In Brief
McDowell & Company Limited acquired a sick company (Hindustan Polymers Limited) through an amalgamation scheme and claimed tax relief for accumulated losses under Section 72A of the Income Tax Act. The issue was whether waived interest (Rs. 25.02 lakhs) amounting to income under Section 41(1) should reduce the accumulated losses available for set-off. The Supreme Court held that when computing accumulated losses for Section 72A relief, income accrued under Section 41(1) must be deducted. The court rejected the assessee's argument that Section 41(1) income belonged only to the erstwhile company, ruling that the assessee cannot claim full benefit of accumulated losses without accounting for such income. The appeal was dismissed.
The lawyer headnote and full judgment text are available to registered users.