DCIT, CIRCLE - 8, KOLKATA, KOLKATA vs. M/S. UNIQUE INTERNATIONAL PVT. LTD., KOLKATA

In the first ground raised in its appeal, the Revenue has challenged the action of the ld. CIT(Appeals) in allowing the claim of the assessee for set off of unabsorbed depreciation loss of the amalgamating company carried forward amounting to Rs.84,22,538/- in the assessment of the assessee-company being amalgamated company even though the amalgamating company was not engaged in the business for three or more years.

The assessee in the present case is a Company, which is engaged in the business of manufacturing and exporting of leather goods and manufacturing of Pen Refills as well as trading of Pens. The return of income for the year under consideration was originally filed by it on 29.11.2006 declaring total income of Rs.42,90,186/-. Subsequently a revised return was filed by the assesese on 04.12.2007 declaring total income at ‘nil’ and book profit under section 115JB of the Act at Rs.1,23,86,308/-. As per the order of the Hon’ble High Court of Calcutta dated 06.07.2005, M/s. Surya Kiran Udyog Pvt. Ltd. (amalgamating company) was amalgamated with the assessee-company (amalgamated company) w.e.f. 01.04.2004. In the revised computation of total income done as per the normal provisions of the Act, the brought forward depreciation loss of the amalgamating company pertaining to A.Y. 2003- 04 and 2004-05 amounting to Rs.84,22,538/- was set off by the assessee- company against its income for the year under consideration. The claim of the assessee for such set off was examined by the Assessing Officer as per the relevant provisions of section 72A of the Income Tax Act, 1961 read with Rule 9C of the Income Tax Rules, 1962. On such examination, he found that one of the conditions to be satisfied in order to claim such set

Against the order passed by the Assessing Officer under section 143(3), an appeal was preferred by the assessee before the ld. CIT(Appeals) disputing, inter alia, the disallowance made by the Assessing Officer on account of its claim for set off of brought forward loss of amalgamating company. During the course of appellate proceedings before the ld. CIT(Appeals), it was submitted on behalf of the assessee-company that the amalgamating company was in the process of setting up a Plant for manufacturing Ball Pen tips during the first year itself, i.e. financial year 2001-02 as is evident from the investment made in capital work-in-progress, which as on 31.03.2012 was Rs.5,07,57,755/- . It was also submitted that the Amalgamation Scheme had become effective on 05.09.2005 when the certified copy of the Court’s order sanctioning such Scheme was filed with the Registrar of Companies. It was contended that the amalgamating company thus was engaged in the business of manufacturing of Ball Pen Tips for more than three years and the relevant condition to claim the set off of loss of the said Company

The ld. D.R. contended that the effective date of amalgamation as approved by the Hon’ble High Court was 01.04.2004 and since the amalgamating company was incorporated only on 13.09.2001, the condition of being in the business for more than three years was certainly not satisfied. He contended that the date of receipt of order of the Hon’ble High Court or the date of filing the said order with the Registrar of Companies is not relevant for deciding the effective date of amalgamation and the ld. CIT(Appeals) is not justified to rely on the said date to hold that the condition of amalgamating company being engaged in the business for more than three years was duly satisfied.

The ld. counsel for the assessee, on the other hand, contended that the effective date of amalgamation was 01.04.2004 as approved in the order of the Hon’ble Calcutta High Court. He contended that the amalgamating company however was engaged in the business of manufacturing ball pen tips right from 13.10.2001 when the first payment was made by it for purchase of machinery. He contended that the first year of business operation in case of amalgamating company thus was completed on 31.03.2002 itself and the condition of being in the business of three years or more on the date of amalgamation, i.e. 01.04.2004 was duly satisfied. In this regard, he relied on the definition of ‘previous year’ given in section 3 of the Income Tax Act, which provides that in the case of a business or profession newly set up in any financial year, the previous year shall be the period beginning with the date of setting up the business or profession and ending with the relevant financial year. He

We have considered the rival submissions and also perused the relevant material available on record. It is observed that M/s. Surya Kiran Udyog Pvt. Ltd. (amalgamating company) was amalgamated with the assessee-company (amalgamated company) as per the order of the Hon’ble Calcutta High Court and the effective date of such amalgamation was 01.04.2004 as per the order of the Hon’ble High Court, which is not in dispute. The said amalgamating company was incorporated on 13.09.2001 and the first step to set up the business of manufacturing ball pen tips was taken by it on 13.10.2001 when the order for purchase of machinery was placed. If the said date is taken as the date of commencement of business by the amalgamating company, the question is whether the condition stipulated in the relevant provisions that the amalgamating company should have been engaged in the business for three or more years is satisfied or not. The relevant provision as contained in sub-section 1 of section 72A in this regard is extracted below:-

