The Mula Pravara Electric Co. Op. Society Ltd., Ahmednagar V. DCIT, Ahmednagar Circle, Ahmednagar

ITA 1308/PUN/2010

• Counselvise Citation: 130824514 RSA 2010
• Duration Of Justice: 2 year(s) 7 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2002-2003
• Appeal Filed On: 25-10-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S K SINGH
• Assessee Lawyers: S N DOSHI
• Keywords: Depreciation; Period of limitation
• Section: 72(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI .G.S. PANNU, ACCOUNTANT MEMBER AND SHRI R.S. PADVEKAR JUDICIAL MEMBER ITA NO. 1308/PN/2010 : (ASSTT. YEAR : 2002-03) THE MULA PRAVARA ELECTRIC CO-OP. SOCIETY LTD., BELAPUR ROAD, SHRIRAMPUR, TAL. SHRIRAMPUR, DIST. AHMEDNAGAR PAN AAAAT 3301 A APPE LLANT VS. DY. CIT AHMEDNAGAR CIRCLE, AHMEDNAGAR RE SPONDENT APPELLANT BY : SHRI S.N. DOSHI RESPONDENT BY : SHRI S.K. SINGH DATE OF HEARING : 26-4-2013 DATE OF PRONOUNCEMENT : 31-5-2013 ORDER PER R.S. PADVEKAR, JM THE ASSESSEE HAS FILED AN APPLICATION U/S 254(2) O F THE INCOME-TAX ACT, 1961 BEING M.A. NO. 53/PN/2012 WITH A PRAYER TO RECALL T HE ORDER PASSED IN ITA NO. 1308/PN/2011 DATED 6-3-2012 POINTING OUT VARIOUS MI STAKES. WHILE DISPOSING OF THE MISCELLANEOUS APPLICATION, THE TRIBUNAL ACCEPTED TH E PLEA OF THE ASSESSEE THAT THERE WAS A NON-CONSIDERATION OF AN ALTERNATE SUBMISSION MADE BY THE ASSESSEE WHILE ADJUDICATING GROUND NO. 4. IN GROUND NO. 4, THE AS SESSEE HAD CONTENDED THAT THE LD. CIT(A) ERRED IN HOLDING THAT THERE IS A CESSION OF LIABILITY TO THE EXTENT OF RS. 541.80 CRORES IN THE A.Y. 2002-03 WITHIN THE MEANIN G OF SEC. 41(1) OF THE ACT. IN THE SAID GROUND THE ALTERNATIVE SUBMISSION OF THE ASSES SEE TO THE EFFECT THAT THE LOSS ON ACCOUNT OF EXCESS COST OF ELECTRICITY INCURRED BY T HE ASSESSMENT IN THE F.YS. 1977-78 TO F.YS. 1991-92 TOTALING TO RS. 140,46,06,586/- CA NNOT BE SAID TO HAVE BEEN ACTUALLY ALLOWED AS THE SAID LOSS COULD NEVER BE CL AIMED BY THE ASSESSEE IN ANY OF THE ASSESSMENT YEARS U/S 72(1) OF THE ACT. THE TRI BUNAL HELD THAT THE NON- CONSIDERATION OF THE ALTERNATE CONTENTION OF THE AS SESSEE IN RESPECT OF GROUND NO. 4 CONSTITUTED A MISTAKE APPARENT FROM THE RECORD WITH IN THE MEANING OF SEC. 254(2) OF THE ACT AND THE TRIBUNAL RECALLED THE ORDER FOR THE LIMITED PURPOSE FOR CONSIDERING AND DECIDING THE ALTERNATIVE PLEA RAISED IN GROUND NO. 4 WHICH WAS LEFT 2 ITA NO. 1308/PN/2010 THE MULA PRAVARA ELECTRIC CO-OP. SOCIETY LTD. A.Y. 2002-03 UNADJUDICATED IN THE EARLIER ORDER DATED 6-3-2012. AS PER THE DIRECTIONS OF THE TRIBUNAL IN M.A. THE ORDER IS RECALLED AND BOTH THE PARTIES ARE HEARD ON THE ALTERNATE CONTENTION ON GROUND NO. 4. 