Indian Kanoon - Search engine for Indian Law

5. We have heard the rival submissions and gone through the relevant material on record. ICSL got amalgamated with the assessee company w.e.f. 01-04-2012. A copy of the Scheme of ITA No. 1857 & 1935/PUN/2017 Capgemini Technology Services India Limited arrangement, as approved by the Hon'ble High Court, has been placed at page 68 onwards of the paper book. As per the Scheme of arrangement u/s.391 and 394 of the Companies Act, 1956, it has been provided that all the assets and liabilities of the undertaking of the amalgamating company shall stand transferred and vest in and deemed to be the assets and liabilities of the amalgamated company. Clause 4(h) of the Scheme provides that all the benefits including entitlements and incentives of any nature whatsoever including tax concessions (not limited to income tax, unexpired credit for minimum alternate tax, minimum alternate tax, fringe benefit tax, sales tax) of the Transferor company shall be transferred to and vest in the Transferee Company and: `these shall relate back to the appointed date as if the Transferee Company was originally entitled to all benefits to such incentive schemes and policies subject to the continued compliance by the Transferee Company of all the terms and conditions'. Para 10(f) of the Scheme provides that: `with effect from the appointed date and up to and including the effective date, any exemption from or any assessment with respect to any tax which has been granted or made, or any benefit by way of set off or carry forward as the case may be of any unabsorbed depreciation or investment allowance ITA No. 1857 & 1935/PUN/2017 Capgemini Technology Services India Limited or other allowance or loss which has been extended to or is available to the Transferor Company under the Income Tax Act, 1961 shall be available to the Transferee Company.' On going through the approved Scheme of amalgamation, it is discernible that all the assets and liabilities of the amalgamating (transferor) company vested in the assessee-amalgamated (transferee) company, which "shall be claimed by the Transferee Company and these shall relate back to the appointed date as if the Transferee Company was originally entitled to all the benefits". It has further been provided that any exemption which was benefit by way of set off or carry forward, as the case may be, of any unabsorbed depreciation/investment allowance or "other allowance or loss" which is available to the Transferor Company shall be available to the Transferee Company. On an analysis of the relevant clauses of the Scheme, it is overt that any loss which was available to amalgamating company shall become available to the amalgamated company for necessary set off.

defines the term `accumulated loss' under sub-section (7) to mean: `so much of the loss of .... the amalgamating company ...

ITA No. 1857 & 1935/PUN/2017 Capgemini Technology Services India Limited under the head "Profits and gains of business or profession" (not being a loss sustained in a speculation business) which such .... amalgamating company....would have been entitled to carry forward and set off under the provisions of section 72 if the ... amalgamation ... had not taken place'. It is thus graphically clear from the prescription of section 72A, that it applies only in respect of accumulated losses and unabsorbed depreciation under the head "Profit and gains of business or profession". The benefit of accumulated loss and unabsorbed depreciation of the amalgamating company, which would have been otherwise available to the amalgamated company under the general law of succession, has been circumscribed by certain conditions set out in section 72A. This is a specific provision containing the conditions to be fulfilled for taking the benefit of accumulated loss and unabsorbed depreciation of the amalgamating company by the amalgamated company under the head "Profit and gains of business or profession". It is not as if section 72A is the only provision taking care of all the benefits, privileges or entitlements under the Act, originally pertaining to the amalgamating company now vesting in and passing on the amalgamated company. To reiterate and summarize, all the benefits under the Act due to the ITA No. 1857 & 1935/PUN/2017 Capgemini Technology Services India Limited amalgamating company devolve upon the amalgamated company because of succession. However, we need to find out the restrictions, if any, imposed by provisions of the Act upon availing such benefits.

14. Section 74 deals with `Losses under the head `Capital gains". It specifically provides that where in respect of any assessment year, the net result of the computation under the head "Capital gains" is loss to the assessee, the whole loss shall, subject to the other provisions of this Chapter, be carried forward to the following assessment year and clause (b) of sub-section (1) provides that: "insofar such loss relates to long term capital asset, it shall be set off against income, if any, under the head "Capital gain" assessable for that assessment year in respect of any other capital asset not being a short term capital asset". Clause (c) of section 74(1) provides that "if the 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". Sub-section (2) of section 74 provides that no loss shall be carried forward under this section for more than eight assessment years immediately succeeding assessment year for which the loss was first computed. On going ITA No. 1857 & 1935/PUN/2017 Capgemini Technology Services India Limited through the directive of section 74, it becomes comprehensible that the amount of long term capital loss, not set off as per the relevant provisions, is carried forward to the following assessment years and so on for set off subject to other conditions including that of sub-section (2). In view of the fact that the business of the amalgamating company under amalgamation continues uninterruptedly by the amalgamated company, the benefit of such carry forward and set off earned by the business of the amalgamating company has to be allowed as per the mandate of section 74 to the amalgamated company, more so, when the Scheme of amalgamation as approved by the Hon'ble High Court specifically declares that benefits, inter alia, under tax laws `shall be transferred and vest in the Transferee Company..... as if the Transferee Company was originally entitled to all benefits'. The term "the assessee" as used in sub-section (1) of section 74, which was originally referring to the amalgamating company which suffered the loss, shall now substitute the amalgamated company to be considered as the assessee entitled to set off of the brought forward long term capital loss not only because of the Scheme of amalgamation so providing but also because of the assessee becoming a successor-in-interest of such loss. Going with the ITA No. 1857 & 1935/PUN/2017 Capgemini Technology Services India Limited phraseology of section 74, the sequitur is that the long term capital loss of the amalgamating company is available for set off in the hands of the assessee-amalgamated company. This ground is, thus, allowed.

21. Pithily put, the facts of this issue are that the assessee claimed foreign tax credit. On perusal of the details, the AO observed that the amount of total claim, including tax paid in Japan, was Rs.13,05,33,028/-. He noticed that the assessee claimed credit for four types of taxes paid in Japan viz., Corporation tax, Local Corporation Taxes, Inhabitant Taxes -Surcharge and Enterprise tax - Income based aggregating to 5,15,69,314/- Yen. Noticing the language of the Double Taxation Avoidance Agreement ITA No. 1857 & 1935/PUN/2017 Capgemini Technology Services India Limited (DTAA) between India and Japan, the AO opined that it covered only Corporation taxes. As such, the credit was allowed only in respect of Corporation taxes of 3,55,02,000/- Yen. He further noticed that the assessee company claimed deduction u/s.10AA in respect of the eligible units. Turnover of these eligible units was 8.90% of the total turnover, which, in his view, meant that no Indian income-tax was paid to the extent of profits of the eligible units qualifying for deduction u/s.10AA. He held that the proportionate foreign tax credit in respect of income of 10AA units could not be allowed as deduction. The AO thus allowed total foreign tax credit of Rs.10,92,54,956/- as against the assessee's claim of Rs.13.05 crore. The ld. CIT(A) approved the action of the AO to the extent of allowing credit for taxes paid in Japan as per the DTAA, referring only to income-tax as well as corporation tax. He, however, accepted the assessee's alternate contention of allowing deduction u/s.37(1) in respect of such taxes paid in Japan. On the other foreign tax credit not allowed by the AO on the ground of income of 10AA units not suffering any tax in India, he relied on the judgment of the Hon'ble Karnataka High Court in Wipro Ltd. Vs. DCIT (2016) 382 ITR 179 (Kar) to hold that such credit was admissible. This is how, both the sides ITA No. 1857 & 1935/PUN/2017 Capgemini Technology Services India Limited have come up in appeal before the Tribunal on their respective stands.