The assessee (amalgamated Company) amalgamated with a Company by name SKUPL (amalgamating Company) as per the order of the Calcutta High Court in 2004. The Assessee Company (Unique International (P) Ltd.) had set off the brought forward loss of the amalgamating company in the year under consideration. The Assessing officer was of the view that in order to accept the claim of the assessee company, the condition that must be satisfied is that, amalgamating company should have been engaged in the business in which the accumulated loss occurred or depreciation remained unabsorbed for 3 or more years. Since the date of incorporation of amalgamating company was 13-9-2001 and it was only in the process of setting up plant upto 31-2-2001, the claim of the assessee company was not to be allowed.
On appeal to the Commissioner of Income Tax ( Appeals) [CIT (A)], the CIT (A) allowed the claimed of the Assessee Company for the reason that that the amalgamating Company was in the process of setting up a plant for manufacturing Ball Pin tips during the first year itself and also taking into consideration that the amalgamating Company was engaged in the said business for more than 3 previous years, the relevant condition to claim was duly satisfied. The Tribunal, however, held that the phrase used ‘three or more years’ as appearing in Section 72A cannot be interpreted to mean ‘three or more previous years’. For this purpose, the Tribunal referred to the General clauses Act which defines the term ‘year’ to mean calendar year reckoned according to the British calendar.
The Tribunal held that the word ‘year’ in Section 72A clearly signifies the calendar year and since the amalgamating Company in the present case, was not engaged in the business in which accumulated loss occurred or depreciation remained unabsorbed for three or more calendar years, the assessee company (amalgamated company) was not entitled to claim set off of the brought forward loss of amalgamating company against its income for the year under consideration.