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Pradeep Parikh, A.M.

1. The Department is in appeal before us against the order of the learned CIT(A) dt. 24th Jan., 2000 for asst. yr. 1996-97. The grievance of the Department is that deduction under Section 80HHC of the IT Act, 1961 (the Act) was allowed keeping in view the accounts of M/s AESPL only despite the fact that as per the order of the Delhi High Court, dt. 18th March, 1996, the amalgamation was to take effect from 1st April, 1995.

2. The assessee-company is engaged in the business of manufacturing, trading, servicing and export of scientific instruments. It had returned a total income of Rs. 21,89,840 for the year under consideration. It was seen that two companies, viz., Aimil Exports & Services (P) Ltd. (AESPL for short) and Aimil Sales & Agencies (P) Ltd. (ASAPL for short) had amalgamated with Aimil (P) Ltd. (APL for short) under the scheme of amalgamation effective from 1st April, 1995 and thereafter APL was converted into a public limited company with the name Aimil Ltd., the assessee-company. Along with its return of income, the assessee-company had filed its consolidated balance sheet and P&L a/c for the year ending 31st March, 1996 in which the financial results of all the three companies were merged. It was observed that whereas total taxable income was computed on the basis of merged final accounts, deduction under Section 80HHC was computed and claimed on the basis of the financial results of one of the two transferor companies viz., AESPL. The AO was of the view that once when all the three companies stood amalgamated w.e.f. 1st April, 1995 and the assessee having filed a single return of income on the basis of merged accounts, it was not left to the convenience of the assessee-company to claim deduction under Section 80HHC only on the basis of separate accounts of AESPL. According to him, effective from 1st April, 1995, the three separate legal entities had merged into a single legal entity with the name Aimil Ltd., and hence, deduction under Section 80HHC was allowable only on the basis of the consolidated final accounts. Accordingly, the AO proceeded to recompute the impugned deduction. As per his computation the profit on export of traded goods resulted into a negative figure of Rs. 5,03,530 and hence denied the deduction to the assessee, who otherwise had claimed the deduction of Rs. 17,62,385.