2. WE WOULD LIKE TO RECAPITULATE THE FACTS TO ADJUD ICATE THE ALTERNATE CONTENTION TAKEN BY THE ASSESSEE. THE ASSESSEE IS ONE OF THE FIVE PILOT ELECTRIC CO-OPERATIVE SOCIETIES ESTABLISHED IN THE STATE OF MAHARASHTRA B Y THE GOVERNMENT OF INDIA DURING 1969-70. IT IS STATED THAT THE ASSESSEE SOCIETY WA S ENTRUSTED WITH DISTRIBUTION OF THE ELECTRICAL ENERGY EXCLUSIVELY IN 183 VILLAGES OF SH RIRAMPUR, RAHURI TALUKA FULLY AND NEWASA AND SANGAMNER, RAHATA TALUKA PARTLY. THE AS SESSEE SOCIETY PURCHASES ELECTRICITY FROM MAHARASHTRA STATE ELECTRICITY BOAR D (MSEB) AND SELLS THE SAME TO THE CONSUMERS IN THE SAID AREA EARMARKED FOR IT. I T IS STATED THAT THE RATES FOR THE ELECTRICITY PURCHASES FROM MSEB AND SELLING TO ULTI MATE CONSUMERS ARE CONTROLLED BY THE GOVERNMENT OF MAHARASHTRA THROUGH MSEB. THE ASSESSEE SOCIETY HAS CONSISTENTLY INCURRED LOSSES DUE TO DISPARITY IN TH E PURCHASE PRICE AND SALES PRICE OF THE ELECTRICITY. THE ASSESSEE COULD NOT PAY OFF TH E ELECTRICITY BILLS RAISED BY THE MSEB. AS PER TRI-PARTITE AGREEMENT BETWEEN RURAL EL ECTRIFICATION CORPORATION, MSEB AND THE ASSESSEE-SOCIETY, IT WAS DECIDED TO CHARGE THE ELECTRICITY TARIFF BASED ON AVERAGE PER MONTH EXPENDITURE FOR ELECTRICITY SUPPL Y MADE FROM 11 KV BASHER FROM DECEMBER 1973. THE MSEB STARTED BILLING FOR AGRICUL TURAL PUMPS ON HORSE POWER (H.P). BASED TARIFF FROM 1-7-1977. THE ASSESSEE-SOC IETY ALSO STARTED BILLING FOR AGRICULTURAL CONSUMERS IN ITS AREA OF OPERATION ON H.P. TARIFF BASIS. DUE TO THE DISPARITY IN THE TARIFF THE ASSESSEE STARTED INCUR RING HUGE LOSSES. THE REPRESENTATION WAS MADE BEFORE THE GOVT. OF MAHARASHTRA. SUBSEQUEN TLY, THE GOVT. OF MAHARASHTRA ACCEPTED THE REPRESENTATION MADE BY THE ASSESSEE SO CIETY TO THE MSEB FOR DETERMINING VIABLE TARIFF AND A NOTIFICATION TO THA T EFFECT WAS ISSUED IN THE GAZETTE ON 21-5-1999 DETERMINING THE VIABLE TARIFF. IN COMPLI ANCE TO THE GOVT. NOTIFICATION MSEB VIDE LETTER DATED 13-5-2001 INFORMED THE ASSESSEE T HAT THE TARIFF PAYABLE BY THE ASSESSEE TO THE MSEB WAS REVIEWED FROM APRIL 1977 T O APRIL 2000. AS A RESULT OF THE SAID REVIEW, THE ARREARS OF MSEB WERE SUBSTANTI ALLY REDUCED. THE MSEB AFTER 3 ITA NO. 1308/PN/2010 THE MULA PRAVARA ELECTRIC CO-OP. SOCIETY LTD. A.Y. 2002-03 RECALCULATING THE VIABLE TARIFF VIDE LETTER DATED 1 3-5-2001 HAS ALLOWED REBATE TO THE EXTENT OF RS. 541.80 CRORES IN THE PRICE PAYABLE BY THE ASSESSEE TO THE MSEB. THE REBATE ALLOWED TO THE EXTENT OF RS. 541.80 CRORES H AS BEEN TREATED AS CESSION OF LIABILITY WITHIN THE MEANING OF SEC. 41(1) OF THE A CT BY THE ASSESSING OFFICER AS WELL AS THE LD. CIT(A) AND THE SAME AMOUNT IS ADDED IN T HE INCOME OF THE ASSESSEE IN THE A.Y. 2002-03. 