PROVIDED IN PARA 15.8 MAY BE RETAINED FOR CONSI DERATION FOR THE DEPARTMENT BY PREFIXING THE WORD TO CONSIDER AND ALL THE REMAIN ING RELIEFS BE DELETED. THE SR. 34 IT(SS)A NOS.146 TO 152/KOL/2017 HINDUSTHAN ENGINEERING & IND. LTD., AY 2009-10 TO 2015-16 STANDING COUNSEL WAS ADVISED TO COMMUNICATE THESE F ACTS/OBJECTIONS/SUGGESTIONS BEFORE THE HONBLE BIFR DURING HEARING OF THE CASE ON 16.07.2012. THE APPELLANT DEPARTMENT REQUESTS THE HONBLE AUTHO RITY TO GRANT FOLLOWING PRAYER:- (A) TO ALLOW THE APPEAL. (B) TO QUASH/SET-ASIDE THE BIFRS ORDER DATED 16.07.201 2 AND SS-12 DATED 04.09.2012 AND MODIFY THE OBSERVATIONS IN PARAGRAPH 2. 11(B) IN THE SANCTIONEDSCHEME AND PARA 15.8 OF SS-12 AND PREFIX THE WORDS TO CONSIDER IN RESPECT OF THE RELIEF CLAIMED UNDER SUB-PARA (G) OF 15.8 (UNDER THE HEADING CBDT) OF THE REHABILITATION SCHEME SO THAT THE PETITIONER DE PARTMENT COULD LIMIT THE RELIEF TO THE MERGED ENTITY TO THE EXTENT OF BENEFITS AVAILAB LE UNDER SECTION 72A OF INCOME TAX ACT 1961 SUBJECT TO FULFILLMENT OF THE CONDITIONS L AID DOWN IN THAT SECTION READ WITH RULE 9-C OF INCOME TAX RULES 1962 . (C) TO DELETE RELIEF U/S 80 READ WITH 139 AS NOT REQUIR ED BY THE COMPANY ITSELF. FURTHER RELIEF U/S 40A(3), 40(A)(IA) 41(1), 43B, 45 , 56(2), 72, 32, 72(2), 79, 115JB, PROVISIONS OF CHAPTER XVII, CHARGEABILITY OF INTERE ST AND PENALTIES, TO CAPITALIZED AMOUNT OF RS.245.80 CRORE TO BE DELETED IN PARA 15. 8 OF ORDER DATED 16.07.2012 AND SS-12 DATED 04.09.2012. (D) GRANT AD-INTERIM EX PARTE STAY OF THE OPERATION OF THE IMPUGNED ORDER DATED 16.07.2012 BY BIFR AND SS-12 DATED 04.09.2012. (E) IN THE ALTERNATIVE, MODIFY THE OBSERVATIONS IN PARA GRAPH 2.11 (B) IN THE SANCTIONED SCHEME AND PREFIX THE WORD TO CONSIDER BEFORE SUB PARA. (G) OFPARA 15.8 OF ORDER DATED 16.07.2012 END SS-12 DATED 04.09.201 2 . (F) PASS SUCH OTHER ORDER/DIRECTION AS IS DEEMED FIT IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 60 THE AFORESAID APPEAL AGAINST THE SAID BIFR ORDER (RELEVANT PORTIONS OF WHICH HAVE BEEN REPRODUCED ABOVE, ALONG WITH PRAYER BEFORE AAIFR) W AS DISMISSED BY THE AAFIR VIDE ORDER DATED 22.03.2013 WHICH IS REPRODUCED AS BELOW: HEARD THE LD. COUNSEL FOR THE APPELLANT AS WELL AS THE CAVEATOR. AFTER CONSIDERING THE SUBMISSIONS AND PERUSAL OF PARA 15.8(G) OF THE SANCTIONED SCHEME, THIS AUTHORITY IS OF THE VIEW THAT THE RELIEF GRANTED UNDER THE SAID PARA DOES NOT OVERRIDE THE PROVISIONS OF SECTION 72A OF THE INCOME-TAX ACT OR ANY OTHER S TATUTORY PROVISION FOR THE TIME BEING IN FORCE. AS SUCH, THE CONTENTION AND APPREH ENSION OF THE APPELLANT ARE COMPLETELY MISPLACED. THERE IS NO MERIT IN THE APP EAL. THE APPEAL IS DISMISSED ACCORDINGLY. 61 FROM PERUSAL OF THE ORDER OF AAIFR (SUPRA) DISMI SSING THE APPEAL OF THE REVENUE, IT IS EVIDENT THAT HONBLE AAIFR HELD THAT RELIEF GRANTED IN PARA 15.8(G) OF THE SANCTIONED SCHEME DOES NOT OVERRIDE THE PROVISIONS OF SECTION 72A OF THE A CT OR ANY OTHER STATUTORY PROVISIONS FOR THE TIME BEING IN FORCE AND THEREFORE, THE HONBLE AAIFR CON CLUDED THAT THERE IS NO MERIT IN THE APPEAL AND DISMISSED IT ACCORDINGLY. THE SAID ORDER HAS ACQUI RED FINALITY, AS IT HAS NOT BROUGHT TO OUR KNOWLEDGE, THAT ANY FURTHER PROCEEDINGS ARE PENDING VIZ-A-VIZ THE SAID ORDER. 62 AS PER THE LATEST CIRCULAR OF THE CBDT GOVERNING THE SUBJECT ON HAND, IT IS CLEARLY LAID DOWN THAT DURING THE BIFR PROCEEDINGS, IF THE DEPARTMENT S OBJECTIONS HAVE BEEN CONSIDERED BY THE BIFR 35 IT(SS)A NOS.146 TO 152/KOL/2017 HINDUSTHAN ENGINEERING & IND. LTD., AY 2009-10 TO 2015-16 BEFORE PASSING THE SANCTIONED SCHEME, THEN THE AO S HALL GIVE EFFECT EVEN TO THE RELIEFS/GRANTS FOR THE CONSIDERATION OF THE CBDT. IN THE PRESENT CASE, TH E UNDISPUTED FACT IS THAT THE DEPARTMENTS NODAL AGENCY (DIRECTOR GENERAL OF INCOME-TAX (ADMN.) AND THE DIRECTOR OF INCOME TAX (RECOVERY) HAS GONE THROUGH THE DRAFT REHABILITATION SCHEME AND HA VE CONVEYED THEIR VIEW POINTS/OBJECTIONS TO THE BIFR