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Income Tax Appellate Tribunal, ‘A’ BENCH, CHENNAI
Before: SHRI ABY T VARKEY, HON’BLE & SHRI S.R.RAGHUNATHA, HON’BLE
PER S. R. RAGHUNATHA, ACCOUNTANT MEMBER:
These appeals instituted by the assessee are against the common order of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi, for the assessment years 2014-15 & 2018-19, vide order dated 02.01.2024.For the sake of convenience, the appeals filed by the assessee are being heard together and disposed off, by this consolidated order.
:-2-: ITA. No:530 & 531/Chny/2024 ITA No: 530/Chny/2024 AY 2014-15: 2. The sole issue involved in this appeal is as regards to confirming the disallowance of Rs.5,00,000/- by the ld.CIT(A) as prior period expenses stating that expense is not relating to assessment year 2014-15.
The brief facts of the case are that, the assessee is a company filed its return of income for the assessment year 2014-15 on 29.11.2014, by declaring an income of Rs.6,85,27,250/-. The case was selected for scrutiny through CASS and statutory notices were issued and concluded the assessment by the Assessing Officer on 30.12.2016 by disallowing Rs.5,00,000/- as prior period expenses claimed during the current assessment year by holding as under: “3. As per the letter dated 28.12.2016 of the assessee, it is seen that an amount of Rs.5,00,000 as paid to M/s.M6 Events during the current year for the expenses pertaining to the previous FY 2012-13. Hence, the said amount of Rs.5,00,000 is disallowed and added back to the total income returned by the assesses towards prior period expenses.”
Aggrieved by the order of the Assessing Officer, the assessee preferred an appeal before the ld.CIT(A) and the ld.CIT(A) passed the order on 02.01.2024 by confirming the same by holding as under:
:-3-: ITA. No:530 & 531/Chny/2024 “9. I have considered the written submissions of the appellant and the order of AO in details. Regarding the issue of claim of prior period expenses, it is seen that Rs.5,00,000/- was paid to M/s M6 Events during the previous year for expenses pertaining to F.Y. 2012-13. In this regard, reliance is placed on rationale held in the case of:- 1. Navabharat Ventures Ltd. vs. CIT-IV [2013] 35 taxmann.com 50 (Hyderabad - Trib.) - Business expenditure - Allowability of [Prior period expenses] - Assessment year 2005-06 - Whether where in course of assessment Assessing Officer wrongly allowed assessee's claim in respect of certain expenses which did not relate to assessment year under consideration, Commissioner in exercise of his power under section 263 rightly passed a revisional order setting aside said assessment - Held, yes [In favour of revenue]. Further, it is not demonstrated by the appellant whether the said expenses were recognized or claimed in Asstt. Year 2013-14 or not. Hence, the order of the AO cannot be interfered with, and accordingly, the ground of appeal No. 2 is dismissed.”
Aggrieved by the impugned action of the ld.CIT(A), the assessee is before us.
The ld.AR argued that the appellant has made payment to M/s.M6 Events, Chennai towards telecasting rights in assessee’s TV networks for the event ‘Isaiyilpuduvai Grand Musical Night’ on 24.03.2013 as Media Partner sponsorship. This content is telecasted by the assessee in its TV network for the financial year 2013-14 relevant to assessment year 2014- 15. The ld.AR further stated that during the assessment proceedings the assessee had furnished the covering letter
:-4-: ITA. No:530 & 531/Chny/2024 dated 03.04.2013 issued by M/s.M6 Events for claiming the bill for expenses of the event along with the invoice copy and the payment voucher of the company as a proof of claiming the expense. Further, the said payment has been accounted in the books of accounts of the assessee during the assessment year 2014-15 and made the payment of Rs.4,50,000/- on 02.05.2013 after deducting applicable TDS of 10% on Rs.5.00 Lakhs i.e., Rs.50,000/-. The ld.AR contended that unless the bill or invoice is received for any expenditure spent by the assessee cannot be recorded in the books of accounts for any particular financial year. Thus, the assessee has recorded the said transaction in the books of accounts during the financial year 2013-14 (assessment year 2014-15), since, the claim of the payment received from M/s.M6 Events only on 03.04.2013. In light of the above facts and circumstances the ld.AR prayed for allowing the appeal of the assessee.
