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Income Tax Appellate Tribunal, DELHI BENCH “SMC-I”: NEW DELHI
Before: SHRI P.K.BANSAL
This appeal has been filed by the assessee against the order of the
Ld. CIT(A) dated 28.10.2014. The assessee has taken as many as 4
grounds of appeal. Ground 3 and 4 are general and does not require any
adjudication. Ground No. 1 and 2 read as under :-
ITA No. 6647/Del/2014
“1.1 That on the facts and in the circumstances of the case, and in law, the Authorities below have erred in holding that change in share holding of the assessee company in the Assessment year 2010-2011, precludes it from carrying forward the Business losses and depreciation amounts suffered by it in the asstt. years 2008- 09 to 2010-2011, and that the said losses/depreciation amounts cease to be available with the assessee company for set off against business income in the subsequent years including the asstt. year 2011-2012.
1.2 That the Authorities below have erroneously invoked and applied the provisions of section 79 of The Income Tax Act, 1961, not applicable in the present case, and have further erred in holding that unabsorbed Business Losses totaling Rs. 2,20,32,972, AND unabsorbed Depreciation amounts totaling Rs. 14,57,465, brought forward from the Ass Years 2008-2009 to 2010-2011, are not available with the assessee company for set off against its business income of Rs. 22,96,119 for the asstt. year 2011-2012. That the set off of the business losses being permitted and allowable under section 72 of The Income Tax Act, 1961, it is prayed that the same be directed to be set off against the income of the assessee company for the AY 2011-2012.
1.3 That the Authorities below have failed to appreciate that the change in share holding of the assessee company in the Assessment year 2010-2011 was bonafide and not with a view to avoid or reduce any tax liability, and as held by various courts, the provisions of section 79 of the Act are not made applicable.
That without prejudice, the Authorities below have failed to accept the principles of law enunciated by The Hon'ble Supreme Court in Subhalaxmi mills case wherein the APEX court has held even in a case where provisions of section 79 of the Act apply, unabsorbed depreciation amounts of earlier years are to be set off against current years business income.”
ITA No. 6647/Del/2014
The issue involved in the grounds taken by the assessee is the
applicability of the provision of section 79 of the Income Tax Act 1961
during the year.
I have heard the rival submissions and carefully considered the
same. Before deciding the issue whether the assessee will be entitled to
set off and carry forward the unabsorbed losses and unabsorbed
depreciation brought forward from the earlier year during the impugned
year it is necessary to appreciate the provision of section 79 of the
Income Tax Act.
From the perusal of the aforesaid section it is apparent that this
provision debars a company not being a company in which public are
substantially interested to carry forward only the business loss and not
the unabsorbed depreciation as the section speaks of loss it does not
include unabsorbed depreciation. This section speaks that in the case of
company not being a company in which public are substantially
interested where there is a change in share holding has taken place in a
previous year then no loss incurred in any year prior to the previous
year shall be carried forward and set off against the income of the
previous year unless on the last day of that previous year and on the
last day of the previous year in which the loss was incurred, the shares
of the company carrying not less than 51% of the voting power were 3
ITA No. 6647/Del/2014
beneficially held by the same persons . The assessee has unabsorbed
depreciation for the asstt. years 2008-09 , 2009-10 and 2010-11. Since
the provision of section 79 are not applicable to the unabsorbed
depreciation there is no dispute that the assessee shall be entitled to set
off the unabsorbed depreciation but so far the brought forward losses
are concerned I noted during the impugned assessment year the
assesee has earned profit to the extent of Rs. 23,75,802/- and hold the
brought forward losses to the extent of Rs. 2,20,32,972/- and
unabsorbed depreciation Rs. 14,57,465/-. Since there is no change in
the shareholding as compared to the earlier assessment year
shareholding remains the same in impugned asstt. year. Therefore in my
opinion the provision of section 79 will not be applicable in the case of
the assessee. If these provisions can be applied that can be applied
only to the business loss incurred in any year prior to the previous year
i.e. only for the assessment year 2009-10 and not for the asstt. year
2010-11. In the assessment year 2010-11, I noted that the AO has not
disallowed the carry forward of the losses incurred in the asstt. year
2009-10. Therefore I am of the view that since there is no change in
the share holding pattern of the assessee in the impugned asstt. year as
compared to asstt. year 2010-11 the provision of section 79 will not
debar the assesee in the impugned asstt. year to carry forward and set 4
ITA No. 6647/Del/2014
off the losses of the asstt. year 2010-11. I accordingly set aside the
order of the Ld. CIT(A).
In the result, appeal filed by the assessee is allowed.
Order pronounced in the open court on 12/07/2016.
Sd/-
(P.K. BANSAL) ACCOUNTANT MEMBER
Dated: 12/07/2016 Veena Copy forwarded to 1. Applicant 2. Respondent 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, New Delhi