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Income Tax Appellate Tribunal, DELHI BENCH ‘A’ NEW DELHI
Before: SHRI N.K. SAINI & SHRI SUDHANSHU SRIVASTAVA
This appeal has been preferred by the Revenue against the order passed by the Ld. CIT (Appeals)-I, New Delhi vide dated 22.5.2015 for assessment year 2009-10 and the sole issue before us is whether the Ld. CIT (Appeals) was correct in allowing assessee’s claim of set off of brought forward losses.
2.0 Brief facts of the case are that the assessee company is engaged in the manufacturing and trading of edible oils. Another company M/s K.N. Guruswamy Oil Mills Limited (KNG) was amalgamated with the assessee company on 1.4.2007 pursuant to the amalgamation being approved by the Hon’ble High Court of Delhi vide orders dated 8th September, 2008 and 25th September, 2008. The return of income for the captioned year was filed declaring total income at Nil. At the time of amalgamation, M/s KNG had accumulated losses to the tune of Rs. 7,07,28,268/- which included accumulated loss of Rs. 1,29,88,099/- and unabsorbed depreciation to the tune of Rs. 5,77,40,169/-. Post amalgamation, the accumulated losses and unabsorbed depreciation of KNG was brought forward/carried forward and set off by the assessee company in view of the provisions of Section 72A of the Income Tax Act, 1961 (hereinafter referred to as "the Act"). During the year under consideration, the assessee had set off accumulated losses amounting to Rs.1,04,77,404/- against its income. However, the Assessing Officer was of the view that the assessee had not satisfied the required conditions for the set off of accumulated losses and, therefore, the set off was disallowed by the Assessing Officer.
2.1 Aggrieved, the assessee approached the Ld. CIT (Appeals) who held that the assessee had fully complied with the conditions prescribed u/s 72A of the Act and the ground raised was allowed in favour of the assessee. Now, the department is in appeal before the ITAT and has raised the following grounds of appeal:-
“1. The ld. CIT(A) has erred in law and on facts in allowing the brought forward loss of Rs. 1,04,77,404/- of M/s K.N. Guruswamy Oil Mills Ltd., a subsidiary merged with the appellant company, by admitting additional evidence without confronting with the A.O. contravening Rule 46A.
The ld. CIT(A) has erred in law and on facts in allowing the claim of brought forward losses without verifying the claim in view of the provisions of section 72A(2) of Income Tax Act,1961,” 3.0 The Ld. Sr. DR submitted that the Ld. CIT (Appeals)
had erred in allowing the benefit of set off of accumulated losses without considering the objection of the Assessing Officer that the conditions prescribed in Section 72A had not been complied with.
It was also argued by the Ld. Sr. DR that the Ld. CIT (Appeals) had admitted additional evidence without confronting the Assessing Officer with such evidence and thereby contravening the provisions of Rule 46A of the Income Tax Rules, 1962.
4.0 In response, the Ld. AR submitted that the issue stood covered in favour of the assessee by the order of the ITAT in assessee’s own case for assessment year 2011-12. A copy of the said order was also placed before the Bench. The Ld. AR further submitted that the Ld. CIT (Appeals) had not admitted any additional evidence in contravention of Rule 46A of the Income Tax Rules and, therefore, this allegation by the department was incorrect.
5.0 We have heard the rival submissions and have also perused the material available on record. A perusal of the order of assessment shows that the Assessing Officer has simply mentioned that the assessee has not complied with the conditions laid down in section 72A of the Act but has not specified as to how the conditions were not met by the assessee. The Ld. CIT (Appeals) has also noted in the impugned order that the findings of the Assessing Officer in this regard were ambiguous.
5.1 Section 72A of the Income Tax Act, 1961 ("the Act") provides that subject to the fulfilment of certain conditions as prescribed in subsection (2), the amalgamated company shall be allowed to carry forward and set off of accumulated losses and unabsorbed depreciation of the amalgamating company. In addition to the specified conditions as laid down in subsection (2), clause (iii) of subsection (2), Rule 9C of the Income Tax Rules, 4 1962 (for short "the Rules") prescribes certain other conditions that must be fulfilled by the amalgamated company and such condition specified in Rule 9C is that the amalgamated company should achieve at least 50% of the installed production capacity of the amalgamating undertaking before the end of four years from the date of amalgamation and continue to maintain the said minimum level of production till the end of five years from the date of amalgamation. The proviso appended to Rule 9C (a) says that the Central Government, on application made by the amalgamated company, may relax the condition of achieving the level of production and the period during which the same is to be achieved or both in suitable cases having regard to the genuine efforts made by the amalgamated company to attain the prescribed level of production and circumstances preventing such efforts from achieving the same.
5.2 An identical issue came up before the ITAT in assessee’s own case for assessment year 2011-12 also and vide order dated 5.11.2018 in the ITAT decided the issue in favour of the assessee. The relevant observations of the ITAT are contained in Para 6 and 7 of the said order and the same are being reproduced here in under for a ready reference:-
“6. We have gone through the record. Rule 9C of the Rules prescribes that the amalgamated company, owning an industrial undertaking of the amalgamating company by way of amalgamation, shall achieve the level of production of at least fifty per cent of the installed capacity of the said undertaking before the end of four years from the date of amalgamation and continue to maintain the said minimum level of production till the end of five years from the date of amalgamation. The proviso thereof, however, provides that the Central Government, on an application made by the amalgamated company, may relax the condition of achieving the level of production or the period during which the same is to be achieved or both in suitable cases having regard to the genuine efforts made by the amalgamated company to attain the prescribed level of production and the circumstances preventing such efforts from achieving the same.
It is, therefore, clear that if the assessee obtains the relaxation of the conditions from the CBDT, it would be sufficient compliance with the requirements of section 72 A of the Act. In this matter, there is no denial of the facts recorded by the Ld. CIT(A), and it is not the case of the revenue that the assessee did not obtain the orders of relaxation from the CBDT as provided in Rule 9C. We have gone through the copy of this order filed before us. In this factual situation we do not find anything illegality or irregularity in the impugned orders. There is no need to interfere with the same and we accordingly upheld it. There are no merits in this appeal and the appeal is accordingly dismissed.” 5.3 Accordingly, in view of the decision of the Coordinate Bench in assessee’s own case as stated above for assessment year 2011-12, respectfully following the same, we hold that the Ld. CIT (Appeals) was correct in allowing the benefit of set off of brought forward losses. We also add that the department’s contention that the Ld. CIT (Appeals) has contravened provisions of Rule 46A of the Rules by admitting additional evidence is also not substantiated by facts on record and, therefore, this plea is also dismissed.
6.0 In the result, the appeal of the revenue stands dismissed.
Order pronounced in the open court on 28th JANUARY, 2019.