Per contra, the ld.Addl.CIT-DR, argued that the assessee has not shown that the expenditure of Rs.5,00,000/- had not been claimed in the earlier assessment year i.e, 2013-14 and also stated that the assessee has not produced any agreement entered with the party to carry out such media sponsorship
:-5-: ITA. No:530 & 531/Chny/2024 arrangement and hence the expenditure cannot be allowed, thereby prayed for dismissing the appeal of the assessee.
We have heard both the parties, perused materials available on record and gone through orders of the authorities below. It is accepted fact that the company is carrying on the business of television networks and during the assessment year 2013-14, the assessee has carried out recording of the program called ‘Isaiyilpuduvai Grand Musical Nights’ on 24.03.2013 by M/s.M6 Events. According to the ld.AR, the program was telecasted during the assessment year 2014-15. Further, as seen in the orders of lower authorities the expenditure of Rs.5,00,000/- paid to M/s. M6 Events is supported by their invoice along with the covering letter dated 03.04.2013 for having claimed the bill for payment and the corresponding payment voucher dated 02.05.2013 and the genuineness of the expenditure has not been doubted. We noted that the Assessing Officer has only observed that the expenditure of Rs.5,00,000/- paid to M/s. M6 Events pertains to the previous year 2012-13 based on the invoice dated 29.03.2013, without considering the covering letter dated 03/04/2013 of the party for payment and the corresponding payment made by the :-6-: ITA. No:530 & 531/Chny/2024 assessee which was on 02.05.2013 (Assessment year 2014-15). Considering the nature of business carried on by the company and the event was telecasted in the assessment year 2014-15, even though the program has been recorded in the assessment year 2013-14, the corresponding payment of Rs.5,00,000/- paid to M/s. M6 Events by the assessee during the A.Y. 2014- 15, the claim of the said expenditure by the assessee in the assessment year 2014-15 needs to be allowed. Moreover we also note that the applicable TDS also has been deducted while making payment to M/s.M6 Events on 02.05.2013 (AY 2014- 15). Anyway allowing the expenditure in this year instead of earlier year is revenue neutral, since the assessee is paying the taxes at the maximum marginal rate. Therefore, considering the facts and circumstances of the case, we are inclined to admit the expenditure of Rs.5,00,000/- as allowable as claimed by the assessee in the assessment year 2014-15 and allow the appeal of the assessee.
ITA No: 531/Chny/2024 for AY 2018-19: 8. The sole issue involved in this appeal is as regards to not setting off of brought forward losses/unabsorbed depreciation against the total income computed in the assessment order.
:-7-: ITA. No:530 & 531/Chny/2024
The brief facts of the case are that, the assessee filed its return of income for the assessment year 2018-19 on 15.11.2018 by declaring a loss of Rs.27,13,735/-. The case was selected for scrutiny through CASS and the statutory notices were issued and completed the assessment u/s. 143(3) of the Act on 21.04.2021 by assessing the Total income of the assessee as Rs.1,91,10,320/- by holding as under: “Now, we would like to bring to the attention of this authority that we are having the earlier year brought forward losses to the extent of Rs.11,45,16,892 and the summary of the same is given below for the perusal of this authority· 1. Brought Forward Long Term Capital Loss P. Y 2010 11 Rs. 1,24,154 2. Brought Forward Short Term Capital Loss P. Y s 2013-14 & 2014-15 Rs.85,99,141 3. Unabsorbed Depreciation Loss PY s 2015 16 Rs. 3,09,54,684 4. Unabsorbed Depreciation Loss PY s 2016 17 Rs. 7,48,38,913 Now, we humbly pray this authority to adjust the unabsorbed depreciation loss against the Total Taxable Income assessed by this Ld. Authority i.e. to the extent of Rs.1,91,10,320/-. We also wish to submit before this authority till AY 2020-21, we are incurring losses and we have enough losses. 8. The above submission of the assessee is considered but since the assessee has not claimed set off elf of losses during the year in the 1.T. Return, the AO is not empowered to consider it during the year. Assessing officer cannot go beyond the claim as made in the return of income as per Supreme Court decision in the case of Goetz India Us. Vs. CIT (2006) 284 /TR 323 wherein the Apex Court restricted the power of AO to entertain a claim for deduction otherwise than by a Revised Return. 9. Hence, in view of the above, assessee's depreciation claimed wrongly is reduced tothe extent of Rs.2,18,24,056/- and accordingly the Depreciation reworks to Rs.4,79,93,266.
