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Income Tax Appellate Tribunal, E BENCH, MUMBAI
IN THE INCOME TAX APPELLATE TRIBUNAL "E" BENCH, MUMBAI SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER SHRI RAHUL CHAUDHARY, JUDICIAL MEMBER Income Tax Officer, Ward 3(3), Thane, Room No. 4, 6th Floor, B-Wing, Ashar IT Park, Road No. 16Z, Wagle Industrial Estate, Thane (West) - 400604 ……………… Appellant M/s Satya Sai Agroils Pvt. Ltd., Vs Plot No. A-474, Road No. 34, Wagle Indl. Estate, Thane (West), 400604 ..…………… Respondent [PAN:AAECS9603E] Satya Sai Agroils Pvt. Ltd. (Now Merged with Adani Wilmar Limited), “Fortune House”, Nr. Adani House, Mithakhali Cross Roads, Navrangpura, Ahmedabad - 380009 [PAN: AAECS9603E] ……………… Appellant Income Tax Officer, Ward 3(3),Thane, Vs Wagle Indl. Estate, Thane (West) – 400604 ……………… Respondent Appearances For the Department : Shri Amol Kirtane For the Assessee : None Date of conclusion of hearing : 12.05.2022 Date of pronouncement of order : 10.08.2022 O R D E R Per Rahul Chaudhary, Judicial Member: 1. The present cross appeals arise from the order of the Learned Commissioner of Income Tax (Appeals)-2, Thane [hereinafter
ITA. No. 289/Mum/2021 & 1885/Mum/2020 Assessment Year: 2010-11 referred to as „the CIT(A)‟], passed on 06.03.2020 for the Assessment Year 2010-11, which in turn arose from the Assessment Order, dated 26.03.2013, passed under Section 143(3) of the Income Tax Act, 1961 [hereinafter referred to as „the Act‟].
The relevant facts, in brief, are that the Assessee, a company engaged in manufacturing of soya oils, soya product and snacks foods, filed its return of income for the Assessment Year 2010-11 on 13.10.2010 declaring total loss of INR 17,60,46,917/-. The return of the Appellant was selected for scrutiny. During the assessment proceedings, the Assessing Officer noted that 100% shares of the Appellant have been transferred to M/s Adani Wilmer Limited and therefore, disallowed carry forward of loss of INR 17,60,46,917/-.
Being aggrieved, the Assessee filed appeal before CIT(A). Before CIT(A), it was contended on behalf of the Appellant that Section 79 of the Act prohibits carry forward of the losses incurred in any year prior to the previous year in which changes shareholdings of the Company in excess of 50% of total shareholders of the Company takes place. Section 79 of the Act does not prohibit carry forward of losses incurred during the previous year in which change in shareholding as specified in Section 79 takes place. Accordingly, the Assessee claimed that provisions of Section 79 of the Act did not apply to the carry forward of the current year business loss of INR 5,57,05,749/- and unabsorbed depreciation of INR 67,24,989/-. The Assessee also raised an additional ground before CIT(A) contending that provisions of Section 79 of the Act only apply in case of business losses and not in the case of unabsorbed depreciation and therefore, the ITA. No. 289/Mum/2021 & 1885/Mum/2020 Assessment Year: 2010-11 Appellant should be allowed to carry forward the brought forward unabsorbed depreciation of INR 1,08,35,487/- consisting of unabsorbed depreciation of INR 21,79,598/- pertaining to Assessment Year 2006-07 and INR 86,55,889/- pertaining to Assessment Year 2009-10. The CIT(A) vide order, dated 06.03.2020, partly allowed the appeal. The CIT(A) directed the Assessing Officer to carry forward the business losses amounting to INR 5,57,05,749/- and depreciation amounting to INR 67,24,987/- pertaining to the current Assessment Year 2010-11. 4. Being aggrieved, both the Assessee and the Revenue are in cross appeals before us. The Revenue is aggrieved by the order of CIT(A) granting carry forward of business loss of INR 5,57,05,749/- pertaining to Assessment Year 2010-11 to subsequent assessment years, while the Assessee is agreed by the order of CIT(A) denying the carry forward of the brought forward unabsorbed depreciation of INR 1,08,39,487/- consisting of unabsorbed depreciation amounting to INR 21,79,598/- pertaining to Assessment Year 2006-07 and INR 86,55,889/- pertaining to Assessment Year 2009-10. 5. When the matter was taken up for hearing, none was present for the Assessee. After perusal of the appeal, we proceeded with the hearing to decide the appeal on merits after hearing the Ld. Departmental Representative on the basis of material on record.
We would first take up the appeal of the Revenue [ITA No. 289/Mum/2021]. The Grounds raised by the Revenue are as under:
“1. On the facts & in the circumstances of the case and in law, the Ld. CIT(A) erred in allowing the assessee
ITA. No. 289/Mum/2021 & 1885/Mum/2020 Assessment Year: 2010-11 company to carry forward the business loss of Rs. 5,57,05,749/- inspite of the fact that the assessee company had transferred 100% of shares in favour of M/s Adani Wilmer Ltd. vide share purchase agreement dated 09.03.2010 much before the last date of the previous year i.e. 31.03.2010 thereby losing out on voting power & hence liable to carry forward the losses of the previous year.
