![No Set-Off of Amalgamation Losses Under Kerala Agricultural Income Tax Act: Supreme Court in Aspinwall and Co. Ltd. v. Inspecting Assistant Commissioner [2026 INSC 359]](/assets/images/article-incometax.svg)
Quick Answer: An amalgamated company cannot set off the accumulated losses of the amalgamating company against its own agricultural income under the Kerala Agricultural Income Tax Act, 1991, merely because the court-sanctioned scheme of amalgamation says so. The Supreme Court distinguished Dalmia Power Ltd., as the State of Kerala was neither required to be nor was given notice of the scheme, and dismissed Aspinwall's five appeals.
In Aspinwall and Co. Ltd. v. Inspecting Assistant Commissioner (2026 INSC 359), the Supreme Court held that the appellant could point to no provision in the Kerala Agricultural Income Tax Act, 1991 allowing losses suffered by the amalgamating company to be set off against the income of the amalgamated company, and that Clause 14.2 of the scheme of amalgamation did not help it (paras 10, 14). Dalmia Power Ltd. v. ACIT was distinguishable because there the Income Tax Department had statutory notice of the scheme and raised no objection, whereas no notice to the State Government was required or issued here (paras 12–13). The Court also declined to disturb the High Court's unchallenged finding that the losses were beyond the 8-year limit in Section 12 (para 15). A Bench of Justice Rajesh Bindal and Justice Vijay Bishnoi dismissed the appeals (para 16).
Status: Kerala High Court orders upholding the Kerala Agricultural Income Tax and Sales Tax Appellate Tribunal, including order dated 23.09.2011 in OTC No. 3 of 2011, affirmed; all five Civil Appeals dismissed with no order as to costs (paras 2–2.4, 16).
Headnote: Set-Off of Amalgamating Company's Losses Under Kerala Agricultural Income Tax Act
Kerala Agricultural Income Tax Act, 1991 – Sections 2(7), 2(20), 3, 12, 48, 54 and 60 – Income Tax Act, 1961 – Section 72A – Companies Act, 1956 – Sections 391, 394 and 394-A – Amalgamation – Carry forward and set-off of accumulated losses of amalgamating company – Clause of scheme of amalgamation – No notice to State Government – Dalmia Power Ltd. distinguished – Eight-year limit on carry forward.
Held: (i) Section 12 of the Kerala Act enables a person who sustains a loss to carry it forward for set-off against the income of subsequent years, for a maximum of 8 years (para 9).
(ii) Section 54 of the Kerala Act, on succession to business, provides for each person to be assessed on its actual share of agricultural income, and its proviso only makes the successor liable for tax due from the person succeeded (para 9.1).
(iii) Section 72A of the Income Tax Act, 1961, by a non-obstante clause, deems the accumulated losses and unabsorbed depreciation of the amalgamating company to be those of the amalgamated company (para 9.3).
(iv) Dalmia Power Ltd. turned on the Income Tax Department not objecting to the scheme despite notice under the statutory framework; here there was no statutory requirement of notice to the State Government under the 1956 Act and no notice was issued, so Dalmia Power does not cover the case (paras 11–13).
(v) No provision of the Kerala Act permits set-off of the amalgamating company's losses against the amalgamated company's income, and reliance only on Clause 14.2 of the scheme fails (para 14).
(vi) The High Court's finding that the losses pertained to a period beyond 8 years, not specifically challenged, also disentitled the appellant to set-off for all the assessment years (para 15).
(paras 9–16)
Case Details: Aspinwall and Co. Ltd. v. Inspecting Assistant Commissioner (2026 INSC 359)
Final Outcome: Civil Appeals dismissed; set-off of the amalgamating company's accumulated losses against the amalgamated company's agricultural income denied; no order as to costs.
Case: Aspinwall and Co. Ltd. v. Inspecting Assistant Commissioner
Neutral Citation: 2026 INSC 359
Case No.: Civil Appeal No. 7796 of 2012 with Civil Appeal No. 6617 of 2019, Civil Appeal Nos. 13454 and 13455 of 2015 and Civil Appeal No. 19865 of 2017
Court: Supreme Court of India (Civil Appellate Jurisdiction) – Reportable
Date of Decision: 13 April 2026
Bench: Justice Rajesh Bindal (author) and Justice Vijay Bishnoi
Relevant Acts & Sections: Kerala Agricultural Income Tax Act, 1991 – Sections 2(7), 2(20), 3, 12, 48, 54 and 60; Income Tax Act, 1961 – Section 72A; Companies Act, 1956 – Sections 391, 394 and 394-A; Companies Act, 2013 – Section 230(5)
Impugned Orders: Orders of the High Court of Kerala at Ernakulam dated 23.09.2011 in OTC No. 3 of 2011, 27.07.2017 in OTC No. 11 of 2013, 27.07.2015 in OTC Nos. 1 and 2 of 2015, and 24.05.2019 in OTC No. 1 of 2019, upholding orders of the Kerala Agricultural Income Tax and Sales Tax Appellate Tribunal (paras 2–2.4)
Counsel: Mr. S. Ganesh, Senior Advocate, for the appellant; Mr. Pallav Shishodia, Senior Advocate, for the respondent (paras 5–6)
Source: Supreme Court of India
Key Holdings of the Supreme Court
- Under Section 12 of the Kerala Act, a loss may be carried forward for set-off for a maximum of 8 years (para 9).
