Y.R Meena, J.:— This appeal is directed against the order and judgment of the Income-tax Appellate Tribunal dated January 31, 2001. The issue for our consideration in this appeal is whether unabsorbed loss can be carried forward and allowed in the case of this assessee when the loss was suffered by four co-operative societies in the preceding year?

2. There were four co-operative societies duly registered with the Registrar of Co-operative Societies for Rajasthan, Jaipur. The co-operative societies are: (i) Rajasthan Co-operative Spinning Mills Ltd., Gulabpura; (ii) Gangapur Cooperative Spinning Mills Ltd., Gulabpura; (iii) Ganganagar Co-operative Spinning Mills Ltd., Hanumangarh; and (iv) Gulabpura Cotton Ginning and Pressing Sahkari Samiti Ltd., Gulabpura. The Government of Rajasthan had major shareholding in the aforesaid co-operative societies. The Registrar, Cooperative Societies, Jaipur, made an order under section 17 of the Rajasthan Co-operative Societies Act, 1965, read with rule 13 of the Rajasthan Co-opera-tive Societies Rules, 1966, for merger of the aforesaid four co-operative socie-ties with all their assets and liabilities into Rajasthan Rajya Sahkari Spinning and Ginning Mills Federation Ltd., Jaipur.

3. Consequent to the above statutory order, all the assets and liabilities, plant and machinery, debtors, creditors, transactions, staff and employees as existing prior to the merger and at book value were incorporated and recorded in the books of the appellant co-operative society with effect from April 1, 1993. Though the business of all these four aforesaid co-operative societies continued it continued in the new name, i.e, Rajasthan Rajya Sahkari Spinning and Ginning Mills Federation Ltd., Jaipur. In terms of section 18(2) of the Rajasthan Co-operative Societies Act, 1965, the registrations of the merged societies stood cancelled on the registration of the assessee-society and the said societies ceased to exist as corporate bodies. The registration under the Rajasthan Sales Tax Act, Central Sales Tax Act and other laws were taken by the appellant-society in its name on and from April 1, 1993.

4. The assessee-society filed its return of income on October 31, 1994, showing total income at Rs. 1,58,04,510 after setting off brought forward losses of Rs. 2,68,39,504 and claimed that the assessee-society is entitled to set off of the said loss under section 72 of the Income-tax Act, 1961. The Assessing Officer has negatived the claim of the assessee holding that the assessee-federation is not entitled for set off of the losses suffered by the former four societies which were merged and no more in existence after April 1, 1993. The relevant assessment years are 1994–95 and 1995–96.

5. In appeal before the Commissioner of Income-tax (Appeals), the Commissioner of Income-tax (Appeals), has also confirmed the view taken by the Assessing Officer. The Tribunal has considered the provisions of sections 72A and 78(2) and held that the assessee is not entitled for carry forward and set off of losses suffered by the earlier four co-operative societies which are ceased from April 1, 1993.

6. Heard learned counsel for the parties.

7. Mr. Ranka, learned counsel for the appellant, submits that the assessee came into existence with effect from April 1, 1993, after merger of four cooperative societies. All the assets and liabilities were taken over by the assessee. The old business continued after merger of all four co-operative societies, the employees and the business are the same, as were run by the earlier four co-operative societies, therefore, it is nothing but a change in the name of the earlier four societies into one. Therefore, for all practical purposes, the loss suffered by the earlier four co-operative societies is the loss of the assessee after merger and it should be allowed against the income of the assessee in the year under consideration. He further submits that the provisions of section 72 should be so construed so as to result in equity and justice. He placed reliance on the following decisions:

(1) Saroj Aggarwal (Smt) v. Commissioner Of Income Tax, U.P., [1985] 156 ITR 497 (SC);

(2) CIT v. Madhukant M. Mehta, [1981] 132 ITR 159 (Guj);

(3) CIT v. J.H Gotta, [1985] 156 ITR 323 (SC);

(4) K.P Varghese v. ITO, [1981] 131 ITR 597 (SC);

(5) Tirath Singh v. Bachittar Singh, AIR 1955 SC 830;

(6) Mysore Minerals Ltd. v. CIT, [1999] 239 ITR 775 (SC); and

(7) Commissioner Of Income-Tax v. Shaan Finance (P.) Ltd., [1998] 231 ITR 308 (SC).