3. WE ARE CONCERNED WITH THE LIMITED ISSUE SO FAR A S THE ALTERNATE PLEA OF THE ASSESSEE THAT FROM THE A.Y 1978-79 TO 1992-93, THE ASSESSEE HAS INCURRED TOTAL BUSINESS LOSS TO THE EXTENT OF RS. 140,46,06,586/- AND THE SAID LOSS HAS NOT BEEN SET OFF OR ALLOWED TO THE ASSESSEE UNDER ANY OF THE PRO VISIONS OF THE ACT INCLUDING SEC. 72 AND HENCE, THE ASSESSEE HAS NOT IN EFFECT GOT NO TAX BENEFIT AND TO THE EXTENT OF RS. 140,46,06,586/- AND HENCE, SAID AMOUNT CANNOT B E BROUGHT TO TAX U/S 41(1) OUT OF THE TOTAL REBATE OF RS. 541.80 CRORES. IN SHORT , THE REBATE TO THE EXTENT OF RS. 541.86 CRORES IS TO BE REDUCED BY THE SAID AMOUNT O F BUSINESS LOSS WHICH HAS LAPSED. 4. THE LD. COUNSEL ARGUES THAT SEC. 41(1) OF THE AC T WAS ALSO EXISTED IN INCOME- TAX ACT 1922 ACT AS SEC. 10(2A). HE FURTHER ARGUED THAT SEC. 41(1) ENACTS A LEGAL FICTION AND IS THEREFORE TO BE STRICTLY CONSTRUED. IF THE ASSESSEE HAS NOT GOT ANY TAX BENEFIT EVEN BY CLAIMING ANY EXPENDITURE THEN SEC. 41(1) CANNOT BE MADE APPLICABLE TO THE ASSESSEE TO THE EXTENT OF EXPENDITURE WHICH OTHERWISE RESULTED INTO LOSSES. HE REFERRED TO SEC. 41(1) AND SUBMITS THAT THE SAID SUB-SECTION CONSISTS OF TWO PARTS. THE FIRST PART OF SUB-SECTION (1) OF SEC. 41 CONTEM PLATES LOSS, EXPENDITURE OR TRADING LIABILITY IN SOME FORMER YEARS IN WHICH ALLOWANCE O R DEDUCTION HAS BEEN MADE IN THE ASSESSMENT FOR ANY YEAR AND THE SECOND PART OF THE SAID SECTION CONTEMPLATES RECOUPMENT OF SUCH LOSS OR EXPENDITURE OR BENEFIT I N RESPECT OF SUCH TRADING LIABILITY BY WAY OF REMISSION OR CESSION THEREOF IN SUBSEQUEN T YEAR. HE ARGUES THAT THE WORD SUCH APPEARING IN THE SECOND PART OF SUB-SECTION (1) OF SECTION 41 IS SIGNIFICANT AS IT SUGGESTS THAT THE RECOUPMENT OF BENEFIT MUST BE IN RESPECT OF LOSS, EXPENDITURE OR 4 ITA NO. 1308/PN/2010 THE MULA PRAVARA ELECTRIC CO-OP. SOCIETY LTD. A.Y. 2002-03 TRADING LIABILITY MENTIONED IN THE FIRST PART OF SU B-SECTION (1) OF SEC. 41. HE FURTHER ARGUES THAT IT IS NOT DISPUTED THAT THE TARIFF PAID OR PAYABLE BY THE ASSESSEE TO THE MSEB WAS DEBITED BY THE ASSESSEE TO THE P & L A/C BUT CONSISTENT LOSSES ARE PROJECTED IN THE P & L A/C OF THE ASSESSEE EXCLUDIN G THE ELEMENT OF DEPRECIATION. HE SUBMITS THAT THE LOSS WHICH WAS CARRIED FORWARD FIN ALLY LAPSED TO THE EXTENT OF RS. 140.46 CRORES WHICH OTHERWISE THE ASSESSEE HAS GOT LEGITIMATE RIGHT TO SET OFF U/S 72 OF THE ACT. HE FURTHER ARGUES THAT IF AFTER CLAIMIN G THE EXPENDITURE OR DEDUCTION THE FINAL RESULT IS LOSS THEN OTHERWISE ALSO TO THAT EX TENT THERE IS NO TAX LIABILITY ON THE ASSESSEE AND THE ASSESSEE CAN CARRY FORWARD THE