The order of the CIT(A) may be vacated & that of the Assessing Officer may be restored.
The appellant craves leave to add, amend, alter or delete any ground of appeal”.
The Assessing Officer had denied the carry forward of business loss of the relevant previous year amounting to INR 5,57,05,749/- by invoking the provisions of Section 79 of the Act. In appeal filed by the Assessee before CIT(A) relief was granted to the Assessee as the CIT(A) directed the Assessing Officer to allow the carry forward of the aforesaid business loss by holding that the provisions of Section 79 of the Act cannot be invoked to disallow carry forward of business loss pertaining to the relevant previous year. In our view, there is no infirmity in the order passed by the CIT(A) on this issue. Section 79 of the Act read as under:
“(1) Notwithstanding anything contained in this Chapter, where a change in shareholding has taken place during the previous year in the case of a company, not being a company in which the public are substantially interest, no loss incurred in any year prior to the previous year shall be carried forward and set off against income of the previous year, unless on the last day of the previous year, the shares of the company carrying not less than fifty-one per cent of the voting power were beneficially held 4
ITA. No. 289/Mum/2021 & 1885/Mum/2020 Assessment Year: 2010-11 by person who beneficially held shares of the company carrying not less than fifty-one per cent of the voting power on the last day of the year or years in which the loss was incurred.” (Emphasis Supplied) 8. A perusal of Section 79 of the Act clearly shows that the provisions of the said section are not attracted in case of loss incurred during the relevant previous year. The expression „loss incurred in any year prior to previous year‟ clearly shows that Section 79 of the Act is only concerned that the losses incurred in any year prior to the relevant previous year and the carry forward/set off thereof such loss against the income of the relevant previous year. The CIT(A) was correct in directing the Assessing Officer to allow carry forward of business loss of INR 67,24,987/- pertaining to the current Assessment Year 2010-11. Thus, we decline to interfere with the order passed by the CIT(A) on this issue.
In view of the above, Ground No. 1 and 2 raised by the Revenue are dismissed.
Now we would take up appeal preferred by the Assessee [ITA No. 1885/Mum/2020] wherein the following grounds have been raised:
“1. In law and in the facts and circumstances of the appellant‟s case, Ld. CIT(A) has erred in not admitting additional ground of appeal challenging action of Assessing Officer by not allowing carry forward of brought forward depreciation loss of Rs. 21,79,598/- for A.Y. 2006-07 and Rs. 86,55,889/- for A.Y. 2009-10 even though provisions of section 79 of the act are not applicable to carry forward of brought forward depreciation loss.
ITA. No. 289/Mum/2021 & 1885/Mum/2020 Assessment Year: 2010-11
1.1 In law and in the facts and circumstances of the appellant‟s case, Ld CIT(a) has erred in holding that such additional claim made by appellant was not arising from assessment records. She ought to have appreciated that AO himself in assessment order observed that brought forward loss is not allowed to be carry forward as per provisions of section 79 of the Act and such loss was based upon unabsorbed losses assessed u/s 143(1) of the Act and certified by tax auditor in his tax audit report.
In law and in the facts and circumstances of the 1.2 appellants case, Ld CIT(a) has erred in holding that unabsorbed depreciation losses might have been set off in intervening period without appreciating the fact that AO in his remand report never objected veracity of quantum of unabsorbed depreciation loss.
The appellant craves leave to add, amend and/or alter the ground or grounds of appeal either before or at the time of hearing of the appeal.” 11. We note that the CIT(A) had declined to grant relief claimed by the Appellant in relation to carry forward of unabsorbed depreciation of INR 21,79,598/- pertaining to Assessment Year 2006-07 and INR 86,55,889/- pertaining to Assessment Year 2009-10 holding as under:-
“7.2 I have perused the facts of the case and legal position with regard to the issue under consideration. Admittedly, this claim was not put up before the A.O. It has been contended before me that this is a legal issue and therefore relief can be claimed in any appellate forum. Admitting in principle that the contention that relief in respect of legal issue can be claimed at any 6
ITA. No. 289/Mum/2021 & 1885/Mum/2020 Assessment Year: 2010-11 appellate forum even though it was not claimed before A.O. I have reservations on the scope of this contention. The law requires that all the facts of the issue under consideration should be available on record of the A.O. It is only then that additional ground of appeal can be entertained in appellate proceedings. In the present facts of the case, depreciation relates to A.Y. 2006-07 and A.Y. 2009-10. There is nothing on record to suggest determination of these figures by A.O. in the order of assessment. There is nothing on record also to the fact that these unabsorbed depreciation have not been absorbed against the income of intervening periods. It is a known law that unabsorbed depreciation carried forward to subsequent years merges into depreciation of the current year. Therefore, the current year depreciation claimed, as is apparent from written submission filed in the course of appellate proceedings is only Rs. 67,24,987/-. Therefore, prima facie, this figure of depreciation is after considering the figures of unabsorbed depreciation of earlier years. The moot point is that facts necessarily required for determining the availability of unabsorbed depreciation in the current year and their subsequent carry forward are not available in the records of A.O. I have called for seen the records of assessment and I am therefore satisfied that the issue under consideration in additional ground of appeal cannot be decided on the basis of records of assessment. Therefore, the additional ground of appeal cannot be entertained and is therefore rejected.” (Emphasis Supplied) 12. According to the Ld. Departmental Representative the CIT(A) was justified in rejecting the additional ground raised by the Appellant as the relevant facts were not borne from the assessment records.