- Dalmia Power Ltd. does not apply where the taxing State was neither statutorily entitled to notice of the amalgamation scheme nor given notice (paras 12–13).
- The Kerala Act contains no provision allowing the amalgamated company to set off the amalgamating company's losses; a clause in the scheme alone is not enough (para 14).
- The unchallenged factual finding that the losses were beyond 8 years independently defeated the claim (para 15).
Brief Facts of the Case
Pullangode Rubber & Produce Co. Ltd. was amalgamated with the appellant, Aspinwall and Co. Ltd., under a scheme sanctioned in November 2006 with the appointed date of 01.01.2006. The amalgamating company had accumulated losses in its balance sheet, and the question was whether they could be set off against the income of the amalgamated company under the Kerala Agricultural Income Tax Act, 1991 (para 4).
Clause 14.2 of the scheme provided that, from the appointed date, the profits, income, expenditure or losses of the amalgamating company would be treated as those of Aspinwall (para 10). The Tribunal and the Kerala High Court rejected the claim, and five appeals covering different assessment years reached the Supreme Court; facts were taken from Civil Appeal No. 7796 of 2012 (paras 2–3).
The appellant relied on Sections 12 and 54 of the Kerala Act and on Dalmia Power Ltd. v. ACIT. The respondent argued that only the assessee who suffered the loss can set it off, that the amalgamating company stood dissolved, that the language of Section 72A of the Income Tax Act is altogether different from the Kerala Act, and that the State of Kerala was never issued notice of the amalgamation (paras 5–6.4).
Issues Before the Supreme Court
- Whether the amalgamated company can set off the accumulated losses of the amalgamating company against its agricultural income under the Kerala Act (paras 4, 14).
- Whether Clause 14.2 of the sanctioned scheme, read with Dalmia Power Ltd., binds the State and entitles the appellant to set-off (paras 10–13).
- Whether the 8-year limit in Section 12 also defeats the claim (para 15).
Court's Findings and Reasoning
Scheme of the Kerala Act (paras 8–9.2): The Court set out the definitions of "assessee" and "person", the charging section, Section 12 on carry forward of loss for up to 8 years, Section 48 on legal representatives, Section 54 on succession to business and Section 60 on companies in liquidation. Under Section 54, the predecessor and successor are each assessed on their actual share, and the proviso only allows recovery of tax from the successor.
Contrast with Section 72A (para 9.3): Section 72A of the Income Tax Act, opening with a non-obstante clause, deems the accumulated loss and unabsorbed depreciation of the amalgamating company to be that of the amalgamated company for the year of amalgamation.
Dalmia Power distinguished (paras 11–13): It was not disputed that no notice of the amalgamation proceedings was issued to the State of Kerala. In Dalmia Power, a case under the Companies Act, 2013, Section 230(5) and Rule 8(3) of the 2016 Rules required notice, and the Income Tax Department did not object despite notice, so the approved scheme could be acted upon. The Court also referred to Section 394-A of the 1956 Act and the Ministry of Corporate Affairs Circular dated 15.01.2014 inviting comments from the Income Tax Department. There was no statutory requirement of notice to the State Government and none was issued, so the reliance on Dalmia Power was misconceived.
No statutory basis for set-off (para 14): The appellant could not refer to any provision in the Kerala Act allowing the amalgamating company's losses to be set off against the amalgamated company's income, and relied only on Clause 14.2 of the scheme, which had already been rejected.
Eight-year limit (para 15): The High Court found, for Assessment Year 2006-07, that the loss of the amalgamating company pertained to a period beyond 8 years; the other appeals related to later years. Under Section 12, no set-off was available, and no specific ground challenging this finding of fact had been raised.
Final Outcome and Directions
- No merit found in the appeals; all five Civil Appeals dismissed (para 16).
- No order as to costs (para 16).
- Pending applications, if any, disposed of (para 17).