SAI D LOSS FOR AT LEAST NEXT EIGHT SUBSEQUENT YEARS AND SET OFF THE SAME U/S 72 OF THE ACT. HE SUBMITS THAT THE FACT OF ALLOWANCE OR DEDUCTION IS NOT RESTRICTED TO THE YEA R IN WHICH IT IS MADE BUT IT CONTINUED IN VIEW OF SEC. 72 TO THE EXTENT OF FURTH ER EIGHT YEARS AND IF THE BUSINESS LOSS IS SET OFF AS PER SEC. 72 THEN IN TRUE SENSE T HE ASSESSEE RECEIVES THE BENEFIT IN EXCESS OF THE LOSS. HE FURTHER ARGUES SEC. 41(1) T HAT BEING A DEEMING PROVISION, THE INTENTION OF PARLIAMENT IS NOT TO LEVY THE TAX BURD EN ON AN ASSESSEE WHO HAS NOT RECEIVED ANY TAX BENEFIT IN RESPECT OF ANY ALLOWANC E OR DEDUCTION BUT TO RECOVER ANY TAX BENEFITS WHICH THE ASSESSEE HAD AVAILED IN ANY ASSESSMENT YEAR BY WAY OF SET OFF OF LOSSES U/S 72 OF THE ACT IN THE SUBSEQUENT A SSESSMENT YEAR. HE FURTHER PLEADED THAT THIS IS A CASE WHERE NO TAX LIABILITY CAN BE FASTENED ON THE ASSESSEE ON THE AMOUNT OF AGGREGATE LOSS OF RS. 140,46,06,586 A ND HE PLEADED FOR REDUCING THE AMOUNT TO THAT EXTENT. HE CONCLUDES HIS ARGUMENT B Y SUBMITTING THAT TO EXTENT OF RS. 140,46,06,586/- CRORES SEC. 41(1) OF THE ACT IS NOT APPLICABLE. 5. WE ALSO HEARD THE LD. DR WHO SUBMITS THAT WE HAV E TO GIVE LITERAL INTERPRETATION TO PROVISION OF SEC. 41(1) AND IN TH IS CASE ADMITTEDLY, THE ASSESSEE HAS CLAIMED THE DEDUCTION IN RESPECT OF OLD TARIFF PAYA BLE TO THE MSEB IN THE RESPECTIVE ASSESSMENT YEARS BY DEBITING SAME TO P & L A/C. H E SUBMITS THAT THE LANGUAGE OF THE SAID PROVISION DOES NOT SUGGEST THAT THE ASSESS EE MUST RECEIVE SOME TAX BENEFITS AND THEN ONLY THE ADDITION CAN BE MADE. H E PLEADED FOR CONFIRMING THE ORDER OF AUTHORITIES BELOW. 5 ITA NO. 1308/PN/2010 THE MULA PRAVARA ELECTRIC CO-OP. SOCIETY LTD. A.Y. 2002-03 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RECORD. INTERESTINGLY, VERY IMPORTANT ARGUMENT IS ADVANCED BY THE LD. COUN SEL. IN THIS CASE, IT IS NOT DISPUTED THAT THE ASSESSEE HAS CLAIMED DEDUCTION IN RESPECT OF TARIFF PAYABLE TO THE MSEB AS PER OLD AGREEMENT. THERE WAS A REVISION OF THE TARIFF AFTER REPRESENTATION AND THE ASSESSEE COULD GET SUBSTANTIAL BENEFIT BY W AY OF REBATE TO THE EXTENT OF RS. 541.80 CRORES FROM THE DUES PAYABLE TO THE MSEB AFT ER INTERVENTION BY THE GOVERNMENT OF MAHARASHTRA. TO UNDERSTAND THE PROVI SION BETTER, WE HAVE TO CONSIDER THE SECTION 41(1) WHICH READS AS UNDER: 41(1) WHERE AN ALLOWANCE OR DEDUCTION HAS BEEN MAD E IN THE ASSESSMENT FOR ANY YEAR IN RESPECT OF LOSS, EXPENDITURE OR TRA DING LIABILITY INCURRED BY THE ASSESSEE (HEREINAFTER REFERRED TO AS THE FIRST MENT IONED PERSON) AND SUBSEQUENTLY DURING ANY PREVIOUS YEAR,- (A) THE FIRST MENTIONED PERSON HAS OBTAINED WHETHER