AND BIFR HAS PASSED THE ORDER AFTER CONSIDERIN G THE DEPARTMENTS VIEW/OBSERVATIONS, WHICH IS CLEARLY DISCERNIBLE FROM THE AVERMENTS/PLEADINGS OF THE CBDT NODAL OFFICERS (DIRECTOR GENERAL OF INCOME-TAX (ADMN.) AND THE DIRECTOR OF INCOME-TAX ( RECOVERY) IN THE APPEAL PREFERRED BEFORE THE AAIFR. THIS FACT THAT DEPARTMENTS VIEWS WERE CONS IDERED EMERGES FROM A PERUSAL OF THE APPEAL OF THE CBDT BEFORE THE HONBLE AAIFR RELEVANT PORTIONS OF WHICH HAVE BEEN REPRODUCED (SUPRA) WILL CLEARLY REVEAL THAT THE DEPARTMENTS VIEW HAS BEEN CONSIDERED BY THE BIFR BEFORE THE SANCTIONED SCHEME WAS PASSED ON 04.09.2012. SO, ONCE WE HAVE TAKEN NOTE THAT DEPARTMENTS VIEW/OBJECTION HAS BEEN TAKEN NOTE BY THE BIFR BEFORE PASSING THE SANCTIONED SCHEME READ WITH THE CIRCULAR ISSUED BY THE CBDT, IMPOSES A DUTY ON THE AO TO GIVE EFFEC T TO EVEN ALL THE RECOMMENDATIONS (I.E. RELIEFS TO BE GIVEN FOR PROPOSALS FOR CONSIDERATION OF CBDT GIVEN AT SUB PARA (A) TO (H) OF PARA 15.8 OF THE SANCTIONED SCHEME OF BIFR. THE CBDT CIRCULAR IS AG AIN REPRODUCED FOR EASY UNDERSTANDING. THE CBDT IN EXERCISE OF THE POWERS U/S.119(2) (A) OF THE IT ACT, 1961 VIDE ORDER DATED 22-04-1001 (F.NO.225/91/ITA II) HAD DIRECTED THAT EFFECT TO ALL ORDERS PASSED BY BOARD OF INDUSTRIAL & FINANCIAL RECONSTRUCTION ( BIFR) IN AN APPROVAL SCHEME OF RECONSTRUCTION/REHABILITATION BE GIVEN DURING THE C OURSE OF AN ASSESSMENT AFTER GRANTING ALL THE RELIEFS UNDER THE IT ACT, 1961 INC LUDING THOSE RELIEFS WERE THE BIFR HAD RECOMMENDED CONSIDERATION OF SUCH RELIEFS UNDER THE IT ACT BY THE CENTRAL GOVERNMENT. IN SUPERSESSION OF THIS, THE CBDT NOW DIRECTS THAT WHEREVER THE ORDER OF THE BIFR IN AN APPROVED SCHEME OF RECONSTRUCTION/REHABILITAT ION (B) DIRECTS THAT THE RELIEFS BE ALLOWED UNDER THE I.T. ACT, 1961 THE EFFECT TO SUCH ORDERS BE GIVEN IMMEDIATELY. RECOMMENDS THAT THE RELIEFS UNDER THE I.T. ACT, 196 1 MAY BE CONSIDERED BY THE CENTRAL GOVERNMENT, THE RELIEF BE ALLOWED TO THE AS SESSEE IF DURING COURSE OF THE PROCEEDINGS BEFORE THE BIFR, THE VIEWS OF THE I. TA X DEPARTMENT HAVE BEEN CONSIDERED BY THE BIFR . HOWEVER, IF THE ORDER OF BIFR HAS BEEN PASSED WITH OUT MAKING I. TAX DEPARTMENT A PARTY OR WITHOUT GIVING A CHANCE TO THE I. TAX DEPARTMENT TO SUBMIT ITS VIEWS THE EFFECT OF BIFR RECOMMENDATI ONS IS TO BE GIVEN ONLY AFTER SUCH RECOMMENDATIONS OF THE BIFR ARE CONSIDERED BY THE C BDT. 63 FROM THE AFORESAID, IT IS CLEAR THAT THE CBDTS OBJECTION/VIEW WAS CONSIDERED BY THE BIFR IN TERMS OF CIRCULAR WHICH IS BINDING ON THE OFFICE RS OF THE DEPARTMENT. 64 IN THE ABOVE FACTUAL AND JUDICIAL BACKDROP, THE SUM AND SUBSTANCE OF THE ISSUE INVOLVED RELATES TO THE CLAIM OF UNABSORBED LAPSED LOSSES AN D UNABSORBED DEPRECIATION OF THE AMALGAMATING COMPANY NAMELY MSL WITH THE APPELLANT COMPANY ON TH E BASIS OF THE ORDER OF BIFR DATED4.9.2012. 36 IT(SS)A NOS.146 TO 152/KOL/2017 HINDUSTHAN ENGINEERING & IND. LTD., AY 2009-10 TO 2015-16 THERE IS NO DISPUTE EVEN AS PER THE AO THAT THE APP ELLANT IS ENTITLED TO CLAIM THE SAID LOSSES IN TERM S OF THE ORDER OF BIFR DATED 4.9.2012. IN FACT OUT O F TOTAL CLAIM OF LOSSES OF RS.140.44 CRORES, THE AO HAS ALLOWED LOSSES OF RS. 91.70 CRORES AND THE BALA NCE LOSSES OF RS. 48.74 CRORES APART FROM UNABSORBED DEPRECIATION OF RS. 72.56 CRORES HAVE NO T BEEN ALLOWED. THUS AGGREGATE SUM IN DISPUTE IS OF RS.121.30 CRORES. 