8. On the other hand, learned counsel for the Revenue, submits that as the provisions of section 72 provide that where the assessee suffers the loss, if that cannot be set off against the income of that year so much of the loss as has not been so set off against the income of that year, that loss shall, subject to the other provisions, be carried forward to the following assessment year and that be set off against the income of the following year.

9. The provision of section 72A relates to the carry forward and set off of accumulated loss and unabsorbed depreciation allowance in amalgamation or merger of the company owning an industrial undertaking or a ship with another company. As in the case in hand, four co-operative societies are merged and this assessee on merger of those four co-operative societies came into existence with effect from April 1, 1993, there was no merger or amalgamation of companies, the benefit of section 72A is not available to the assessee.

10. sub-section (2) of section 78 provides for carry forward and set off of losses in case of change in constitution of firm or on succession.

11. Whether the loss suffered by the four co-operative societies is loss suffered by the assessee, or the assessee can be treated as one and the same assessee after the merger of four co-operative societies which were merged on April 1, 1993, for that, we would like to refer to some observations of their Lordships.

12. This aspect has been considered by the Karnataka High Court in the case of Hindustan Aeronautics Limited v. Commissioner Of Income-Tax, Karnataka., [1984] 149 ITR 795. The Karnataka High Court has taken the view that the term “inheritance” used in section 78(2) must mean only a transmission of the assets or liabilities of one person to another by the personal law applicable to them and not in any other mode of transfer known to law. The section is in the nature of a corollary to the broad principle underlying sections 72 to 74 and should be strictly construed and in the case of change of ownership of one company to another company, set off of losses suffered by the earlier company cannot be allowed against the profit of the successor-company.

13. In Saroj Aggarwal (Smt) v. Commissioner Of Income Tax, U.P., [1985] 156 ITR 497 (SC), at page 508 their Lordships observed as under:

“Facts should be viewed in natural perspective, having regard to the compulsion of the circumstances of a case. Where it is possible to draw two inferences from the facts and where there is no evidence of any dishonest or improper motive on the part of the assessee, it would be just and equitable to draw such inference in such a manner that would lead to equity and justice. Too hyper technical or legalistic approach should be avoided in looking at a provision which must be equitably interpreted and justly administered. It is true that there must be succession by inheritance. But it is possible in a particular case without any express provision either in the deed or in writing to infer from the conduct of the parties that there was succession, and if such a view is possible in spite of the absence of an express provision, in our opinion, such an inference could be and should be drawn. Courts should, whenever possible, unless prevented by the express language of any section or compelling circumstances of any particular case, make a benevolent and justice-oriented inference.”

14. In CIT v. Madhukant M. Mehta, [1981] 132 ITR 159 (Guj), the case of the assessee was that where on the death of the sole proprietor the legal heirs formed a partnership firm and the issue was whether the firm succeeded in the business of the sole proprietor, the assessee is entitled to carry forward loss of sole proprietor and to set off against the income of the firm. The Gujarat High Court has taken the view as under (headnote):

“(i) that the presence of the three factors found by the Income-tax Officer was not necessarily destructive of the integrity or identity of the business so as to negative the idea of succession; (ii) that the facts showed that M had died intestate. Under section 8 of the Hindu Succession Act his property would devolve, firstly, upon the heirs being relatives specified in Class I of the Schedule. Son, daughter and widow are included in Class I. There was a clear recital in the partnership deed that the partners as heirs succeeded to the business of the deceased. The business of the deceased had been carried on even prior to the execution of the partnership deed and the partnership was brought into existence within a very short period after M's death. Having regard to all the circumstances there was succession by inheritance in this case. Merely because, M's legal heirs brought into existence a firm and decided to carry on the same business under the firm name, the succession by inheritance was not lost or destroyed. The link or nexus between the business carried on by the deceased and after his death by his heirs previously as a body of heirs and subsequently as a collection of persons joined with each other by the bond of partnership was not lost either in substance or in form and the business, which the firm carried on, still remained the same business which was succeeded to by inheritance by the heirs who were partners. The assessee-firm was entitled to carry forward and set off the speculation losses of M against the income from speculation business earned during the relevant assessment years.”

15. The view taken by the Gujarat High Court in CIT v. Madhukant M. Mehta, [1981] 132 ITR 159 has been upheld by the Supreme Court in the case of CIT v. Madhukant M. Mehta, [2001] 247 ITR 805.