IN CASH OR IN ANY OTHER MANNER WHATSOEVER, ANY AMOUNT IN RESPECT OF S UCH LOSS OR EXPENDITURE OR SOME BENEFIT IN RESPECT OF SUCH TRAD ING LIABILITY BY WAY OF REMISSION OR CESSION THEREOF THE AMOUNT OBTAINED BY SUCH PERSON OR THE VALUE OF BENEFIT ACCRUING TO HIM SHALL BE DEEME D TO BE PROFITS AND GAINS OF BUSINESS OR PROFESSION AND ACCORDINGLY CHA RGEABLE TO INCOME TAX AS THE INCOME OF THAT PREVIOUS YEAR, WHETHER TH E BUSINESS OR PROFESSION IN RESPECT OF WHICH THE ALLOWANCE OR DED UCTION HAS BEEN MADE IS IN EXISTENCE IN THAT YEAR OR NOT; OR (B) THE SUCCESSOR IN BUSINESS HAS OBTAINED WHETHER IN CASH OR IN ANY OTHER MANNER WHATSOEVER, ANY AMOUNT IN RESPECT OF SUCH L OSS OR EXPENDITURE WAS INCURRED BY THE FIRST MENTIONED PER SON OR SOME BENEFIT IN RESPECT OF THE TRADING LIABILITY REFERRE D TO IN CLAUSE (A) BY WAY OF REMISSION OR CESSATION THEREOF THE AMOUNT OBTAIN ED BY THE SUCCESSOR IN BUSINESS OR THE VALUE OF BENEFIT ACCRU ING TO THE SUCCESSOR IN BUSINESS SHALL BE DEEMED TO BE PROFITS AND GAINS OF THE BUSINESS OR PROFESSION, AND ACCORDINGLY CHARGEABLE TO INCOME TA X AS THE INCOME OF THAT PREVIOUS YEAR. EXPLANATION 1 FOR THE PURPOSES OF THIS SUB-SECTIO N, THE EXPRESSION LOSS OR EXPENDITURE OR SOME BENEFIT IN RESPECT OF ANY SUCH TRADING LIABILITY BY WAY OF REMISSION OR CESSATION THEREOF SHALL INCLUDE THE REMISSION OR CESSATION OF ANY LIABILITY BY A UNILAT ERAL ACT BY THE FIRST MENTIONED PERSON UNDER CLAUSE (A) OR THE SUCCESSOR IN BUSINESS UNDER CLAUSE (B) OF THAT SUB-SECTION BY WAY OF WRITING OF F SUCH LIABILITY IN HIS ACCOUNTS. EXPLANATION 2 FOR THE PURPOSES OF THIS SUB-SECTIO N, SUCCESSOR IN BUSINESS MEANS (I) WHERE THERE HAS BEEN AN AMALGAMATION OF A COMPA NY WITH ANOTHER COMPANY, THE AMALGAMATED COMPANY; (II) WHERE THE FIRST MENTIONED PERSON IS SUCCEEDED BY ANY OTHER PERSON IN THAT BUSINESS OR PROFESSION, THE OT HER PERSON; 6 ITA NO. 1308/PN/2010 THE MULA PRAVARA ELECTRIC CO-OP. SOCIETY LTD. A.Y. 2002-03 (III) WHERE A FIRM CARRYING ON A BUSINESS OR PROFES SION IS SUCCEEDED BY ANOTHER FIRM, THE OTHER FIRM; (IV) WHERE THERE HAS BEEN A DEMERGER, THE RESULTING COMPANY, (2) .. 7. IN THE CASE OF NARAYANAN CHETTIAR INDUSTRIES VS. ITO (2005) 277 ITR 426 (MAD), THE HON'BLE MADRAS HIGH FOLLOWING THE DECISI ON OF THE HON'BLE SUPREME COURT IN THE CASE OF TIRUNELVELI MOTOR BUS SERVICE CO. (P ) LTD. VS. CIT (1970) 78 ITR 55 (SC) HELD THAT BEING IT IS A DEEMING PROVISION AND CREATES A LEGAL FICTION IT IS TO BE STRICTLY COMPLIED WITH IF ANY ADDITION IN THE INCOM E HAS TO BE MADE BY THE REVENUE. THE HON'BLE HIGH COURT HAS ALSO OBSERVED THAT BEFOR E APPLYING SEC. 41(1) UNLESS AN ALLOWANCE AND