65 THE AFORESAID CLAIM HAS BEEN DENIED BY AO ON THE BASIS THAT BIFR ORDER DATED 4.9.2012 DID NOT DIRECT THE RELIEF BUT IT ONLY PROVIDED FOR CONSIDERATION OF THE RELIEF AND SINCE THERE IS NO ORDER OF CBDT PROVIDING FOR SUCH RELIEF, THE CLAIM IS NOT MAINTAINABLE. THIS REASONING IS APPARENTLY FLAWED FOR IT RUNS CONTRARY TO THE JUDGM ENT OF THE HONBLE APEX COURT IN THE CASE OF INDIAN SHAVING PRODUCTS LTD. V. BOARD OF INDUSTRIAL AND FINANCIAL RECONSTRUCTION AND ANOTHER218 ITR 140,AND THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V. J. K. CORPORATION (SUPRA) AND CIRCULAR OF CBDT DATED 16.2.2000 (SUPRA). THE APEX COURT IN THE CASE OF INDIAN SHAVING PRODUCTS LTD. (SUPRA) HAS HELD THAT SANCTION OF A S CHEME OF AMALGAMATION UNDER SECTION 18 OF THE SAID ACT NECESSARILY IMPLIES THAT THE REQUIREMENTS OF SECTION 72A OF THE INCOME TAX ACT HAVE BEEN MET AND THE BIFR MUST EXERCISE POWER CONFERRED UPON IT BY SECTION 32(2) OF THE SAID ACT AND MAKE THE DECLARATION CONTEMPLATED BY SECTION 72A OF THE INCOME TAX ACT. FURTHER HONBLE JURISDICTIONAL HIGH COURT HAS ALSO IN NO UNCERTAIN TERMS HAVE HELD THAT THE SCHEME OF BIFR OVERRIDE THE INCOME- TAX ACT AND THE SAID SCHEME CAN BE SET AT NAUGHT ON LY BY THE BIFR OR THE AAIFR UNDER THE SAID SICA ACT ITSELF AND NOT OTHERWISE EXCEPT BY THE CON STITUTIONAL PROVISION. IT HAS BEEN FURTHER HELD BY THE HONBLE HIGH COURT THAT INCOME TAX AUTHORITY CANNOT HAVE ANY JURISDICTION TO RENDER THE OPERATION OF THE SAID (BIFR) SCHEME NUGATORY UNDER ANY CIRCUMSTANCES. IT WAS ALSO HELD THAT TRIBUNAL WAS NOT RIGHT IN HOLDING FOR THE SCHEME SA NCTIONED BY THE BIFR APPROVAL/CONSENT OF THE CENTRAL GOVERNMENT/CENTRAL BOARD OF DIRECT TAXES WA S NECESSARY IN VIEW OF THE PROVISION OF THE SAID ACT. HAVING REGARD TO THE ABOVE CONCLUSIVE JU DGMENTS THE ONLY CONCLUSION THAT FLOWS IS THAT THE SCHEME SANCTIONED BY BIFR IS TO BE ALLOWED IN E NTIRETY. THE OBJECTION OF THE REVENUE THAT THE SCHEME PROVIDES FOR CONSIDERATION OF THE RELIEF AND NOT FOR DIRECTION OF THE RELIEF IS ALSO CONTRARY T O THE CIRCULAR OF THE CBDT WHEREBY IT HAS BEEN PROVID ED THAT ONCE THE INCOME TAX DEPARTMENT HAS BEEN HEARD BY BIFR, THEN SUCH SCHEME IS TO BE GIVEN EFFECT AND THEN IT SHOULD BE KEPT IN MIND THAT THERE IS NO DISTINCTION BETWEEN DIRECTION AND CONSIDERATION OF RELIEF/GRANT. IN THE INSTANT CASE IT HAS BEEN AMPLY DEMONSTRATED THAT THE INCOME TAX DEPARTM ENT WAS HEARD BY BIFR AND THEREFORE THERE REMAINS NO OCCASION TO DRAW ADVERSE INFERENCE AND D ENY THE LEGITIMATE CLAIM ARISING FROM THE SCHEME. TO SUM UP THE TRIAD COMPRISING OF THE JUDGM ENT OF THE HONBLE APEX COURT IN THE CASE OF INDIAN SHAVING PRODUCTS LTD. V. BOARD OF INDUSTRIAL AND RECONSTRUCTION AND ANOTHER (SUPRA), THE 37 IT(SS)A NOS.146 TO 152/KOL/2017 HINDUSTHAN ENGINEERING & IND. LTD., AY 2009-10 TO 2015-16 HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CI T V. J. K. CORPORATION (SUPRA) AND CIRCULAR OF BOARD DATED 16.2.2000 (SUPRA) AND SECTION 32 OF SIC A WHEN APPLIED TO THE SCHEME, THE CLAIM OF THE APPELLANT IS IN ACCORDANCE WITH LAW AND HAS TO BE G IVEN EFFECT TO. 66 BEFORE PARTING WITH THE MATTER WE ALSO CONSIDER IT APPROPRIATE TO INDEPENDENTLY CONSIDER THE SANCTIONED SCHEME BIFR DATED 4.9.2012 67 THE DIRECTIONS OF CBDT ARE FOUND AT SUB-CLAUSE ( G) TO PARA 15.8 WHICH READS AS UNDER: (G) HINDUSTAN ENGINEERING & INDUSTRIES LTD. (HEIL ) SHALL BE ENTITLED TO CARRY FORWARD AND SET OFF THE ACCUMULATED LOSSES (INCLUDING LAPSE D LOSSES) AND UNABSORBED DEPRECIATION AS PER THE INCOME TAX ACT, 1961 TILL SUCH LOSSES ARE S ET OFF FULLY AGAINST INCOME IN THE ASSESSMENT YEARS SUBSEQUENT TO THE ASSESSMENT YEAR DURING WHICH MERGER OF MSL AS ABOVE SHALL TAKE PLACE. THE EFFECT OF THIS PROVISION SHA LL BE GIVEN IN THE MANNER AS IS PROVIDED UNDER SECTION 72A OF THE INCOME TAX ACT, 1961 OR OT HERWISE ANY STATUTORY PROVISIONS FOR THE TIME BEING IS ENFORCED. 68 OTHER RELIEFS/GRANTS FOR THE CONSIDERATION OF CB DT ARE FOUND AT SUB-CLAUSE (A) TO (H) (EXCEPT G) ABOVE AT PARA 15.8 OF THE SANCTIONED SCHEME OF B IFR, WHICH READS AS UNDER: (A) TO EXEMPT/GRANT RELIEF TO THE COMPANY FROM THE PROV ISIONS OF SECTION 41A(3), 40A(A)(IA), 41)1), 34-B, 45, 56(2), 72(2), 72(3), 7 9, 80 READ WITH 139, 115JB AND PROVISIONS OF CHAPTER XVII OF THE INCOME TAX ACT. (B) TO ALLOW THE COMPANY TO CAPITALIZE AMOUNT OF RS.245 .80 CRORE, WHICH WAS DISALLOWED AS REVENUE EXPENDITURE IN THE ASSESSMENT FOR AY 2001-02 BY DEBITING THE CAPITAL WORK IN PROGRESS ACCOUNT AND CREDITING THE P&L A/C IN THE FY 2010-11. THIS AMOUNT