Legal Principle Laid Down
Under the Kerala Agricultural Income Tax Act, 1991, the right to carry forward and set off a loss is tied by Section 12 to the person who sustained it, for not more than 8 years, and the Act has no provision allowing an amalgamated company to set off the amalgamating company's losses. A clause in a court-sanctioned scheme of amalgamation does not bind the State on this point where the State was neither required to be given, nor given, notice of the scheme; Dalmia Power Ltd. is confined to cases where the revenue had notice and did not object (paras 9, 12–15).
Precedents Relied Upon
- Dalmia Power Ltd. v. Assistant Commissioner of Income Tax, 2019 INSC 1410 : (2020) 420 ITR 339 – Distinguished – scheme binding where the Income Tax Department had notice and did not object. Discussed at paras 5–6, 12–13.
- General Radio & Appliances Co. Ltd. v. M.A. Khader, 1986 INSC 85; Saraswati Industrial Syndicate Ltd. v. CIT, 1990 INSC 266; Singer India Limited v. Chander Mohan Chadha, 2004 INSC 447; CIT v. Maruti Suzuki (India) Ltd., 2019 INSC 815; Religare Finvest Ltd. v. State (NCT of Delhi), 2023 INSC 819 – Cited by the respondent on the effect of amalgamation. Noted at para 6.3.
Important Paragraphs of the Judgment
Verbatim extracts from the judgment. For the full text, refer to the judgment PDF below.
Para 9: "Such loss can be carried forward for a maximum period of 8 years."
Para 11: "The fact which was not disputed by learned senior counsel for the appellant at the time of hearing is that no notice of amalgamation proceedings was issued to the State of Kerala to raise objection with reference to any terms referred to with the amalgamation scheme."
Para 12: "As the scheme was approved, all terms and conditions contained therein stood approved and could be acted upon."
Para 13: "Neither there is any statutory requirement for issuing notice to the State Government before any scheme of amalgamation is approved by the Court under the 1956 Act nor such notice was issued."
Para 14: "Learned counsel for the appellant has not been able to refer to any provision under the Kerala Act in terms of which the losses suffered by amalgamating company can be set-off against the income of the amalgamated company."
Para 15: "Hence, in terms of Section 12 of the Kerala Act the appellant/Aspinwall and Co. Ltd. will not be entitled to any set-off."
Practical Impact of the Ruling
- For plantation and agricultural companies: Losses of an amalgamating company cannot be carried into the amalgamated company under the Kerala Act merely through the scheme (paras 14–15).
- For scheme drafting: A tax clause in a scheme is not binding on a State revenue authority that had no notice of the scheme; Dalmia Power will not help in such cases (paras 12–13).
- For taxpayers generally: The benefit of Section 72A of the Income Tax Act cannot be read into a State statute that has no similar provision (paras 9.3, 14).
- For appeals: Findings of fact, such as losses being beyond the 8-year limit, must be specifically challenged in the appeal (para 15).
FAQs on Set-Off of Amalgamation Losses Under the Kerala Agricultural Income Tax Act
1. What did the Supreme Court decide in Aspinwall and Co. Ltd. v. Inspecting Assistant Commissioner?
It held that Aspinwall could not set off the accumulated losses of the amalgamating company against its own agricultural income under the Kerala Act, and dismissed all five appeals (paras 14–16).
2. Why did Dalmia Power Ltd. not help the appellant?
In Dalmia Power the Income Tax Department had notice of the scheme and did not object. Here no notice to the State Government was required under the 1956 Act or issued (paras 12–13).
3. Does the Kerala Act have a provision like Section 72A of the Income Tax Act?
The appellant could not point to any provision in the Kerala Act allowing such set-off; Section 72A, which deems the amalgamating company's losses to be those of the amalgamated company, is in the Income Tax Act (paras 9.3, 14).
4. How long can a loss be carried forward under the Kerala Act?
Under Section 12, for a maximum of 8 years (para 9).
5. Was there any other ground for rejecting the claim?
Yes. The High Court found that the losses pertained to a period beyond 8 years, and this finding of fact was not specifically challenged (para 15).
Keywords: 2026 INSC 359, Aspinwall and Co. Ltd. v. Inspecting Assistant Commissioner, Kerala Agricultural Income Tax Act 1991, Section 12, Section 54, set-off of accumulated losses, amalgamation, amalgamating company, Section 72A Income Tax Act, Dalmia Power Ltd., scheme of amalgamation, Section 394-A Companies Act 1956, Justice Rajesh Bindal, Justice Vijay Bishnoi, Supreme Court judgment
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Download Judgment PDF – Aspinwall and Co. Ltd. v. Inspecting Assistant Commissioner
Source: Supreme Court of India (official website).