Case Name: ASPINWALL AND CO. LTD VERSUS INSPECTING ASSISTANT COMMISSIONER
Petition Number: CIVIL APPEAL NO. 7796 OF 2012; CIVIL APPEAL NO. 6617 OF 2019; CIVIL APPEAL NO. 13454 OF 2015; CIVIL APPEAL NO. 13455 OF 2015; CIVIL APPEAL NO.19865 OF 2017
Neutral Citation: 2026 INSC 359
Date of Judgement: 13.04.2026
Coram: HON’BLE MR JUSTICE RAJESH BINDAL & HON’BLE MR JUSTICE VIJAY BISHNOI
INTRODUCTION
The appeals before the Supreme Court challenged the orders of the Kerala High Court, which had upheld the decisions of the Kerala Agricultural Income Tax and Sales Tax Appellate Tribunal. The core issue revolves around whether an amalgamated company can legally carry forward and set off the accumulated agricultural losses of the amalgamating company under the Kerala Agricultural Income Tax Act, 1991, simply based on a clause in the court-approved scheme of amalgamation.
FACTS
The appellant amalgamated with ‘Pullangode Rubber & Produce Co. Ltd.’ (the amalgamating company). The scheme of amalgamation was sanctioned in November 2006, with an appointed date of January 1, 2006. The amalgamating company had accumulated losses on its balance sheet. Clause 14.2 of the amalgamation scheme explicitly provided that all profits, income, expenditure, or losses of the amalgamating company would be deemed as those of the amalgamated company.
Relying on this clause, the appellant sought to set off these accumulated losses against its own income. The revenue authorities rejected this claim. The appellant consecutively lost before the Tribunal and the Kerala High Court, which ruled that the losses pertained to a period beyond the statutorily permissible 8-year limit for carry forward and that the governing statute did not permit such a transfer of losses.
ISSUE
Whether an amalgamated company is entitled to carry forward and set off the accumulated losses of the amalgamating company against its own profits under the provisions of the Kerala Agricultural Income Tax Act, 1991?
ARGUMENTS OF THE PARTIES
The Appellant argued that under Section 54 of the Kerala Act, the amalgamated company acts as a successor and is entitled to the set-off. Relying heavily on the Supreme Court judgment in Dalmia Power Ltd and Another v. Assistant Commissioner of Income-Tax, 2019 INSC 1410 : (2020) 420 ITR 339, the appellant contended that once a court sanctions a scheme of amalgamation without any objections from the revenue department, all its clauses (including Clause 14.2 regarding the transfer of losses) become binding.
The Respondent (State/Revenue) argued that the reliance on Dalmia Power Ltd. was misplaced. Unlike the proceedings under the Companies Act for the Income Tax Department, the State of Kerala was never issued a statutory notice during this amalgamation process. Furthermore, it was argued that Section 12 of the Kerala Act strictly allows only the assessee who suffered the losses to claim the set-off. Since the amalgamating company was dissolved, it ceased to exist. The respondent highlighted that, unlike Section 72A of the Central Income Tax Act, 1961, which explicitly permits the carry-forward of losses in amalgamations, the Kerala Act contains no such enabling provision. Lastly, the losses in question were over 8 years old, barring them under Section 12 regardless.
JUDGEMENT AND ANALYSIS
The Hon’ble Supreme Court dismissed the appeals, ruling in favour of the Respondent. The Court conducted a comparative analysis of the statutory frameworks. It noted that Section 72A of the Income Tax Act, 1961, begins with a non-obstante clause specifically enabling an amalgamated company to inherit the accumulated losses and unabsorbed depreciation of an amalgamating company. However, the Kerala Agricultural Income Tax Act, 1991, lacks any equivalent provision. Section 12 of the Kerala Act strictly confines the right to carry forward losses (for a maximum of 8 years) to the specific person/assessee who sustained them. Section 54 deals with succession to business regarding tax liability but does not grant the successor the right to inherit tax losses.
Crucially, the Court distinguished the precedent set in Dalmia Power Ltd. In that case, the Companies Act and its rules made it mandatory to issue a notice to the Central Government/Income Tax Department, giving them a specific window to object. Because they failed to object, the scheme was binding. In the present case, there was no statutory requirement under the Companies Act, 1956, to issue notice to the State Government regarding agricultural income tax, nor was any such notice issued. Consequently, a private clause in an amalgamation scheme (Clause 14.2) cannot bypass the explicit statutory provisions of the Kerala Act or bind an un-notified State Government.
Finally, the Court observed an uncontested finding of fact by the High Court: the losses sought to be set off by the amalgamating company pertained to a period beyond 8 years, which explicitly barred them from being carried forward under Section 12 of the Kerala Act anyway.
CONCLUSION
The Supreme Court concluded that in the absence of an explicit statutory provision, akin to Section 72A of the Income Tax Act, 1961, an amalgamated company cannot inherit and set off the accumulated losses of an amalgamating company under the Kerala Agricultural Income Tax Act, 1991. The Court held that terms within a corporate scheme of amalgamation cannot override substantive tax statutes or bind the State Revenue Department to grant tax benefits, especially when the State was not a notified party to the amalgamation proceedings.