OF CAPITAL WORK IN PROGRESS WILL BE TREATED AS PART OF THE COST OF THE ASSETS. (C) TO EXEMPT THE COMPANY FROM CHARGEABILITY OF INTERES T AND PENALTIES FOR DEFAULTS COMMITTED TILL DATE OF PRODUCTION OF ROLLING MILL A ND STILL PLANT RESPECTIVELY. (D) TO EXEMPT THE COMPANY FROM SECTION 72 & SECTION 32 OF THE INCOME TAX ACT SO AS TO ALLOW COMPANY TO CARRY FORWARD ITS ACCUMULATED LOSS ES AND ALLOWANCES BEYOND THE PERIOD EIGHT YEARS TILL IT IS FULLY ADJUSTED AGAINST THE P ROFITS OF THE COMPANY IN THE SUBSEQUENT YEARS. (E) TO EXEMPT THE COMPANY FROM THE LEVY OF MAT UNDER SE CTION 115JB OF THE INCOME TAX ACT, 1961 FOR THE PERIOD OF REHABILITATION FROM 01. 04.2009 TO 31.03.2015. (F) TO EXEMPT/GRANT RELIEF UNDER SECTION 41(1) APART FR OM OTHER LIABILITIES WRITTEN BACK FOR ALL LIABILITIES FOR WHICH RELIEF IS GRANTED/SAN CTIONED AS PER DRS. (G) .. (H) TO ALLOW DEPRECIATION ON PLANT & MACHINERIES OF MIS C UNIT OF MALANPUR STEEL LTD. FOR THE PERIOD WHEN THE STEEL PLANT WAS UNDER SUSPE NSION OF OPERATION/CLOSED/SHUT DOWN (FROM OCTOBER, 1998 TO THE DATE OF RESTART) 69 AS REGARD UNABSORBED DEPRECIATION OF RS. 72.56 C RORES IT IS NOTED THAT SECTION 32(2) COMES INTO PLAY WHICH PROVIDES AS UNDER: 2 WHERE IN THE ASSESSMENT OF THE ASSESSEE, FULL EF FECT CANNOT BE GIVEN TO ANY ALLOWANCE UNDER SUB-SECTION (1) IN ANY PREVIOUS YEAR, OWING T O THERE BEING NO PROFITS OR GAINS, CHARGEABLE FOR THAT PREVIOUS YEAR, OR OWING TO THE PROFITS OR GAINS CHARGEABLE BEING LESS THAN THE ALLOWANCE, THEN, SUBJECT TO THE PROVISIONS OF SUB-SECTION (2) OF SECTION 72 AND SUB- 38 IT(SS)A NOS.146 TO 152/KOL/2017 HINDUSTHAN ENGINEERING & IND. LTD., AY 2009-10 TO 2015-16 SECTION (3) OF THE SECTION 73, THE ALLOWANCE OR THE PART OF THE ALLOWANCE TO WHICH EFFECT HAS NOT BEEN GIVEN, AS THE CASE MAY BE, SHALL BE ADDED TO THE AMOUNT OF THE ALLOWANCE FOR DEPRECATION FOR THE FOLLOWING PREVIOUS YEAR AND DEE MED TO BE PART OF THAT ALLOWANCE, OR IF THERE IS NO SUCH ALLOWANCE FOR THAT PREVIOUS YEAR, BE DEEMED TO BE THE ALLOWANCE FOR THAT PREVIOUS YEAR, AND SO ON FOR THE SUCCEEDING PREVIOU S YEARS. 70 IT IS THUS NOTED THAT THE DEPRECATION IS TO BE C ARRIED FORWARD AS PER SECTION 32(2) OF THE ACT WITHOUT ANY TIME LIMITATION. FURTHER, CLAUSE (B) O F SECTION 72A(7) PROVIDES THAT UNABSORBED DEPRECIATION MEANS SO MUCH OF THE ALLOWANCE FOR DE PRECATION OF THE AMALGAMATING COMPANY WHICH REMAINS TO BE ALLOWED AND WHICH WOULD HAVE BEEN ALL OWED TO THE AMALGAMATING COMPANY UNDER THE PROVISIONS OF ACT AMALGAMATION HAD NOT TAKEN PLACE. 71 HAVING REGARD TO THE ABOVE STATUTORY PROVISIONS THERE CAN BE NO DISPUTE AS TO ALLOWABILITY OF THE UNABSORBED DEPRECATION OF MSL IN THE HANDS OF T HE APPELLANT COMPANY. 72 THE QUANTUM BEING ASCERTAINED, THE FACTS NOT IN DISPUTE, THE STATUTORY POSITION BEING CLEAR AS TO THE UNLIMITED PERIOD OF LIMITATION FOR CLAIM OF UNABSORBED DEPRECIATION, THE CLAIM OF THE ASSESSEE AS TO UNABSORBED DEPRECATION IS IN ORDER AND HAS TO GRANTED AS PER LAW(MOTHER INDIA REFRIGERATION 155 ITR 711 (SC). 73 IN RESPECT OF THE UNABSORBED LOSSES, THE AO WAS OF THE OPINION THAT IT INCLUDES LAPSED LOSSES OF AY 2000-01 AND 2001-02 OF RS. 48.74 CROR ES AND THE SAME CANNOT BE CONSIDERED AS PER THE PROVISIONS OF ACT BEYOND EIGHT YEARS. THE CARRY FORWARD OF UNABSORBED LOSSES AS NOTED ABOVE, IS GOVERNED BY THE SPECIAL PROVISION I.E. SECTION 72A OF THE ACT. SO, WHEN A SPECIAL PROVISION RELATING TO CARRY FORWARD AND SET OFF OF ACCUMULATED LOSS ON AMALGAMATION IS STIPULATED IN SECTION 72A OF THE ACT, IT WILL OVERRIDE THE GENERAL PROVISIONS IN RES PECT OF CARRY FORWARD OF LOSSES GIVEN IN SECTION 72 OF THE ACT. AS PER SECTION 72A OF THE ACT RELEVANT TO THE PRESENT CASE, THE LAW IS THAT WHERE THERE HAS BEEN AMALGAMATION OF A COMPANY OWNING AN INDUST RIAL UNDERTAKING (M/S MSL) WITH ANOTHER COMPANY (THE ASSESSEE M/S. HEIL) THEN NOTWITHSTANDI NG ANYTHING CONTAINED IN ANY OTHER PROVISIONS OF THIS ACT, THE ACCUMULATED LOSS