:-8-: ITA. No:530 & 531/Chny/2024 (Rs.6,98,17,322-Rs.2,18,24,056). Penalty proceedings u/s. 270A are initiated for under reporting of income.”
Aggrieved by the order of the Assessing Officer, the assessee preferred an appeal before the ld.CIT(A). The ld.CIT(A) passed an order dated 02.01.2024 by confirming the order of AO by holding as under: “10.The b/f losses of business/depreciation of earlier years were not claimed in the ITR and CIT(A) is not the competent authority to admit and examine the claim at this juncture, as the ITR cannot. be revised now and itis a stale claim. Similarly, the appellant had made incorrect claim of depreciation of Rs.2,18,24,056/-. These was option to file revised return incase of assessee subsequent to filing of ITR with incorrect depreciation within prescribed time but the option was not exercised and issue came to light in scrutiny assessment proceedings. The condition for claim of b/f business loss/ depreciation loss entails mandatory filing of ITR within time as well as exercising the claim of such losses in the relevant assessment year, which was not done by the appellant. Reliance is placed on rationale held in the cases of:- CIT vs. Perla Telecommunication and Electronic Components India Pvt. Ltd. 141 taxmann.com 388 (SC) (2022) - when revised computation, not valid revised return - cannot claim any such additional deductions or exemption. Ultratech Cement vs. Addi.CIT 81 taxmann.com 74 (Bombay) (2017) - An additional ground relating to claim of deduction could not be permitted to be raised, if necessary evidence that assessee was entitled to claim was not on record and assessee had no reason to satisfy appellate authority that ground now raised was bona fide and same could not have been raised earlier for good reasons In the case of Shree Datta Prasad Sahakari Patsanstha Ltd. vs. ITO 134 taxmann.com 324 (Mumbai-lTAT) (2022)- Even though appellant was otherwise eligible for 80P(2)(a)(i) deduction, it could not be allowed such deduction in view of condition imposed u/s 80A(5), in cases where no deduction was claimed.
:-9-: ITA. No:530 & 531/Chny/2024 11. Hence, in the given situation, the action of the AO in rejecting the claim of adjustment of unabsorbed b/f loss/ depreciation loss with the income arrived at during assessment, being not validly claimed in the ITR, cannot be interfered with. Ground Nos. 2,3,4 and 5 are dismissed.”
Aggrieved by the impugned order, the assessee is before us.
The ld.AR argued that the Assessing Officer and the ld.CIT(A) has erred in not considering the brought forward losses to the extent of Rs.11,45,16,892/- against the income assessed for the assessment year 2018-19. The brought forward losses carried forward by the assessee to set off is as follows: 1. Brought forward long term capital loss PY 2010-11 Rs.1,24,154 2. Brought Forward Short Term Capital Loss P.Y s 2013-14 & 2014-15 Rs.85,99,141 3. Unabsorbed depreciation loss PYs 2015-16 Rs.3,09,54,684 4. Unabsorbed depreciation loss PYs 2016-17 Rs.7,48,38,913 ------------------- Total Rs.11,45,16,892
The ld.AR in support of its claim of set off of carry forward loss and unabsorbed depreciation relied upon the decision of Hon’ble Madras High Court in the case of CIT vs. Abbinitha Foundation Pvt Ltd [2017] 83 Taxman.com 100 (Mad), wherein the Hon’ble Madras High Court held as under: “5.2 Thus, on a combined reading of the judgments of the Hon'ble Apex Court in the case of Goetze India (supra) and of the Hon'ble Bombay High Court in the case of CIT vs. Pruthvi Brokers & Shareholders Pvt. Ltd. (supra), it is our considered opinion that :-10-: ITA. No:530 & 531/Chny/2024 although the AO cannot be held in error for not admitting the assessee's claim through revised computation, the ITA T can entertain such a claim. Therefore, it is our considered opinion that interest of justice would be served if this issue is restored to the file of the AO with a direction to accept the assesee's claim which has been filed by filing a revised computation after proper examination and verification. We are also guided by the spirit of CBDT Circular No. 14 (XL- 35) of 1955 dated 11th April 1955 wherein the CBDT has laid down administrative instruction for guidance of income tax officers on matters pertaining to assessment. The Board has in the above said instruction stated that it is one of the duties of the officers of Sony Mobile Communications vs DCIT 11 the department to assist a tax payer in every reasonable way, particularly in the matter of claiming and securing reliefs. Therefore, in view of the above cited reasons and in interest of justice we restore this issue to the file of the AO with