The term used in the relevant provision thus is “three or more years” and not “three or more previous years”. The definition of the previous year as given in sub-section 3 of the Act thus is not relevant in this context and the same, in our opinion, cannot be adopted as sought to be contended by the ld. counsel for the assessee. The word “year” no doubt is not defined either in the relevant provisions of section 72A of the Income Tax Act or anywhere else in the said Statute and in the absence of the same, one has to look into the meaning as assigned to the said word in the General Clauses Act. Section 3(66) of the General Clauses Act defines “year” to mean a Calendar Year reckoned according to the British Calendar. The General Clauses Act is, as its very nature implies, a general Act subject to the particular context. If there is nothing else to guide the Court in the particular case, regarding the year, then the year has to be taken as a calendar year. No doubt, the text of the relevant provisions, in which the word ‘year’ is used and the context in which such word has been used along with the legislative intention has to be taken into consideration while assigning any meaning to the said word. If the text and context of the relevant provisions of section 72A in this regard are taken into consideration, we find that the period of three or more years as specified therein clearly signifies three or more calendar years and not certainly three or more previous years as defined in section 3 of the Act. The term ‘previous year’ as defined in section 3 of the Act is altogether different and the same, therefore, cannot be adopted to give meaning to the word ‘year’ used in the relevant provisions of section 72A going by it text and context. The said word clearly signifies the calendar year and since the

As regards the issue involved in Ground No. 2 of the Revenue’s appeal relating to the deletion by the ld. CIT(Appeals) of the disallowance of Rs.77,829/- made by the Assessing Officer on account of belated payment of employees’ contribution towards P.F. and E.S.I. after the expiry of due dates prescribed in the relevant Statute but before the date of filing the return of income for the year under consideration, the ld. representatives of both the sides have agreed that the same is squarely covered in favour of the assessee, inter alia, by the decision of the Hon’ble Supreme Court in the case of CIT –vs.- Alom Extrusions Limited reported in 319 ITR 306 and in the case of CIT –vs.- Vinay Cement Limited reported in 213 CTR 268. Respectfully following the ratio laid down by the Hon’ble Supreme Court in these cases, we uphold the impugned order of the ld. CIT(Appeals) giving relief to the assessee on this issue and dismiss Ground No. 2 of the Revenue’s appeal.

In the solitary ground raised in its cross Objection, the assessee- company has challenged the addition of Rs.39,07,500/- made by the Assessing Officer and confirmed by the ld. CIT(Appeals) on account of short-term capital gain on sale of property by applying the provisions of section 50C of the Act.

In its return of income filed for the year under consideration, the assessee-company had declared short-term capital gain of Rs.33,64,430/- on sale of property as worked out by reducing the cost of acquisition of Rs.3,14,31,770/- from the sale consideration of Rs.3,47,96,200/- as per the relevant sale deed. In this regard, it was noticed by the Assessing Officer that the value of the property sold by the assessee as adopted or assessed by the concerned authority of the State Government for the purpose of payment of stamp duty was Rs.3,87,03,700/-. Applying the provisions of section 50C, he adopted the said value as deemed sale consideration of the property sold by the assessee and recomputed the short-term capital gain at Rs.72,71,930/- resulting in addition of Rs.39,07,500/- to the total income of the assessee on account of short- term capital gain. On appeal, the ld. CIT(Appeals) upheld the action of the Assessing Officer on this issue.

We have heard the arguments of both the sides on this issue and also perused the relevant material available on record. Relying on the various decisions of the Tribunal, the ld. counsel for the assessee has contended that the property in question transferred by the assessee- company during the year under consideration being in the nature of booking rights and not land and building, section 50C is not applicable. The ld. D.R., on the other hand, has contended that this contention is being raised on behalf of the assessee for the first time before the Tribunal, and therefore, an opportunity should be given to the Assessing Officer to examine/verify the same. We find merit in this contention of the ld. D.R. and since the ld. counsel for the assessee also has not raised any objection in this regard, we restore this issue to the file of the Assessing Officer for deciding the same afresh after examining/verifying the contention of the assessee that the property in question transferred during the year under consideration being in the nature of booking rights

In the result, the appeal of the Revenue is partly allowed, while the Cross Objection of the assessee is treated as allowed for statistical purposes. Order pronounced in the open Court on September 7th, 2016. Sd/- Sd/-