AND THE UNABSORBE D DEPRECIATION OF THE AMALGAMATING COMPANY (M/S. MSL) SHALL BE DEEMED TO BE THE LOSS OF THE AM ALGAMATED COMPANY (THE ASSESSEE M/S. HEIL) FOR THE PREVIOUS YEAR IN WHICH THE AMALGAMATION WAS AFFECTED AND OTHER PROVISIONS OF THIS ACT RELATING TO SET OFF OF CARRY FORWARD LOSS SHALL APP LY ACCORDINGLY. SO, BY THIS DEEMING FICTION THE ACCUMULATED LOSS OF THE AMALGAMATING COMPANY I.E. M /S. MSL SHALL BE DEEMED TO BE THE LOSS OF THE ACCUMULATED COMPANY I.E. HEIL (ASSESSEE). SO, WHEN THE ASSESSEE IN THIS CASE BEFORE US, IN A.Y 2010-11 CLAIMED THE ACCUMULATED LOSS FROM AY 2010-1 1 ONWARDS AFTER AMALGAMATION TOOK EFFECT 39 IT(SS)A NOS.146 TO 152/KOL/2017 HINDUSTHAN ENGINEERING & IND. LTD., AY 2009-10 TO 2015-16 FROM 01.04.2009 AND CONSEQUENTLY IN THE PRESENT ASS ESSMENT YEAR IN 2012-13 BY VIRTUE OF SEC.72A(1), THE ACCUMULATED LOSS OF MSL SHALL BE DE EMED TO BE THE LOSS OF THE ASSESSEE COMPANY IN THE PREVIOUS YEAR IN WHICH THE AMALGAMATION WAS EFF ECTED I.E. AY 2010-11 ONWARDS. AS PER THE DEFINITION OF ACCUMULATED LOSS GIVEN U/S. 72A OF TH E ACT, THE ACCUMULATED LOSS OF M/S. MSL IN THIS CASE HAS TO BE SO MUCH OF LOSS OF AMALGAMATING COMP ANY I.E. M/S. MSL, COMPUTED UNDER THE HEAD PROFIT & GAIN OF BUSINESS, WHICH SUCH AMALGAMATIN G COMPANY I.E. M/S. MSL WOULD HAVE BEEN ENTITLED TO CARRY FORWARD AND SET OF UNDER THE PROV ISION OF SEC.72 OF THE ACT, AS IF THE AMALGAMATION HAS NOT TAKEN PLACE. AS PER SEC. 72 OF THE ACT, WH ERE FOR ANY ASSESSMENT YEAR, THE NET RESULT OF THE COMPUTATION UNDER THE HEAD PROFIT AND GAINS OF BUS INESS IS A LOSS TO THE ASSESSEE (NOT LOSS SUSTAINED IN A SPECULATION BUSINESS) AND SUCH LOSS CANNOT BE OR IS NOT WHOLLY SET OFF AGAINST THE INCOME UNDER ANY HEAD OF INCOME IN ACCORDANCE WITH THE PROVISION S OF SEC.71, SO MUCH OF THE LOSS AS HAS NOT BEEN SO SET OFF OR WHERE THE ASSESSEE HAS NO INCOME UNDE R ANY OTHER HEAD, THE WHOLE LOSS SHALL SUBJECT TO THE OTHER PROVISIONS OF THIS CHAPTER BE CARRIED FOR WARD TO THE FOLLOWING ASSESSMENT YEAR AND IT SHALL BE SET OFF AGAINST THE PROFIT AND GAINS IF ANY OF A NY BUSINESS OF PROFESSION CARRIED ON BY THE ASSESS EE AND ASSESSABLE FOR THAT ASSESSMENT YEAR. AND IF TH E LOSS CANNOT BE WHOLLY SO SET OFF, THE AMOUNT OF LOSS NOT SO SET OFF SHALL BE CARRIED FORWARD TO THE FOLLOWING ASSESSMENT YEAR AND SO ON. HOWEVER, WE NOTE THAT SUB-SEC.(3) OF SEC.72 OF THE ACT PRES CRIBES A LIMITATION PERIOD OF 8 ASSESSMENT YEARS IMMEDIATELY SUCCEEDING THE ASSESSMENT YEAR FOR WHIC H THE LOSS WAS FIRST COMPUTED. IN OTHER WORDS, THERE IS AN OUTER LIMIT OF 8 YEARS FOR CARRY FORWAR D OF LOSSES FROM THE FIRST YEAR LOSS WAS COMPUTED UNDER THIS SECTION. SINCE THE DEFINITION OF ACCUM ULATED LOSSES U/S. 72A OF THE ACT, WHICH IS THE SPECIAL PROVISION FOR CARRY FORWARD OF LOSSES OF AM ALGAMATED COMPANIES, INCORPORATES THE AMALGAMATING COMPANYS ACCUMULATED LOSS WHICH IS EN TITLED TO CARRY FORWARD AND SET OFF AS PER THE PROVISION OF SEC.72 OF THE ACT, SUB CLAUSE (3) OF S ECTION 72 OF THE ACT PRESCRIBES A CAP OF EIGHT ASSESSMENT YEARS IMMEDIATELY SUCCEEDING ASSESSMENT YEAR FOR WHICH THE LOSS WAS FIRST COMPUTED. THE AO WHILE GIVING EFFECT TO THE BIFR ORDER DID NO T UNDERSTAND THE BINDING NATURE OF THE CBDT CIRCULAR AND HAS NOT GIVEN EFFECT TO THE SUB-CLAUSE (A) OF 15.8 WHEREIN PARA (A) THE BIFR HAS ASKED CBDT TO CONSIDER EXEMPT/GRANT RELIEF TO THE COMPANY FROM THE PROVISIONS OF SECTION----------------- -------------------------72A(2), 72(3), 79, 80 R EAD WITH SEC. 139 ETC. SINCE THE DEPARTMENTS VIEW HAS BEEN CONSIDERED BY THE BIFR BEFORE PASSING THE SANCTIONED SCHEME AS PER CBDT CIRCULAR, THE AO WAS DUTY BOUND TO GIVE EFFECT TO THE RECOMMENDAT ION MADE BY THE BIFR. SO, WHEN THE BIFR SCHEMES CONSIDER, RELIEF U/S. 72(3), MEANS THE LIMI TATION PERIOD PRESCRIBED U/S. 72(3) OF THE ACT I.E. 8 YEARS HAS TO BE LIFTED AND AO HAS TO GIVE EFFECT TO IT AND CARRY FORWARD OF LOSS HAS TO BE GIVEN MORE THAN 8 YEARS. MOREOVER, WE