16. In Commissioner Of Income Tax, Bangalore v. J.H Gotla, Yadagiri., [1985] 156 ITR 323 (SC), the facts of the case are that the assessee has transferred some part of the machinery of his business to his wife and minor children. The wife has entered into partnership with a third person and the minor children admitted to benefits of partnership. The premises and remaining machinery has been leased to the firm. Losses suffered by the individual business which had been carried forward against the share income of the wife and minor children included in his total income under section 16(3) can be set off against the losses suffered by him in the preceding year. At page 340, their Lordships observed as under:

“In view of the aforesaid and in view of the attitude of the law-makers in dealing with this problem as evidenced by the amendment and in the circular originally issued prior thereto and bearing in mind that under the scheme of the Act, where the wife or minor child carries on a running business, the right to carry forward the loss in the running business would be available to the wife or minor child if they themselves were assessed, but the right would be completely lost if the individual in whose total income the loss is to be included is not permitted to carry forward the loss under section 24(2), since that would be the result of the strict literal construction, it is apparent that that could not have been the intent of Parliament. Therefore, where section 16(3) of the Act operates, the profit or loss from a business of the wife or minor child included in the total income of the assessee should be treated as the profit or loss from a ‘business carried on by him’ for the purpose of carrying forward and set off of such loss under section 24(2) of the Act.”

17. In K.P Varghese v. ITO, [1981] 131 ITR 597 (SC), their Lordships emphasised that a statutory provision must be so construed, if possible, that absurdity and mischief may be avoided. At page 604, their Lordships observed as under:

“The primary objection against the literal construction of section 52, subsection (2), is that it leads to manifestly unreasonable and absurd consequences. It is true that the consequences of a suggested construction cannot alter the meaning of a statutory provision but it can certainly help to fix its meaning. It is a well recognised rule of construction that a statutory provision must be so construed, if possible, that absurdity and mischief may be avoided.”

18. In Tirath Singh v. Bachittar Singh, AIR 1955 SC 830, their Lordships, at page 833, observed as under:

“Where the language of a statute, in its ordinary meaning and grammatical construction, leads to a manifest contradiction of the apparent purpose of the enactment, or to some inconvenience or absurdity, hardship or injustice, presumably not intended, a construction may be put upon it which modifies the meaning of the words, and even the structure of the sentence.”

19. In Mysore Minerals Ltd. v. CIT, [1999] 239 ITR 775 (SC), again their Lordships have taken the view that where the statute confers a benefit on the asses-see, the provisions should be so interpreted and the words used therein should be assigned such meaning as would enable the assessee to secure the benefit intended to be given by the Legislature to the assessee and their Lordships, at page 781, observed as under:

“It is well-settled that there cannot be two owners of the property simultaneously and in the same sense of the term. The intention of the Legislature in enacting section 32 of the Act would be best fulfilled by allowing deduction in respect of depreciation to the person in whom for the time being vests the dominion over the building and who is entitled to use it in his own right and is using the same for the purposes of his business or profession. Assigning any different meaning would not subserve the legislative intent. To take the case at hand it is the appellant-assessee who having paid part of the price, has been placed in possession of the houses as an owner and is using the buildings for the purpose of its business in its own right. Still the assessee has been denied the benefit of section 32. On the other hand, the Housing Board would be denied the benefit of section 32 because in spite of its being the legal owner it was not using the building for its business or profession. We do not think such a benefit to none situation could have been intended by the Legislature. The finding of fact arrived at in the case at hand is that though a document of title was not executed by the Housing Board in favour of the assessee, but the houses were allotted to the assessee by the Housing Board, part payment received and possession delivered so as to confer dominion over the property on the assessee whereafter the assessee had in its own right allotted the quarters to the staff and they were being actually used by the staff of the assessee. It is common knowledge, under the various schemes floated by bodies like Housing Boards, houses are constructed on a large scale and allotted on part-payment to those who have booked. Possession is also delivered to the allottee so as to enable enjoyment of the property. Execution of documents transferring title necessarily follows if the schedule of payment is observed by the allottee. If only the allottee may default the property may revert back to the board. That is a matter only between the Housing Board and the allottee. No third person intervenes. The part-payments made by the allottee are with the intention of acquiring title. The delivery of possession by the Housing Board to the allottee is also a step towards conferring ownership. Documentation is delayed only with the idea of compelling the allottee to observe the schedule of payment.”

