CEAT LIMITED,MUMBAI vs. ASSISSTANT COMMISSIONER OF INCOME-TAX, 6(1)(1), MUMBAI

ITA 8146/MUM/2025Status: DisposedITAT Mumbai29 September 2026AY 2020-2123 pages
AI SummaryPartly Allowed

What were the facts?

The assessee, Ceat Limited, filed an appeal against the order of the CIT(A) for Assessment Year 2020-21, which upheld the disallowance of set-off of brought forward business loss of Rs. 7,69,19,122/-. This loss pertained to Ceat Speciality Tyres Limited (CSTL), which merged with the assessee w.e.f. April 1, 2019. The Assessing Officer (AO) disallowed the loss under section 115BAA(2)(iii) as CSTL had claimed the expenditure under section 35(2AB) in AY 2019-20, and the assessment for that year was completed. The assessee argued that the weighted portion of the expenditure was already disallowed and the balance was eligible under sections 35(1)(i) and 35(1)(iv). The AO also disallowed Rs. 26,98,271/- under section 14A for dividend income and added Rs. 1,34,33,223/- for liquidated damages treated as revenue receipt. The CIT(A) deleted the section 14A disallowance and the addition for liquidated damages but upheld the disallowance of brought forward loss.

What did the Tribunal hold?

The Tribunal held that the principle laid down by the Supreme Court in CIT v. Manmohan Das is apposite, stating that the eligibility of a loss for carry forward and set-off, including its true nature, is to be examined in the assessment year in which the set-off is claimed. The view taken by the Income-tax Officer in computing the loss in the previous year is not binding in the subsequent year. The Tribunal found no statutory embargo upon examining the allowability of the underlying expenditure under any other applicable provision of the Act in the year of set-off, especially if the expenditure is otherwise eligible and the benefit of section 35(2AB) was not ultimately availed. The legislative intent of section 115BAA(2) is to deny specified incentives, not actual expenditure otherwise allowable. Therefore, the matter was restored to the AO to examine whether the underlying expenditure satisfies the conditions under sections 35(1)(i), 35(1)(iv), and/or 37(1). The AO was directed to re-compute the eligible carried-forward loss without granting the additional weighted deduction under section 35(2AB). The Tribunal set aside the CIT(A)'s order on this issue and directed the AO to allow the brought-forward loss after factual verification.

What were the issues?

1. Whether the CIT(A) erred in upholding the disallowance of set-off of brought forward business loss of Rs. 7,69,19,122/- pertaining to Ceat Speciality Tyres Limited, which merged with the assessee, in light of section 115BAA(2)(iii) of the Income Tax Act, 1961. Assessee's Contention: The assessee argued that while the expenditure was initially claimed under section 35(2AB), the weighted portion was disallowed, and the remaining amount was eligible for deduction under sections 35(1)(i) and 35(1)(iv). The principle laid down in CIT v. Manmohan Das and other cases suggests that the nature of loss and its eligibility for set-off should be examined in the year of set-off, and the previous year's assessment is not binding. The assessee also contended that section 115BAA(2) should not deny deductions for actual expenditure otherwise allowable. Revenue's Contention: The revenue contended that since the expenditure was originally claimed under section 35(2AB) and the assessment for AY 2019-20 was completed, the loss attributable to that deduction was not eligible for set-off under section 115BAA(2)(iii). They argued that even losses carried forward under section 72A remain subject to section 115BAA restrictions, and the specific restriction for section 35(2AB) cannot be circumvented by reclassifying the expenditure.

Which sections of the Income-tax Act were involved?

Section 115BAA,Section 35(2AB),Section 35(1)(i),Section 35(1)(iv),Section 37(1),Section 14A,Section 43(1),Section 72A,Section 143(3),Section 143(2),Section 142(1)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “C” BENCH, MUMBAI

Before: SHRI NARENDER KUMAR CHOUDHRY, JM & SHRI ARUN KHODPIA, AM

For Appellant: Shri Vijay Mehta
For Respondent: Smt. Esther Ninghauvung Hanghal, DR. :
Hearing: 29.09.2026

Per Arun Khodpia, AM: This appeal is preferred by the assessee, directed against the order of the Commissioner of Income Tax Appeals, National Faceless Appeal Centre (NFAC), Delhi [in short, “the Ld. CIT(A)”], dated 19.09.2025 for the Assessment Year (AY) 2020-21, arises from the assessment order under section 143(3) of the Income Tax Act, 1961 [in short, “the Act”] dated 07.04.2022, passed by ACIT, Circle 6(1)(1), Mumbai [in short, “the Ld. AO”]. Ceat Limited

2.

The grounds of appeal raised by the assessee are as under:

“1. The CIT(A) has erred in upholding the disallowance of set-of

The order continues below.

Read the full judgment

A free account opens 10 full judgments a month. Re-reading one you have already opened does not count again.

Create a free accountSign in

See plans and prices

The summary, the parties, the sections and the citations above are open to everyone and always will be. Only the text of the order and the PDF are metered.

More judgments on Section 115BAA

All 224 judgments and leading authorities on Section 115BAA →

Recent GST High Court judgments

Search GST case law →