NOTE THAT CLAUSE (B) PA RA 15.8 OF THE BIFR SCHEME RECOMMENDS CBDT 40 IT(SS)A NOS.146 TO 152/KOL/2017 HINDUSTHAN ENGINEERING & IND. LTD., AY 2009-10 TO 2015-16 TO EXEMPT THE COMPANY FROM SEC.72 AND 32 OF THE INC OME TAX ACT, SO AS TO ALLOW THE COMPANY TO CARRY FORWARD ITS ACCUMULATED LOSS AND ALLOWANCE BE YOND THE PERIOD OF EIGHT YEARS TILL IT IS FULLY ADJUSTED AGAINST PROFIT OF THE COMPANY IN THE SUBSE QUENT YEARS. THIS RECOMMENDATION ALSO BECOMES DIRECTORY IN NATURE AS PER THE CBDT IN THE FACTS AN D CIRCUMSTANCES OF THE CASE DISCUSSED ABOVE AND THE AO IS DUTY BOUND TO GIVE EFFECT TO IT AS SUCH. IT SHOULD BE REMEMBERED THAT BIFR SCHEME CAN OVERRIDE THE INCOME TAX ACT AS HELD BY JURISDICTION AL HIGH COURT IN J.K. CORPORATION LTD. (SUPRA). MOROVER, WE NOTE THAT BY CLAUSE (H) THE BIFR RECOMM ENDS TO ALLOW DEPRECIATION ON PLANT AND MACHINERY OF MSL UNIT OF MALANPUR STEEL LTD. FOR TH E PERIOD WHEN THE STEEL PLAN WAS UNDER SUSPENSION OF OPERATION/CLOSED/SHUT DOWN (FROM OCTO BER 1998 TO THE DATE OF RESTART) ALSO BECOMES DIRECTORY IN THE LIGHT OF THE CBDT CIRCULAR SINCE T HE DEPARTMENTS VIEW HAS BEEN CONSIDERED BY THE BIFR BEFORE SANCTIONED SCHEME WAS PASSED. THEREFOR E, THE INTENT OF THE BIFR IS VERY CLEAR AND THE AO WAS DUTY BOUND TO GIVE EFFECT TO THE ORDER OF BI FR SINCE THE CIRCULAR PASSED BY THE CBDT IS BINDING ON THE INCOME TAX AUTHORITIES AND AS HELD B Y THE HONBLE JURISDICTIONAL HIGH COURT THAT THE SICA ACT OVERRIDES ALL OTHER STATUTES EXCEPT FOREIG N EXCHANGE REGULATION ACT, 1973 AND URBAN LAND CEILING & REGULATION) ACT, 1976. THEREFORE, T HE AO WAS DUTY BOUND TO GIVE EFFECT TO THE ORDER PASSED BY THE BIFR AND THE ACCUMULATED LOSS A ND THE UNABSORBED DEPRECIATION NEEDS TO BE GRANTED. 74 WE ALSO TAKE NOTE THAT THE SPECIAL PROVISION IN CASE OF AMALGAMATED COMPANIES I.E. SEC. 72A(1) IS SUBJECT TO SEC. 72A(2). THERE ARE CERTAI N CONDITIONS WHICH HAVE BEEN PRESCRIBED U/S. 72A(2) WHICH THE AMALGAMATING COMPANY AS WELL AS TH E AMALGAMATED COMPANY HAS TO FULFILL THEN ONLY THE ACCUMULATED LOSS AS WELL AS UNABSORBED DEP RECIATION WILL BE ALLOWED U/S. 72A(1) OF THE ACT. HOWEVER, AS WE STATED ABOVE AS PER THE LATEST CBDT CIRCULAR (SUPRA), SINCE IN THIS CASE THE DEPARTMENTS VIEWS/OBJECTIONS WERE DULY CONSIDERED BY THE BIFR, BEFORE PASSING THE SANCTIONED SCHEME, THE AO HAS TO GIVE EFFECT TO EVEN THE RECOM MENDATION GIVEN BY IT FOR CONSIDERATION TO THE CBDT. IN FACT, AS STATED ABOVE, AO HAS GIVEN TO SC HEME AND, ALLOWED UNABSORBED LOSSES THOUGH IN PART. SO, THE BIFR RECOMMENDATION GIVEN IN SUB-CLA USE (A) TO (H) OF PARA 15.8 OF THE SANCTIONED SCHEME IS TO BE GIVEN EFFECT TO BY THE AO, SINCE CI RCULAR OF CBDT IS BINDING ON HIM. WE NOTE THAT AS PER THE SANCTIONED SCHEME SUB PARA (A) OF PARA 1 5.8, THE BIFR HAS RECOMMENDED CBDT TO EXEMPT/GIVE RELIEF OF U/S. 72A(2) OF THE ACT. SINC E THE CBDTS OBJECTIONS WERE CONSIDERED BY THE BIFR, BEFORE PASSING THE SANCTIONED SCHEME, THE REC OMMENDATION/FOR CONSIDERATION TO CBDT HAS TO BE TREATED AS MANDATORY BY THE AO AND HAS TO BE GIV EN EFFECT. RESULTANTLY, THE SUB PARA (A) TO (H) HAS TO BE GIVEN EFFECT IT INCLUDES TO EXEMPT/GRANT RELIEF U/S 72A(2) OF THE ACT, WHICH IMPLIES, THE PRE-CONDITIONS STIPULATED IN SECTION 72A(2) OF THE ACT FOR INVOKING SECTION 72A(1) OF THE ACT, NEEDS 41 IT(SS)A NOS.146 TO 152/KOL/2017 HINDUSTHAN ENGINEERING & IND. LTD., AY 2009-10 TO 2015-16 TO BE EXEMPTED AND BECOMES IN-OPERATIVE AND NECESSA RILY HAS TO BE OVERLOOKED AND SO, IN EFFECT THE AO HAS TO GIVE EFFECT TO SEC. 72A(1) WITHOUT LOOKIN G INTO THE CONDITIONS LAID IN SEC. 72A(2) OF THE ACT. 75 IN ARRIVING AT THE ABOVE CONCLUSION, WE DERIVE S UPPORT FROM THE DECISION OF COORDINATE BENCH OF TRIBUNAL IN ITA NO. 1335/AHD/2011 FOR AY 2 007-08DATED 8.12.2015 IN THE CASE OF ITO V. THE AHMEDABAD ADVANCE MILLS LTD. WHERE TOO BIFR BY AN ORDER DATED 21.8.2006 PROVIDED INTER- ALIA AS UNDER: 7.6 INCOME TAX-THE CHAIRMAN, CENTRAL BOARD OF DIRE CT TAXES, NEW DELHI. TO CONSIDER II) EXEMPTION OF CAPITAL GAINS FROM CAPITAL GAIN TA X, IF ANY. THE COMPANY MAY BE ALLOWED TO SET OFF CAPITAL GAINS AGAINST ACCUMULATE D LOSSES. IV) FOR THE PURPOSE OF 8 YEARS LIMITATION PERIOD OF CARRY FORWARD OF LOSSES, 8 YEARS PERIOD WOULD BE COUNTED FROM THE FINANCIAL YEAR 200 2-03. 