Calcutta H.C : The present writ petition has been filed praying, inter alia, for a writ of mandamus commanding the respondents to withdraw, recall and cancel the orders communicated by the letters dated 4th May, 1988

SUSANTA CHATTERJI, J. :

The present writ petition has been filed praying, inter alia, for a writ of mandamus commanding the respondents to withdraw, recall and cancel the orders communicated by the letters dated 4th May, 1988, and 24th Jan., 1989, and to forbear and refrain from giving any effect or further effect thereto. There is a further prayer for commanding the respondents to make a recommendation as contemplated under ss. 72A(1) and 72A(3) of the IT Act, 1961, and for other consequential reliefs on the ground that the specified authority, having already given an intimation under s. 72A(3) of the Act after being satisfied about the conditions mentioned under s. 72A(1), is bound to make a recommendation to the Central Government under section 72A(1) of the Act. It is asserted that, on the basis of the said recommendation, the Central Government is bound to make a declaration under the aforesaid section, regard being had to the facts and circumstances of the case. An attempt is made to make out a case that the refusal of the specified authority to make a recommendation and the refusal of the Central Government to make a declaration are arbitrary, unreasonable, whimsical and capricious. The grievance of the petitioner company is that the respondents have acted irregularly and illegally in rejecting the application and the impugned orders have been passed by the respondents for extraneous reasons and/or for extraneous considerations. It is stated in detail that, on or about 1st Feb., 1984, the petitioner duly applied under s. 72A(3) of the IT Act for the approval of the scheme by the specified authority. By an order dated 7th Feb., 1985, the petitioner received approval of the respondents under section 72A(3) of the Act and the said scheme of amalgamation, after complying with all necessary formalities and the requirements of the Companies Act, 1956, was duly approved by the High Court of Karnataka and the High Court at Calcutta. The Department of Industrial Development, Ministry of Industry, has since issued a set of guidelines for approval of the amalgamation and the petitioner is alleged to have received the approval of the Controller of Capital Issues under the Capital Issues (Control) Act, 1947, inasmuch as the certificate of the specified authority under s. 72A(2) of the Act has to be enclosed with the original return of income of the petitioner. The petitioner is alleged to have filed under s. 72A(1) of the Act and by letter dated 15th July, 1986, the Department of Industrial Development sought a clarification from the petitioner which was duly explained. The respondents, thereafter, sent queries and sought information by letter dated 23rd April, 1987, which was duly furnished and further information was sought for by letter dated 11th May, 1987, and 19th June, 1987. All information was duly supplied as required. Apart from the aforesaid correspondence, the petitioner’s representative allegedly met the officer on special duty, but the petitioner is surprised to receive a letter dated 4th May, 1988, from the respondents alleging that the information sought for by the letter dated 10th Nov., 1987, has not been furnished by the petitioner and, in the absence of such information, the specified authority has rejected the case of the petitioner. The further grievance of the petitioner is that, after the sanction of the scheme, substantial funds were invested in the unit of the amalgamating company, and strenuous efforts were made to: rehabilitate the said unit and to make it viable. The steps taken by the respondents are contrary to law. Having no other alternative remedy, the petitioner is compelled to come to the writ Court to seek reliefs. The petition is opposed. No affidavit has, however, been filed. Having heard the learned lawyers appearing for the respective parties, it appears that on 28th March, 1988, the assessment order was passed by the ITO for the asst. yr. 1985-86. The ITO concerned disallowed the petitioner’s claim for-loss under section 72A and for benefit of carry forward and set off as to accumulated loss of Karnataka Scooters Ltd. as no certificate of the specified authority under s.