20. In Bajaj Tempo Ltd. v. CIT, [1992] 196 ITR 188 (SC), again their Lordships have emphasised on interpretation of the taxing statute so as to give effect to the object of the provision and the statute has to be interpreted liberally so as to advance the object of the provision and not frustrate it and their Lordships, at page 197, observed as under:

“But, for purposes of construing the proviso in section 15C, it is not necessary to go that far as there can be no doubt that a literal construction of clause (i) of sub-section (2) was amenable to denial of benefit to the assessee even in genuine cases. For instance, an undertaking otherwise entitled to the benefit would fall within the mischief of the sub-clause if it was established in a building which was used for business purposes at any time in the remote past. Or it might have been established in a part of a building, earlier used for business purposes due to paucity of accommodation. Denying benefit to such undertaking could not have been intended when the very purpose of section 15C was to encourage industrialisation. It was for this reason that various High Courts evolved the test of commercial expediency or substantial involvement valued in terms of money, etc., to interpret this clause. Adopting a literal construction in such cases would have resulted in defeating the very purpose of section 15C. Therefore, it becomes necessary to resort to a construction which is reasonable and purposive to make the provision meaningful.”

21. It is true that while interpreting the provisions of the Act, a meaning should not be given to a word which results in absurdity, hardship or injustice, but at the same time, to infer the intention of the Legislature, the plain language of the provision should not be ignored which is borne out from the plain language used in the provision.

22. The four co-operative societies where the Government has more than 50 per cent, share in each society were merged in the public interest and the assessee-federation has come into existence in place of those four societies and the business of the assessee-federation is also the same as the business which was rim by the four societies, though in their different capacity. In allowing the carry forward of losses suffered by those four societies which were with effect from April 1, 1993, no more in existence thereafter, can their losses be set off against the profit of the assessee-federation which came into existence with effect from April 1, 1993. The relevant provisions for carry forward of losses and set off against the income of the subsequent year are sections, 72, 72A and 78(2) of the Act.

23. The provisions of section 72 provide for the carry forward and set off of the business loss of the assessee. If any assessee suffers a loss and that loss cannot be set off against the income of that year, that loss can be carried forward and can be set off against the income of the subsequent year. The word “assessee” has been used in section 72A. Therefore, the pertinent question is whether the four societies which were no more in existence from April 1, 1993, can their loss be carried forward and set off against the income of the assessee-federa-tion. Can those four societies and the assessee-federation be treated one and the same assessee. If we go by the plain language, our answer will be in the negative. The four separate societies which have their own identity and independence in earlier year, they have their own profits and losses, they cannot be treated one and the same assessee as that of the assessee-federation in the year under consideration. When the four societies and this assessee-federation cannot be treated as one and the same assessee, in our view, the losses suffered by those four societies cannot be set off against the income of this asses-see-federation in the year under consideration.

24. The provisions of section 72A provide for carry forward and set off of accumulated loss and unabsorbed depreciation allowance in the amalgamation or demerger, etc. It is true that in the case of merger of companies, the losses suffered by a company before amalgamation that can be carried forward and can be set off after amalgamation against the profit of the amalgamated company, but no such provision has been made in the case of merger of societies. When there is no specific provision like section 72A for co-operative societies, that shows intention of the Legislature that the Legislature has no intention to extend a similar benefit in the case of merger of societies. Though it may create hardship, a similar benefit should be given to the societies on merger but when that has not been given, we cannot infer the intention of the Legislature to extend that benefit in the case of societies after merger and give the benefit to a newly established society after merger.

25. sub-section (2) of section 78 also extends the benefit of carry forward or set off of losses in case of succession. As in the case in hand, after the merger of the four societies a new federation has come into existence. After the merger of the four societies it cannot be said that the federation has succeeded or inherited the four societies on April 1, 1993. Therefore, under sub-section (2) of section 78 also, the benefit of carry forward and set off of losses of the four societies also cannot be allowed in the hands of the assessee-federation. In the result, we find no infirmity in the order of the Tribunal in denying the benefit of carry forward and set off of losses suffered by the four societies against the income/profit of the assessee-federation in the assessment year in hand.

26. Consequently, the appeal is dismissed accordingly.