76 THE AO DENIED THE SET OFF ON THE GROUND THAT THE LOSSES COULD NOT BE ALLOWED TO BE SET OFF BEYOND 8 YEARS. THE CIT(A) DELETED THE DISALLOWANC E BY OBSERVING AS UNDER: NOW ISSUE HERE IS WHETHER 8 YEAR'S LIMITATION WILL APPLY IN THIS CASE OR NOT. AS PER THE SECTION 72 , BUSINESS LOSS CANNOT BE SET OFF AGAINST BUSINESS INCOME BEYOND EIGHT YEARS. HOWEVER CAPITAL GAIN CAN NEVER BE ALLOWED TO BE SET OFF AGAINST BUSINESS LOSS BROUGHT FORWARD. THEREFORE INCOME TAX ACT NEVER ALLOWS SET OFF OF CAPITAL GAIN AGAINST BUSINESS LOSS BROUGHT FORWARD. HOWEVER THE BIFR UNDER SICA HAS PO WER TO ALLOW ANY CONCESSION IT CONSIDERED APPROPRIATE FOR THE REVIVAL OF THE COMPA NY. AS DISCUSSED EARLIER, BIFR HAS CLEARLY ALLOWED SET OFF OF CAPITAL GAIN AGAINST ACC UMULATED LOSSES. THE ORDER NOWHERE TALKS OF BROUGHT FORWARD BUSINESS LOSSES. THE LIMITATION OF 8 YEARS APPLIES TO BROUGHT FORWARD BUSINESS LOSSES. HOWEVER ACCUMULATED LOSSES HAVE NO SUCH LIMIT. THE SET OFF IS OF THE ACCUMULATED LOSSES AGAINST CA PITAL GAIN WHICH ARE OTHERWISE NOT PERMISSIBLE UNDER IT ACT . SINCE SICA HAS OVERRIDING POWER AS DISCUSSED EARL IER, THE SET OFF OF CAPITAL GAIN IS PERMITTED BY BIFR AGAINST ACCUMU LATED LOSSES. THEREFORE WHILE IMPLEMENTING THE ORDER OF BIFR, ASSESSING OFFICER H AS TO APPLY THE ORDER EVEN IF IT IS NOT CONSISTENT WITH THE PROVISIONS OF IT ACT . SINCE THE ORDER OF BIFR IS INCONSISTENT WITH THE PROVISIONS OF IT ACT AS FAR AS SETTING OFF OF ACCUMULATED LOSSES BEYOND EIGHT YEARS AGAINST CAPITAL GIN ARE CONCERNED. BUT STILL BIFR ORDER WIL L PREVAIL OVER THE INCONSISTENT PROVISIONS OF IT ACT . ACCORDINGLY APPELLANT WILL BE ELIGIBLE TO SET OFF CAPITAL GAINS AGAINST ACCUMULATED LOSSES EVEN BEYOND 8 YEARS. AS MENTIONED BY THE APP ELLANT, IN THE IMMEDIATELY PRECEDING YEAR, ASSESSING OFFICER IN THE ASSESSMENT ORDER PAS SED ON 13.10.2008 ALLOWED SET OFF OF ACCUMULATED LOSSES BEYOND 8 YEARS AGAINST LONG-TERM CAPITAL GAINS OF RS.15,87,02,368 AND SHORT-TERM CAPITAL GAIN OF RS.1634615. SINCE SAME A SSESSING OFFICER HIMSELF ALLOWED SET OFF OF ACCUMULATED LOSSES AGAINST CAPITAL GAINS IN THE IMMEDIATE PRECEDING YEAR, I DO NOT UNDERSTAND THE CHANGE IN HIS STAND THIS YEAR. IN VI EW OF THE CLEAR ORDER OF BIFR WHICH HAS BECOME FINAL, APPELLANT IS ENTITLED TO SET OFF CAPI TAL GAINS AGAINST ACCUMULATED LOSSES EVEN BEYOND 8 YEARS. ASSESSING OFFICER IS THEREFORE DIRE CTED TO ALLOW SUCH SET OFF.' 77 THE AFORESAID DECISION WAS AFFIRMED BY THE COORD INATE BENCH OF ITAT BY HOLDING THAT BIFR DIRECTION BINDS THE REVENUE AUTHORITIES. ALSO HON BLE MADRAS HIGH COURT IN THE CASE OF CIT V. M/S 42 IT(SS)A NOS.146 TO 152/KOL/2017 HINDUSTHAN ENGINEERING & IND. LTD., AY 2009-10 TO 2015-16 TUBE INVESTMENTS OF INDIA LTD. IN TAX CASE (APPEAL) NOS 519 TO 521 OF 2005 DATED 4.1.2012 IN ALMOST IDENTICAL CIRCUMSTANCES UPHELD THE ORDER OF TRIBUNAL HOLDING THAT THE BIFRS RECOMMENDATION TO THE DEPARTMENT TO CONSIDER GRANTI NG EXEMPTION FROM THE PROVISIONS OF SECTION 43B SHOULD BE TREATED AS A MANDATE. IT WAS HELD AS UNDER: 12. IT IS ALSO CONTENDED THAT EVEN ASSUMING THAT T HE SCHEME HAD NO OVERRIDING EFFECT ON THE PROVISIONS OF THE INCOME TAX ACT , A READING OF THE SCHEME DOES NOT SHOW THAT IT DIR ECTED THE ALLOWING OF THE DEDUCTION UNDER SECTION 43B , EXCEPT OBSERVING THAT THE INCOME TAX AUTHORITIES MAY CONSIDER ALLOWING SUCH DEDUCTION. T HE SCHEME SHOULD BE READ KEEPING IN KIND THE OBJECT OF THE PROVISIONS OF THE SICA FOR R EHABILITATION MEASURE IN RESPECT OF SICK INDUSTRY. WHEN A COMPANY IS DECLARED TO BE A SICK A ND THE ASSESSEE IS TAKING OVER THE MANAGEMENT OF SUCH A SICK COMPANY BASED ON THE SCHE ME FOR THE PURPOSE OF REHABILITATION, SUCH ASSESSEE SHOULD ALSO BE ENTITLED TO THE BENEFI TS AND THE SCHEME SHOULD BE CONSTRUED ONLY KEEPING IN MIND THE REHABILITATION MEASURE. IN THESE CIRCUMSTANCES, THE CONTENTION OF THE REVENUE THAT THE SCHEME HAS NOT SPECIFICALLY DI RECTED THE ALLOWING OF DEDUCTION UNDER SECTION 43B CANNOT BE ACCEPTED AS SUCH BENEFIT SHOULD BE DEALT WITH IN THE SCHEME ITSELF. THEREFORE, THE SUBSTANTIAL QUESTION OF LAW IS ANSWERED IN THE NEGATIVE I.E. AGAINST THE REVENUE . 