ITA. No. 289/Mum/2021 & 1885/Mum/2020 Assessment Year: 2010-11 13. We note that the Hon‟ble Supreme Court has, in the case of Commissioner of Income Tax vs. Shri Subhlaxmi Mills Limited : 249 ITR 795 (SC) has held that for the purposes of applying provisions of Section 79 of the Act only the business loss should be taken into account and not unabsorbed depreciation. Therefore, in our view, the Assessing Officer was not justified in invoking the provisions of Section 79 of the Act for disallowing brought forward unabsorbed depreciation. We note that the Assessee had cited the above judgment of the Hon‟ble Supreme Court before the CIT(A). Generally, the details of the brought forward unabsorbed depreciation are available in the return and/or financial statements. In the Grounds No. 1.1 raised by the Assessee, it has been contended by the Assessee that tax the figures of brought forward losses/unabsorbed depreciation are certified by the tax auditors and formed part of record. Copy of income tax returns for the Assessment Year 2009-10 and 2010- 11 clearly reflect amount of INR 21,79,598/- as business loss pertaining to Assessment Year 2006-07 and INR 86,55,889/- as business loss pertaining to Assessment Year 2009-10 under the Schedule „CFL‟ Details of Losses to be Carried Forward to Future Years. However, the CIT(A) refuse to grant relief on the Assessee holding that additional ground raised by the Assessee could not be admitted on account of the relevant facts not being on record. The apprehension of the CIT(A), as recorded in paragraph 7.2 above, was that the current year depreciation of INR 67,24,987/- could have been inclusive of the brought forward depreciation, or could have been exhausted by way of set-off during the intervening period. Since the same was not clear from the assessment record, the CIT(A) decided not to admit the additional ground. In our view, the Assessing Officer
ITA. No. 289/Mum/2021 & 1885/Mum/2020 Assessment Year: 2010-11 and CIT(A) were required to determine the correct amount of depreciation allowance to be allowed to the Assessee in terms of Section 32(1) and 32(2) of the Act. According to the ratio of the judgment of the Hon‟ble Bombay High Court in the case of Commissioner of Income Tax, Central I, Mumbai vs. Pruthvi Brokers & Shareholders : (2012) 349 ITR 336 (Bombay) the Assessee was, in the facts and circumstances of the present case, entitled to raise additional claim/ground before the CIT(A). Thus, the CIT(A) erred in not admitting the additional ground merely on the ground that the facts required to „verify‟ the claim of the Assessee were not available on record as the depreciation sought to be carry forward pertained to Assessment Year 2006- 07 and 2009-10. Therefore, we remand the issue back to the file of Assessing Officer for fresh adjudication keeping in view the judgment of Hon‟ble Supreme Court in the case of Commissioner of Income Tax vs. Shri Subhlaxmi Mills Limited : 249 ITR 795 (SC) and the provisions of Section 32 of the Act, as applicable at the relevant time. Ground No. 1 to 1.2 are disposed off with the aforesaid direction. Ground No. 2 is disposed off as being general in nature.
In result, the appeal of the Revenue is dismissed, whereas the appeal of the Assessee is allowed for statistical purposes.
Order pronounced on 10.08.2022. (Prashant Maharishi) Judicial Member
म ुंबई Mumbai; दिन ुंक Dated : 10.08.2022 Alindra, PS 9
ITA. No. 289/Mum/2021 & 1885/Mum/2020 Assessment Year: 2010-11
आदेश की प्रतितिति अग्रेतिि/Copy of the Order forwarded to : 1. अपील र्थी / The Appellant 2. प्रत्यर्थी / The Respondent. 3. आयकर आय क्त(अपील) / The CIT(A)- 4. आयकर आय क्त / CIT 5. दिभ गीय प्रदिदनदि, आयकर अपीलीय अदिकरण, म ुंबई / DR, ITAT, Mumbai 6. ग र्ड फ ईल / Guard file.
आिेश न स र/ BY ORDER, सत्य दपि प्रदि //// उप/सह यक पुंजीक र /(Dy./Asstt.