Deputy Commissioner of Income Tax vs Garden Silk Mills Ltd.

D.A. Mehta, J.—On March 23, 2000, at the time of admission, the following question of law was formulated by this Court:

(B) Whether, on the facts and circumstances of the case based on reappraisal of evidence, the Income Tax Appellate Tribunal was justified in holding that an amount of Rs. 2,36,85,075 allowed as deduction u/s 43B to the amalgamating sister concern would not be liable to be included in the hands of the successor amalgamating company with reference to the provisions of Section 43B?

The assessment year in question is 1989-90. The assessee, a limited company took over the assets and liabilities of another company being Vareli Textile Industries Ltd. In relation to the customs duty paid by Vareli Textile Industries Ltd., the said company had claimed deduction of Rs. 2,36,85,075. Vareli Textile Industries Ltd. amalgamated with the asses-see-company with effect from April 1, 1988. The Assessing Officer made addition protectively in the hands of the assessee company on the basis that the claim of deduction of the aforesaid amount in the hands of Vareli Textile Industries Ltd. had been disallowed by the Assessing Officer.

Heard learned Counsel appearing for the appellant-Revenue. It was submitted that the Commissioner (Appeals) had upheld the addition, holding that, as the said deduction was allowed in the hands of Vareli and the closing stock, after such deduction, had been taken over by the assessee-company, the opening stock in the hands of the assessee company had to be enhanced by the said figure. Learned Counsel, therefore, urged that the Tribunal was in error in deleting the addition in question.

Learned Counsel for the respondent-assessee supported the impugned order of the Tribunal dated January 1, 1999, while inviting attention to the judgment of the apex court in the case of Saraswati Industrial Syndicate Ltd. Vs. Commissioner of Income Tax, and submitted that the Tribunal had rightly applied this ratio of the said decision. It was submitted that in fact the assessee-company was only claiming deduction of the purchase price paid for the stock acquired on amalgamation.

The Tribunal after recording facts in paragraph No. 8.4 of the impugned order, has referred to the headnote of the apex court decision in the case of Saraswati Industrial Syndicate Ltd. Vs. Commissioner of Income Tax, and, thereafter, applied the ratio to the facts of the case and come to the conclusion that the addition in question was not correct.

6 In the aforesaid facts and circumstances of the case, it is not possible to find any legal infirmity in the impugned order of the Tribunal so as to warrant interference. The appeal is accordingly dismissed and the question stands answered accordingly. There shall be no order as to costs.