DEDUCTION HAS BEEN MADE IN THE COMPUT ATION OF PROFITS OR GAINS OF BUSINESS OR PROFESSION IN RESPECT OF SUCH EXPENDITU RE OR TRADING LIABILITY OR LOSS INCURRED BY THE ASSESSEE, NO ADDITION CAN BE MADE U /S 41(1) OF THE ACT. IT IS SEEN THAT SEC. 41(1) IS HAVING TWO LIMBS AND THE FIRST L IMB, IN OUR OPINION, IT IS RELEVANT TO DECIDE THE ALTERNATE CONTENTION RAISED BY THE ASSES SEE. THE QUESTION BEFORE US IS BECAUSE THE ASSESSEE HAS CLAIMED DEDUCTION BUT HAD NOT RECEIVED ANY TAX BENEFIT AS THERE WAS A BUSINESS LOSS IN THE RESPECTIVE ASSE SSMENT YEARS, WHICH WE HAVE REFERRED I.E. A.Y. 1978-79 TO 1992-93 AND THE SAID LOSS LAPSED AND ASSESSEE COULD NOT TAKE THE BENEFIT OF SEC. 72(1), DUE TO PERIOD OF LIMITATION OR FOR ANY STATUTORY PROVISION, CAN IT BE SAID THAT IT IS A CASE WHERE T HE ALLOWANCE OR DEDUCTION HAS BEEN MADE IN ANY ASSESSMENT YEAR. WE HAVE TO UNDERSTAND THE SCHEME OF THE INCOME- TAX ACT. SEC. 14 OF THE ACT PROVIDES THAT THE INCO ME HAS TO BE COMPUTED IN THE DIFFERENT HEADS CLASSIFIED AS (1) SALARY; (2) INCOM E FROM HOUSE PROPERTY; (3) PROFITS AND GAINS OF BUSINESS OR PROFESSION; (4) CAPITAL GA IN; (5) INCOME FROM OTHER SOURCES. WE ARE CONCERNED WITH THE HEAD PROFITS AND GAINS O F BUSINESS OR PROFESSION AS SEC. 41 IS UNDER CHAPTER IV-D. AS OBSERVED EARLIER , SEC. 41(1) IS LEGAL FICTION TO BRING TO TAX RECOUPMENT OF ANY LOSS OR EXPENDITURE OR TRADING LIABILITY AS DUE TO PERIOD OF LIMITATION PROVIDED UNDER ACT, IT MAY NOT BE POS SIBLE TO TAX IN THE YEAR IN WHICH DEDUCTION IS ALLOWED. SO FAR AS THE HEAD PROFITS A ND GAINS OF BUSINESS OR PROFESSION FOR COMPUTING THE INCOME UNDER THIS HEAD IF THERE I S A LOSS THEN THE SAME CAN BE SET 7 ITA NO. 1308/PN/2010 THE MULA PRAVARA ELECTRIC CO-OP. SOCIETY LTD. A.Y. 2002-03 OFF IN THE SAME YEAR AGAINST THE INCOME (POSITIVE I NCOME) OF ANY OTHER HEAD U/S 71 OF THE ACT. IF THERE IS NO POSITIVE INCOME FROM IN OT HER HEADS, THEN THE ASSESSEE CAN CARRY FORWARD THE SAID BUSINESS LOSS U/S 72 OF THE ACT WHICH READS AS UNDER: 72(1) WHERE FOR ANY ASSESSMENT YEAR, THE NET RESUL T OF THE COMPUTATION UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PR OFESSION IS A LOSS TO THE ASSESSEE NOT BEING A LOSS SUSTAINED IN A SPECULATIO N BUSINESS, AND SUCH LOSS CANNOT BE OR IS NOT WHOLLY SET OFF AGAINST INCOME U NDER ANY HEAD OF INCOME IN ACCORDANCE WITH THE PROVISIONS OF SEC.71 SO MUCH OF THE LOSS AS HAS NOT BEEN SO SET OFF OR WHERE HE HAS NO INCOME UNDER ANY OTHE R HEAD THE WHOLE LOSS SHALL, SUBJECT TO THE OTHER PROVISIONS OF THIS CHAP TER, BE CARRIED FORWARD TO THE FOLLOWING ASSESSMENT YEAR, AND (I) IT SHALL BE SET OFF AGAINST THE PROFITS AND GAI N, IF