M/S SKIPPER LIMITED,KOLKATA vs. DCIT, CEN. CIR. 3(1), KOLKATA

This is an appeal preferred by the assessee against the order of the Commissioner of Income Tax-21, Kolkata [hereinafter referred to as ‘CIT(A)’] dated 21.12.2021 for the assessment year 2013-14.

After hearing the rival parties and perusing the material on record, we note that set off of unabsorbed depreciation of Rs. 9,82,55,803/- allowed by the AO was withdrawn by in rectification order u/s 154 of the Act dated 09.07.2018. The facts are that an addition of Rs. 3,00,40,000/- u/s 68 of the Act was made to the income of the assessee in the assessment order passed u/s 143(3) read with Section 153A of the act on 31.12.2017 thereby assessing the income at Rs. 9,96,67,709/-. Thereafter the assessee moved a rectification petition dated 28.02.2018 requesting the AO that unabsorbed depreciation of Rs. 9,82,55,803/- has not been allowed set off from the income assessed and the AO thereafter passed a rectification order dated 30.05.2018 allowing the set off of unabsorbed depreciation thereby determining the income of Rs. 28,13,810/-. But thereafter again the AO issued notice u/s 154 to withdraw the set off of unabsorbed depreciation and a rectification order was passed dated 09.07.2018 accordingly. The Ld. CIT(A) also confirmed the order of AO by ignoring the CBDT Circular No. 11/2019 dated 19.06.2019 which specifically issued in order to instruct the AOs to allow the set off of unabsorbed loss/depreciation in the assessment years prior to the amendment. We note that the circular was brought by Central Board of Direct Taxes to ensure the same treatment to be given to unabsorbed depreciation in the matter of set off of losses / depreciation against the addition made u/s 68 / 69/ 69A/ 69B / 69C/ 69D of the Act. This Circular was brought out in view of amendment brought about by Finance Act, 2016 w.e.f 01.04.2017 which provides that no set off of any loss shall be given to assessee under the any of provision of the Act against the income as referred to in Clause A and B of sub-section (1) of Section 115BBE of the Act. Prior to that there was no provision existed in the Act and therefore it is permissible to set off of unabsorbed depreciation/losses against the said income. So in order to set the controversy at rest , a Circular No. 11/2019 dated 19.06.2019 was brought as the AOS were not allowing the set off. The circular is reproduced as under:

In this regard, it has been brought to the notice of the Central Board of Direct Taxes (the Board) that in assessments prior to assessment year 2017-18, while some of the Assessing Officers have allowed set off of losses against the additions made by them under Section(s) 68/69j69A/69B/69C/69D, in some cases, set off of losses against the additions made under Section 115BBE(1) of the Act have not been allowed. As the amendment inserting the words 'or set off of any loss' is applicable with effect from pt of April, 2017 and applies from assessment year 2017-18 onwards, conflicting views have been taken by the Assessing Officers in assessments for years prior to assessment year 2017-18. The matter has been referred to the Board so that a consistent approach is adopted by the Assessing Officers while applying provision of section 115BBE in assessments for period prior to the assessment year 2017-18.

The Board has examined the matter. The Circular No. 3/2017 of the Board dated 20th January, 2017 which contains Explanatory notes to the provisions of the Finance Act, 2016, at para 46.2, regarding amendment made in section 115BBE(2) of the Act mentions that M/s Skipper Ltd. currently there is uncertainty on the issue of set-off of losses against income referred to in section 115BBE. It also further mentions that the pre-amended provision of section 115BBE of the Act did not convey the intention that losses shall not be allowed to be set-off against income referred to in section 115BBE of the Act and hence, the amendment was made vide the Finance Act, 2016.

Thus keeping the legislative intent behind amendment in section 115BBE(2) vide the Finance Act, 2016 to remove any ambiguity of interpretation, the Board is of the view that since the term 'or set off of any loss' was specifically inserted only vide the Finance Act 2016, w.e.f. 01.04.2017, an assessee is entitled to claim set-off of loss against income determined under section 115BBE of the Act till the assessment year 2016-17. A perusal of the Circular, abundantly makes it clear that prior to AY 2017-18 the said set off of loss has to be allowed and so the unabsorbed depreciation. Therefore, we do not find any merit in the conclusion drawn by the Ld. CIT(A) on this issue and accordingly we are inclined to reverse the same by directing the AO to allow the set off of unabsorbed depreciation to the assessee. We are not adjudicating the plea raised by the assessee that the withdrawal of set off in respect of unabsorbed depreciation allowed earlier by ways order u/s 154 of the Act is not permissible as the same is not apparent mistake. Resultantly, the appeal of the assessee is allowed.

In the result, the appeal of the assessee is allowed.