COMMISSIONER OF INCOME TAX, BOMBAY AND OTHERS versus MAHINDRA AND MAHINDRA LIMITED & ORS.

Citation: [1983] 3 S.C.R. 773 · Decided: 02-09-1983 · Supreme Court of India · Bench: V.D. TULZAPURKAR · Disposal: Dismissed

Cited by 1 judgment(s) · see the full citation network in Lexace

Judgment (excerpt)

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COMMISSIONER OF INCOME TAX, 
BOMBAY AND OTHERS 
MAHINDRA AND MAHINDRA LIMITED & ORS. 
Septemb~r 2, 1983 
[V. D. TULZAPURKAR D. P. MADON; JJ.] 
,.,, 
Judicial Review-Courts' power to interefere and review administrative or 
executive decisions and actions-Conditions precedent. 
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Loss-Accunwlated loss and unabs(Jrbed depreciation-Conditions requisite 
for carrying fo~ward and setting off, by an amalgan:zating company o( s~ch lo~~7 
Whether the recommendation of a specified authority ond the Centr~I Govern-
ment's deCision, thereon allowing the amalga1nated company lo carryforward and 
set off losses is open to judicial review-lricome Tax Act, 1961 section 72A as 
introduced by Finan~e Act l\'o. 2 of 1977 scope of. 
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Section 72A of the Incon1e Tax Act, 1961 enables an An1alga1nated· 
Con1pany to carry forward and set off accumulated Joss <ind \.inabsorhed, 
depreciation allowance ih. certain cases of amalgamation on the fulfiJment·of 
thrC:e conditions viz; (a) that the ama~gan1ating company was, immediately 
befofe its amalgimation financially non-viable by reason of its liabilities, 
losses and other relevant factors; (b) that the amalgamation was in the public 
ihterest; and (c) such other conditions. as central government may by notifica-
tion in the official Gazette specify, to ensure that 
tl~e benefit"under the section 
is ·restricted to amalgamation which would facilita~e the .rehabilitation of 
revival of the business of amalgamating company. The Central Government's 
satisfaction in·respect of the three conditions is to be based on the recOinnlen-
dation of the specified Authority, referred to in Section 72A." The Centra'i 
Government then has to make a declaration to that effect and the effe<;t and. 
consequence. of such a declaration is that notwithstanding anything contained 
in any other provision ~f the Act, the accumulated loss and unabsorbed depre-
ciation of amalgantating company is 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 amalg<i.mation was effected: For claiming the benefit of the 
section, the certificate issued by the· specified authority undCr sub~section 2(ii) 
Of sectiOn 72A to th~ effect tha·t adequate steps have been taken by the amalg~­
nl~ted company for the r~h3.bilitation or revival of the ·business of the .imaiga-
matiiig·c.ompany" must be.submitteQ · alongWith the· return of th"C income for the 
said assessment year . 
Mahindra and Mahindra Ltd. was incorpor.ated uilder 
the Indian 
Con1panies Act 1913 and is thus duly registered under the Act cif 1956. lts: 
share capitil.1 has been widely held, the prinCipal share holders beirig the pLibtic'· 
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SUPRBME COURT REPORTS 
U983i ~ s.c .i. 
financial institutions to the extent of about 40% of its equity share capital; it 
is engaged in the manufacture Of jeeps, motor vehicles etc. Olle M/s. Inter-
national Tractor Company of India Ltd. incorporated on April 15, 1963 under 
the Indian Companies Act, 1956 as a public company for the manufacture of 
e~sential commodities like agricultural .. tractors was commercially insolvent at 
the close of the financial year ending October 31, 1977. Therefore, proposal 
for amalgamating ITC! with M & M was considered and approved by the 
Boards of Directors of both the companies by two resolutions dated 4.10.76 
since it was felt that it Would be advantageous to both if their operations could· 
he rationalised for better and more efficient utilisatiOn of their existing 
capacities and f~ciliti~s. 
A scheme of Amalgamation effective from 1.11.1977 was prepared and 
finalised and, after obtaining the approval of the Central Govetnmi.:nt to the 
scheme of amalgamation as required under section 2J(2) of the Monopolies 
and Restrictive Trade Practices Act, 1969, the Bombay High Court was moved 
under sections 391 and 394 of the Companies Act, 1956 seeking its sanctioa 
which was granted. 
On April 27, 1978, M & M, moved an application under Section 72A of 
the Income Tax, 1961 Act for the grant of relief of the requisite declaration 
from file Central Government which was rece.ived by the Central Govcrrnment 
on Ma"y 3of1978. As the amalgamation had been· effected from November 1, 
1977 M & M filed the said .application so as to .;!nable the authorities to investi~ 
eate .the requisite factual pre~conditions for the grant of the. relief and to arrive 
at a decisi

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