In Brief
McDowell & Company Ltd acquired the sick industrial company Hindustan Polymers Ltd (HPL) through an approved amalgamation scheme. Banks waived accrued interest on HPL's loans, which constituted income under Section 41(1) of the Income Tax Act. McDowell claimed Section 72A benefits to set off HPL's accumulated losses. The High Court and Supreme Court held that when claiming Section 72A benefits (which deem accumulated losses to be the assessee's), the assessee must account for income that accrued to the sick company under Section 41(1). The Court distinguished Saraswati Industrial Syndicate as inapplicable to Section 72A scenarios. The appeal was dismissed.
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