78 HAVING REGARD TO THE ABOVE WE ALSO NOTICE THAT T HE AO HELD THAT THE CLAIM IS NOT MAINTAINABLE IN THE INSTANT YEAR AS SET OFF ON ACCO UNT OF CARRY FORWARD BUSINESS LOSS AND UNABSORBED OF DEPRECATION OFF STANDS EXHAUSTED IN THE PRECEDIN G YEARS AND THERE IS NO LEFT OVER BUSINESS LOSS BROUGHT FORWARD AND, UNABSORBED DEPRECIATION. HE H AS ALSO HELD THAT WITHOUT PREJUDICE ANY LOSS THAT COULD HAVE BEEN SET OFF IN THE HANDS OF MERGED COMP ANY IN THE INSTANT YEAR AS A RESULT OF MERGER WOULD ULTIMATELY BE TAXED IN AY 2013-14 BY VIRTUE O F SECTION 72A OF THE ACT READ WITH RULE 9C OF THE RULES. ON CONSIDERATION OF THE ABOVE, WE ARE O F OPINION THAT, SO FAR AS FORMER OBJECTION IS CONCERNED, THE SAME IS FACTUAL AND AO IS DIRECTED T O ALLOW THE CLAIM AFTER CONSIDERING THE AVAILABILITY OF LOSSES FOR THE INSTANT YEAR SUBJECT TO THE CLAIMS MADE IN THE PRECEDING YEAR IN THE LI GHT OF THE OBSERVATIONS AND DECISION GIVEN IN THE PRECE DING PARAS. HOWEVER AS REGARDS THE LATTER IS CONCERNED, THE FACT THAT LOSSES CLAIMED AND ALLOWED IN THE INSTANT YEAR MAY OR MAY NOT RESULT IN TAXABLE INCOME IN SUCCEEDING YEARS DOES NOT CHANGE THE LEGAL EFFECT OF A CLAIM IN THE INSTANT YEAR. SINCE WE HAVE ALREADY HELD THAT THE CLAIM IN THE IN STANT YEAR IS MAINTAINABLE, THE ISSUE OF TAXABILITY OF SAID CLAIM IN ANY SUBSEQUENT YEAR DOESNT ARISE IN VIEW OF THE DISCUSSION IN PARA 73 & 74 SUPRA. WE THEREFORE REJECT THE CONTENTION OF THE REVENUE I N NOT ALLOWING THE LOSSES FULLY AND ALSO THE TAXABILITY OF THE SUM IN SUBSEQUENT YEAR. WE THEREF ORE, ALSO REJECT THE AFORESAID OBJECTION OF THE AO. 79 EX-CONSEQUENTI, THE AO IS DIRECTED TO ALLOW (SUB JECT TO AVAILABILITY) UNABSORBED LOSSES AND UNABSORBED DEPRECATION OF MSL TO THE APPELLANT COMP ANY. GROUND 9 FOR AY 2012-13 IS THEREFORE ALLOWED. 43 IT(SS)A NOS.146 TO 152/KOL/2017 HINDUSTHAN ENGINEERING & IND. LTD., AY 2009-10 TO 2015-16 80 SO FAR AS REMAINING GROUNDS IN THESE APPEALS ARE CONCERNED OUR FINDINGS ARE AS UNDER: A) GROUNDS 3 TO 5, 10 AND 11 FOR AY 2012-13 WERE NO T PRESSED AND ARE THUS DISMISSED; B) GROUNDS 7 FOR AY 2014-15 AND GROUNDS 8 AND 9 FO R AY 2015-16 ARE REGARDING LEVY OF INTEREST WHICH ARE CONSEQUENTIAL IN NATURE. C) GROUNDS 4 TO 6 FOR AY 2014-15 AND GROUNDS 4 TO 7 FOR AY 2015-16 RELATE TO DEPRECIATION ON ASSETS OF M/S MSL WHICH CLAIM IS PA RI-MATERIA WITH GROUNDS 6, 7, 8 FOR AY 2012-13 AND THUS FOLLOWING THE REASONING GIVEN BY U S WHILE DECIDING GROUNDS 6, 7, 8 FOR AY 2012-13, WE ALSO ALLOW THE CLAIM FOR THE AYS 201 4-15 AND, 2015-16. THUS THE GROUNDS RAISED ARE ALLOWED. D) THE OTHER SUBSTANTIVE GROUNDS RAISED GROUND 4 IN AY 2009-10, GROUNDS 4 TO 10 IN AY 2010-11, 2011-12 AND 2013-14 AND ALSO ADDITIONAL GROUNDS 2 TO 4 IN AY 2013-14 HAVE BEEN ACADEMIC IN LIGHT OF THE FINDINGS WHILE ADJUDI CATING THE SCOPE OF THE VALIDITY OF THE ASSESSMENT UNDER SECTION 153A OF THE ACT. 81 IN THE RESULT, THE APPEALS FILED BY THE ASSESSEE ARE PARTLY ALLOWED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 24TH JAN UARY, 2018 SD/- SD/- (DR. A. L. SAINI) (ABY. T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 24TH JANUARY, 2018 JD.(SR.P.S.) COPY OF THE ORDER FORWARDED TO: 1. APPELLANT M/S. HINDUSTHAN ENGINEERING & INDUST RIES LTD. C/O SALARPURIA JAJODIA & CO. 7, C. R. AVENUE, KOLKATA-700 072. 2 RESPONDENT DCIT, C.C-1(4), KOLKATA 3. THE CIT (A) , KOLKATA. 4. 5. CIT , KOLKATA. DR, KOLKATA BENCHES, KOLKATA / TRUE COPY, BY ORDER, SR. PVT. SECRETARY