72A(2) was filed with the income-tax return. The petitioner has preferred an appeal before the CIT (Appeals) and applied for stay of the order whereas there is a direction upon the petitioner to deposit Rs. 4.30 crores out of the balance demand as a condition precedent for the stay. The Central Government has written a letter to the petitioner that the necessary information asked for in the letter dated 10th Nov., 1987, has not been supplied by the petitioner-company. There is another letter dated 18th July, 1988, whereby the Government of India asked the petitioner to supply certain information about up-to-date production and sales data, contribution of the petitioner and the steps taken for revival. By order dated 24th July, 1989, the Central Government rejected the application of the petitioner-company for a certificate/declaration under s. 72A(1) of the IT Act. According to the petitioner- company, the original demand for the asst. yr. 1985-86 is Rs. 9,70,00,958 and there is an order of rectification lessening the demand to Rs. 9,53,50,958 out of which the petitioner claims to have made part payment of Rs. 4,30,00,000 and there is balance income-tax demand Rs. 8,23,80,958. s. 72A of the IT Act, 1961, envisages provisions relating to carry forward and set off of accumulated loss and unabsorbed depreciation allowance in certain cases of amalgamation. Sec. 72A(1) stipulates that “where there has been an amalgamation of a company owning an industrial undertaking or a ship with another company and the Central Government on the recommendation of the specified authority, is satisfied that the following conditions are fulfilled, namely:(a) the amalgamating company was not, immediately before such amalgamation, financially viable by reason of its liabilities, losses and other relevant factors; (b) the amalgamation was in public interest; and (c) such other conditions as the Central Government may, by notification in the Official Gazette, specify, to ensure that the benefit under this section is restricted to amalgamations which would facilitate the rehabilitation or revival of the business of the amalgamating company, then, the Central Government may make a declaration to that effect and, thereupon, notwithstanding anything contained in any other provision of this Act, the accumulated loss and the unabsorbed depreciation of the amalgamating company shall be deemed to be the loss or, as the case may be, allowance for, depreciation of the amalgamated company for the previous year in which the amalgamation was effected, and the other provisions of this Act relating to set off and carry forward of loss and, allowance for depreciation shall apply accordingly..” It is further seen that section 72A(2) provides, inter alia, that “notwithstanding anything contained in sub-s. (1), the accumulated loss shall not be set off or carried forward and the unabsorbed depreciation shall not be allowed in the assessment of the amalgamated company unless the following conditions are fulfilled, namely:(i) during the previous year relevant to the assessment year for which such set-off or allowance is claimed, the business of the amalgamating company is carried on by the amalgamated company without any modification or reorganisation or with such modification or reorganisation as may be approved by the Central Government to enable the amalgamated company to carry on such business more economically or more efficiently; (ii) the amalgamated company furnishes, along with its return of income for the said assessment year, a certificate from the specified authority to the effect that adequate steps have been taken by that company for the rehabilitation or revival of the business of the amalgamating company.” s. 72A(3) also indicates, inter alia, that: “(3) Where a company owning an industrial undertaking or a ship proposes to amalgamate with any other company and such other company submits the proposed scheme of amalgamation to the specified authority and that authority is satisfied, after examining the scheme and taking into account all relevant facts, that the conditions referred to in sub-section (1) would be fulfilled if such amalgamation is effected in accordance with such scheme or, as the case may be, in accordance with such scheme as modified in such manner as that authority may specify, it shall intimate such other company that, after the amalgamation is effected in accordance with such scheme or, as the case may be, such scheme as so modified, it would make (unless there is any material change in the relevant facts) recommendation to the Central Government under sub-s. (1). Explanation. -In this section,(a) ‘accumulated loss’ means so much of the loss of the amalgamating company under the head ‘Profits and gains of business or profession’ (not being a loss sustained in a speculation business) which the amalgamating company would have been entitled to carry forward and set off under the provisions of s. 72 if the amalgamation had not been effected; (b) ‘specified authority’ means such authority as the Central Government may, by notification in the Official Gazette, specify for the purposes of this section; (c) ‘unabsorbed depreciation’ means so much of the allowance for depreciation of the amalgamating company which remains to be allowed and which would have been allowed to the amalgamating company under the provisions of this Act if the amalgamation had not been effected.” Looking at the impugned order as communicated by letter dated 4th

May,1988, copy of which is annexure “T” to the writ petition, it appears that the Officer on Special Duty attached to the Department of Industrial Development, Ministry of Industry, Government of India, has placed on record that the case of amalgamation of M/s Karnataka Scooters Ltd. with M/s Brooke Bond India Limited under s. 72A(1) was considered by the specified authority. The specified authority noted that the required information regarding sales, production as well as contribution made by the company, etc., as asked for by the Department’s letter of even number dated 10th Nov., 1987, has not been furnished. In the absence of the information asked for regarding production and sales and steps taken for the revival of the sick unit, the specified authority did not concede the request of the company and the case was rejected. The petitioner being aggrieved has rushed to the writ Court. The specified authority could not consider the case of the petitioner for necessary recommendation and the issuance of the declaration without obtaining the necessary information as asked for. Nothing has been produced to convince this Court that the information sought for was supplied. Even if the information was already placed by the petitioner, the specified authority ought to have been asked once again to consider the case on merits by referring to the information already supplied and by clarifying the position. Without a decision on merits, the petitioner is not entitled to come to the writ Court and unless there is any mala fide or the matter is kept in cold storage without taking any decision on merits for any oblique reason, the writ Court is slow to interfere. Nothing has been placed before this Court to indicate, inter alia, that there is any bias and/or mala fide on the part of the respondents to keep the proposal of the petitioner in cold storage for any oblique reason. On the contrary, it appears that the petitioner has come to the writ Court in hot haste without giving proper opportunity to the specified authority to consider the case of the petitioner in the proper perspective. Regard being had to the materials on record, this Court is of the view that the present writ petition is premature and there is nothing for the writ Court to interfere in the matter at this stage. The petitioner may very well, pursuant to the impugned order dated 4th May, 1988, draw the attention of the specified authority with the request that the requisitions by letter dated 10th Nov., 1986, have either been complied with or will be complied with and, thereafter, the case may be considered on merits. For the foregoing reasons, the reliefs as prayed for are not available to the petitioners. This Court does not find any merit in the contention of the writ petitioner. Accordingly, the writ petition is rejected. There will be no order as to costs. It is, however, made clear that this order will not prevent the petitioner from asking the specified authority to consider the case of the petitioner again on merits by complying with the formalities as required under the law and by production of all the documents and information as called for by the specified authority in accordance with law. Interim order, if any, is vacated, Since this Court has observed that the rejection of the petitioner’s prayer is premature and permitted the Department to consider it upon the application of the petitioner, there is nothing to be stayed as prayed for.

[Citation : 187 ITR 628]