The court held that the appellant was entitled to adjust the written down value of assets based on unabsorbed depreciation without needing Central Government approval under Section 72A, as it was not a claim for carry forward.

JUDGMENT (PER M.S.KARNIK, J.) :

1. This appeal under Section 260A of the Income Tax Act, 1961 (‘IT Act’, for short) is against the order of the Income Tax Appellate Tribunal, (‘the Tribunal’, for short), Mumbai Bench, ‘D’ Mumbai dated 10/01/2003. The appeal was admitted on 19/10/2004 on the following substantial question of law :

“Whether on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that in view of insertion of section 72A in the Income-tax Act, 1961, the appellant (being the amalgamated company) not having obtained approval of the Central Government was not entitled to adjust the written down value of the assets of the amalgamating companies on the basis depreciation actually allowed to them and to claim depreciation on such adjusted written down value of the assets of the amalgamating companies?"

2. Some few facts are relevant to answer the substantial question of law which arises in this appeal. The appellant is a company incorporated under the provisions of the Companies Act, 1956 and is engaged in the business of manufacture and sale of aluminium based presensitised lithographic plates, chemicals and polyester based reprographic films for printing and other allied image transfer industries. Respondent no.1 is the Assessing Officer, who has passed the assessment order for the assessment year 1992-93 and respondent no.2 is the Commissioner of Income-tax who at the relevant time had jurisdiction and administrative control over the appellant's case.

3. The appellant at the relevant time was assessed by the Assistant Commissioner of Income-tax, Circle-7 (3), Mumbai and the Commissioner of Income-tax having jurisdiction over the appellant's case is Commissioner of Income-tax, City-VII, Mumbai.

4. TechNova Graphic Systems Pvt. Ltd. had filed a petition before this Court for being amalgamated with TechNova Platemaking Systems Limited (now known as TechNova Imaging Systems Limited) that is, the appellant. TechNova Platemaking Systems Limited (now known as TechNova Imaging Systems Limited) had also filed a petition before this Court for amalgamating Image Printmakers Pvt. Ltd. with the appellant company.

5. This Court by its oral order dated 13/11/1991 accorded its sanction for amalgamation of TechNova Graphic Systems Pvt. Ltd. and Image Printmakers Pvt. Ltd. with TechNova Platemaking Systems Limited (now known as TechNova Imaging Systems Limited) that is the appellant, with effect from 1/04/1990. This Court further ordered that the transferor companies namely TechNova Graphic Systems Pvt. Ltd. and Image Printmakere Pvt. Ltd. be dissolved without winding-up. In view of the order of this Court, the transferor company ceased to carry on the business during the previous year ended on 31/03/1991, relevant to assessment year 1991-92. According the appellant, TechNova Graphic Systems Pvt. Ltd. (the Transferor Company) had unabsorbed depreciation for the assessment year 1990-91 amounting to Rs. 12,64,516/-. Similarly, Image Printmakers Pvt.Ltd. (the Transferor Company) had unabsorbed depreciation as per following details:

Assessment Year 1988-89 Rs.4,19,484/-

Assessment Year 1989-90 Rs.31,28,570/-

Assessment Year 1990-91 Rs.72,643/-

Since both the transferor companies were dissolved without winding-up, they were not entitled to carry forward and set off unabsorbed depreciation to the assessment year 1991-92.

6. The Appellant had filed its return of income for the year ended 31/03/1991 relevant to the assessment year 1991-92 on 31-12-1991 returning a loss of Rs. 18,76,800/- after inter alia claiming depreciation of Rs.63,64,949/-. The depreciation allowance was not correctly calculated. The appellant thus had filed revised return of income on 31/01/1992 claiming depreciation of Rs.63,80,841/. The appellant while calculating depreciation on the assets of the amalgamating (transferor) companies took the value of the assets on the basis of the depreciation which had been actually allowed to them and th