ANY OF ANY BUSINESS OR PROFESSION CARRIED ON BY HIM AND ASSESSABLE FOR THA T ASSESSMENT YEAR; (II) IF THE LOSS CANNOT BE WHOLLY SO SET OFF, THE A MOUNT OF LOSS NOT SO SET OFF SHALL BE CARRIED FORWARD TO THE FOLLOWING ASSESSMEN T YEAR AND SO ON; PROVIDED THAT WHERE THE WHOLE OR ANY PART OF SUCH L OSS IS SUSTAINED IN ANY SUCH BUSINESS AS IS REFERRED TO IN SECTION 33B WHI CH IS DISCONTINUED IN THE CIRCUMSTANCES SPECIFIED IN THAT SECTION, AND THEREA FTER ANY TIME BEFORE THE EXPIRY OF THE PERIOD OF THREE YEARS REFERRED TO IN THAT SECTION, SUCH BUSINESS IS RE-ESTABLISHED RECONSTRUCTED OR REVIVED BY THE ASSE SSEE SO MUCH OF THE LOSS AS IS ATTRIBUTABLE TO SUCH BUSINESS SHALL BE CARRIE D FORWARD TO THE ASSESSMENT YEAR RELEVANT TO THE PREVIOUS YEAR IN WHICH THE BUS INESS IS SO RE-ESTABLISHED RECONSTRUCTED OR REVIVED; AND (A) IT SHALL BE SET OFF AGAINST THE PROFITS AND GAI NS, IF ANY, OF THAT BUSINESS OR ANY OTHER BUSINESS CARRIED ON BY HIM AN D ASSESSABLE FOR THAT ASSESSMENT YEAR AND (B) IF THE LOSS CANNOT BE WHOLLY SO SET OFF THE AMO UNT OF LOSS NOT SO SET OFF SHALL, IN CASE THE BUSINESS SO RE-ESTABLISH ED, RECONSTRUCTED OR REVIVED CONTINUES TO BE CARRIED ON BY THE ASSESSEE, BE CARRIED FORWARD TO THE FOLLOWING ASSE SSMENT YEAR AND SO ON FOR SEVEN ASSESSMENT YEARS IMMEDIATELY SUCCEEDING. 8. SECTION 72 IS THE PROVISION WHICH IS A PART OF THE PROVISION OF COMPUTATION OF GROSS TOTAL INCOME OF THE ASSESSEE. THE DEFINITION OF GROSS TOTAL INCOME IS GIVEN IN SEC. 80V(5) WHICH PROVIDES THAT THE TOTAL INCOME CO MPUTED IN ACCORDANCE WITH THE PROVISIONS OF INCOME-TAX ACT BEFORE MAKING ANY DEDU CTION UNDER CHAPTER VI-A. HENCE SECTION 80V(5) CONSIDERS SEC. 72 ALSO AS A P ART OF COMPUTATION PROCESS OF THE TOTAL INCOME OF THE ASSESSEE. 9. THE CONTENTION OF THE ASSESSEE IS THAT EVEN IF A NY ALLOWANCE OR DEDUCTION IN RESPECT OF ANY EXPENDITURE OR TRADING LIABILITY HAS BEEN MADE IN ANY ASSESSMENT YEARS, WHICH HAS DIRECT BEARING IN REDUCING TAX LIA BILITY OF THE ASSESSEE, THEN ONLY 8 ITA NO. 1308/PN/2010 THE MULA PRAVARA ELECTRIC CO-OP. SOCIETY LTD. A.Y. 2002-03 SEC. 41(1) CAN BE INVOKED. IN OTHER WORDS, THE ASS ESSEE SHOULD HAVE BEEN BENEFITED BY REDUCING ITS TAX LIABILITY ON SUCH ALL OWANCE OR DEDUCTION IN RESPECT OF EXPENDITURE OR TRADING LIABILITY. IN A SITUATION E VEN IF THE DEDUCTION IS CLAIMED IN RESPECT OF ANY EXPENDITURE OR TRADING LIABILITY IN ANY ASSESSMENT YEAR AND IF THERE IS A LOSS THEN UNLESS AS PROVIDED IN SEC. 72 OF THE ACT, THE ASSESSEE GETS THE BENEFIT OF SET OFF IN THE SAID SECTION, THEN ONLY SEC. 41(1) C AN BE INVOKED. THE ASSESSEES ARGUMENT IS BASED ON THE FACT THAT DURING THE A.Y. 