the direction to admit the claim of the assessee and allow the same if after proper verification and examination it is found to be correct and as per law. Needless to say, the AO shall give appropriate opportunity to the assessee to present its case Therefore, as per Board's circular cited above and following the above cited decisions Hon'ble FAA, may be pleased to consider the appellant's prayer for set off of carried forward business loss and/or unabsorbed depreciation of earlier years against the total income computed by the learned AO. Even otherwise, as per Explanation 5 to Sec.32, that the provisions of this sub-section shall apply whether or not the assesse has claimed the deduction in respect of depreciation in computing his total income. Further, as per section 32(2), earlier year(s) unabsorbed depreciation becomes current year depreciation and the same has perforce to be deducted first from the total income as computed by the learned AO. Vide page 5 of the asst.order unabsorbed depreciation of PYs is Rs.3,09,54,684 and for PY 2016- 17 the same is Rs.7,48,38,913, aggregating to Rs.10,57,91,599. This amount has first to be adjusted against the TI of Rs.1,91,10,320, to this extent, computed by the learned in the asst. order under appeal. Therefore, in view of the binding nature of the above Madras H.C. decision, other citations, Board's Circular and the mandatory provision of Sec.32(2) & Explanation 5 thereunder, Hon'ble CIT (A) may be pleased to direct the AO to allow the correct amount of carried forward business loss/unabsorbed depreciation of earlier
:-11-: ITA. No:530 & 531/Chny/2024 years and to adjust the same against the total income computed by him.”
Further, the ld.AR contended that in light of the factual matrix of the assessee’s case and decision of the Hon’ble Madras High Court decision, the assessee is eligible for set off of carry forward losses and unabsorbed depreciation for the assessment year 2018-19 and prayed for setting aside the order of the lower authorities by allowing the appeal of the assessee.
Per contra, the ld.DR relied on the orders of the lower authorities and prayed for dismissing the appeal of the assessee.
We have heard both the parties, perused materials available on record and gone through orders of the authorities below. The assessee is a private limited company and filed its return of income for the assessment year 2018-19 on 15.11.2018 by declaring loss of Rs.27,13,735/-. The AO completed the scrutiny assessment selected under CASS and passed the order u/s.143(3) of the Act on 21.04.2021 by disallowing the excess claim of Depreciation of Rs.2,18,24,055/-
:-12-: ITA. No:530 & 531/Chny/2024 and computed the total income of the assessee as Rs.1,91,10,320/-. During the assessment proceedings the assessee accepted the above disallowance of excess claimed depreciation and filed a submission to give set off of the available “carry forward losses and unabsorbed depreciation” to the tune of Rs.11,45,16,892/- against the income assessed. However, the same has be denied by the Assessing officer stating that the AO cannot go beyond the claim as made in the return of income as per Supreme Court decision in the case of Goetz India Us. Vs. CIT (2006) 284 ITR 323 wherein the Apex Court restricted the power of AO to entertain a claim for deduction otherwise than by a Revised Return. The same has been upheld by the ld.CIT(A).
It is noted that, the assessee filed a revised computation before the lower authorities for giving a set off of the carried forward business loss and unabsorbed depreciation to the tune of Rs.11,45,16,892/- against the addition made to the total income of the assessee in the Assessment order passed. Since, the claim of the assessee was to set off the existing carried forward business loss and unabsorbed depreciation in the current Assessment year, we are of the opinion that the same is :-13-: ITA. No:530 & 531/Chny/2024 eligible for set off. We direct the AO to allow the set off of the same, since this issue has not been examined by the Assessing Officer, hence we set aside the impugned order to restore the issue of carried forward business loss and unabsorbed depreciation to the tune of Rs.11,45,16,892/- back to the file of the Assessing Officer for verification of the correctness of the amount carried forward from the previous Assessment years. The assessee is directed to submit the statement of the “carried forward business loss and unabsorbed depreciation” of the relevant assessment years before the Assessing Officer with support of relevant documents to avail set off of the same against the assessed Income of the current Assessment year.