JUDGMENT :

The following three questions have been referred to this Court by the Tribunal for the opinion of this Court:

"1. Whether, on the facts and in the circumstances of the case, the assessee is entitled to allowance of relief u/s. 80.J in respect of PVC Division originally owned by T. Maneklal Mfg. Co. which amalgamated with the assessee company on 1.6.1977 ?

2. Whether, the assessee is entitled to deduction of Rs.35,899/- being expenditure incurred on amalgamation, as revenue deduction u/s 37 of the I.T. Act, 1961?

3. Whether, the Appellate Tribunal has erred in law in not holding that the expenditure of Rs.35,899/- incurred to acquire control and management of the affairs of another company resulted in acquisition of capital asset and as such the expenditure related thereof should be held as capital expenditure and not as revenue one?".

16th August 1999:-

2. So far as question No.1 is concerned, the Tribunal has discussed in detail in its order dated 16.12.1983, vide paragraphs 17 to 20 of the Reference. It appears that M/s. T. Maneklal amalgamated with the assessee Company on 1.7.1974. It had made a claim for relief under section 80.J of the Income Tax Act [hereinafter referred to as the Act] for Assessment Year 1978-79 before the Income Tax Officer, Bombay. The initial assessment with a claim under section 80.J was for the year 1975-76. It is also clear that M/s. T. Maneklal was granted relief under section 80.J for the A.Y. 78-79 for the third succeeding assessment year. The ITO refused to entertain the claim for A.Y. 1978-79 on the ground that the said claim was already considered in the hands of T. Maneklal in its assessment. The Tribunal has considered the fact that the benefit granted to M/s. T. Maneklal under section 80.J for the A.Y. 78-79 but in that case, the Company followed the previous year beginning from 1.6.1976 and ending on 31.5.1977. The assessee Company, on the other hand followed financial year as its previous year, the relevant previous year being 1.4.1977 to 31.3.1978. After amalgamation, the previous year to be followed for A.Y. 79-80 would be financial year. The assessee's claim was that the relief that was due under section 80.J. for the period 1.6.1977 i.e. after amalgamation upto the end of the previous year viz. 31.3.1978 should be allowed in the hands of the assessee.

3. It is known that under section 80.J, benefit is granted to an industrial undertaking for the financial year and for successive assessment years. According to the Tribunal, if the Department's view is accepted, for the broken period from 1.6.1977 to 31.3.1978 the relief will be lost and the provisions of section 80.J did not contemplate losing of benefit as a result of amalgamation. Provision has to be construed more favourably. The Tribunal, in our opinion, has rightly arrived at a conclusion that the provisions is to be considered more liberally, more particularly when various reliefs are provided for the amalgamation and the Company is amalgamated. It is clear from the finding recorded by the Tribunal that in fact the assessee was not claiming double relief but was only claiming continuity of the relief, or to put it differently, was claiming the loss of relief due to amalgamation of the industrial undertaking. Hence, we find that there is no overlapping. The Tribunal has thus interpreted the provisions with a view to see that the benefit which the Company was entitled is not lost. The Tribunal has considered the provisions contained in section 2 (1)(B) of the Act, which indicates what is amalgamation. The amalgamating Company steps in the shoes of amalgamated Company, and thus the amalgamating Company in effect loses its identity as a result of amalgamation. As a result of amalgamation, one unit owned by T. Maneklal became the property of the assessee Company. The assessee Company, therefore, in Tribunal's view, was entitled to relief under section 80.J in respect of the said unit, as a successor Company. The Tribunal, on co