Commissioner Of Income-Tax vs Subhulaxmi Mills Ltd.

1. In this case, certificate has been granted by the High Court under Section 261 of the Income-tax Act, 1961, only with respect to question Nos. 2, 3 and 4, which read thus (see [1983] 143 ITR 863, 864) :

"2. Whether, on the facts and in the circumstances of the case, the finding of the Tribunal that in applying Section 79 of the Act, only the business loss should be taken into account and not the unabsorbed depreciation or unabsorbed development rebate, is erroneous in law ?

3. Whether, on the facts and in the circumstances of the case, the Tribunal erred in law in holding that in order to invoke the provisions of Section 79 of the Act, the Department must prove not only that there was a transfer of the shareholding of not less than 51 per cent, of the voting power as per Clause (a) of Section 79, but also that such a transfer was with the intent to reduce or avoid the tax liability as per Clause (b) of Section 79 ?

4. Whether, on the facts and in the circumstances of the case, it is established from the material on the record of the case that the condition of the exception Clause (a) of Section 79 of the Act is not fulfilled and, therefore, no loss incurred in any year prior to the previous year corresponding to the assessment year under reference could be carried forward and set off against the income of the said previous year ?"

2. Mr. J. Ramamurthy, learned senior counsel for the Revenue states fairly that so far as questions Nos. 3 and 4 are concerned, they are concluded against the Revenue by the decision of this court in CIT v. Italindia Cotton Co. P. Ltd. [1988] 174 ITR 160. The said decision in fact expressly approves the decision now under appeal herein.

3. So far as question No. 2 is concerned, the question is whether in applying Section 79 of the Act, only the business loss should be taken into account and not the unabsorbed depreciation or unabsorbed development rebate. The High Court has answered the question saying that when Section 79 speaks of loss, it does not include unabsorbed depreciation or unabsorbed development rebate. We agree with the High Court.

4. The appeals are accordingly dismissed. No costs.