1978-79 TO 1992-93 THE ASSESSEE HAS INCURRED BUSINESS LOSS AND SAID LOSS LAPSED AND ASSESSEE COULD NOT GET ANY TAX BENEFIT IN RESPECT OF THE SAID LOSS/LOSSES. IN THE PRESENT CASE, THE ASSESSEE WAS DIRECTED TO FILE THE POSITION OF TOTAL LOSS AS WEL L AS BUSINESS LOSS WHICH THE ASSESSEE HAS FILED WHICH IS AS UNDER: ASSESSMENT YEAR COST OF ELECTRICITY DEBITED TO P & L A/C. COST OF ELECTRICITY WAIVED LOSS AS PER RETURN A B C D TOTAL LOSS BUSINESS LOSS DEPRECIATION (I + II) (I) (II) 1978 - 79 27,027,228.00 12,676,952.00 1,977,280.00 404,805.00 1,572,475.00 1979-80 27,970,011.00 17,678,546.00 14,436,956.00 10,626,477.00 3,810,479.00 1980-81 32,838,849.00 25,089,815.00 15,447,600.00 11,547,220.00 3,900,380.00 1981-82 47,048,917.00 29,174,377.00 21,626,000.00 21,207,605.00 418,395.00 1982 - 83 53,799,545.00 43,517,772.00 30,325,000.00 25,306,791.00 5,018,209.00 1983-84 67,479,868.00 45,625,795.00 80,026,613.00 29,427,461.00 50,599,152.00 1984-85 76,846,696.00 48,940,039.00 41,453,100.00 35,674,492.00 5,778,608.00 1985 - 86 171,408,895.00 137,798,717.00 87,780,030.00 81,312,454.00 6,46 7,576.00 1986-87 157,282,352.00 111,782,102.00 100,544,040.00 93,579,193.00 69,64,847.00 1987-88 234,750,926.00 170,557,138.00 130,783,371.00 124,868,780.00 5,914,591.00 1988-89 256,841,480.00 187,633,816.00 154,609,043.00 147,813,784.00 6,795,259.00 1989-90 274,313,945.00 214,692,985.00 182,135,821.00 174,504,320.00 7,631,501.00 1990-91 343,737,029.00 236,527,299.00 237,489,980.00 228,692,979.00 8,797,001.00 1991 - 92 517,290,129.00 410,549,957.00 297,386,666.00 284,850,618.00 12,536,048.00 1992-93 553,890,620.00 416,002,074.00 149,860,865.00 134,789,607.00 15,071,258.00 9 ITA NO. 1308/PN/2010 THE MULA PRAVARA ELECTRIC CO-OP. SOCIETY LTD. A.Y. 2002-03 1978-79 TO 1991-92 2,842,526,490.00 2,108,247,384.00 1,545,882,365.00 1,404,606,586.00 141,275,779.00 10. FROM THE ABOVE CHART, IT IS SEEN THAT THE ASSES SEE HAS CONTINUOUSLY INCURRED BUSINESS LOSS (OTHER THAN DEPRECIATION) FROM THE A. Y. 1978-79 TO 1992-93 TO THE EXTENT OF RS. 140,46,06,586/-. AS PER THE STATEMEN T MADE BY THE LD. COUNSEL AT THE BAR THE SAID LOSS HAS LAPSED AND ASSESSEE COULD NOT GET THE BENEFIT DUE TO THE PERIOD OF LIMITATION IS PROVIDED U/S 72(3) OF THE A CT OR BY REASON OF OTHER STATUTORY PROVISIONS. THE FIRST PART OF SEC. 41(1) CONTEMPL ATES LOSS, EXPENDITURE OR TRADING LIABILITY IN SOME FORMER YEARS IN WHICH ALLOWANCE O R DEDUCTION HAS BEEN MADE AND THE SECOND PART OF THE SAID SECTION CONTEMPLATES RE COUPMENT OF SUCH LOSS OR EXPENDITURE OR BENEFIT IN RESPECT OF SUCH TRADING LIABILITY BY WAY OF REMISSION OR CESSATION IN SOME SUBSEQUENT YEARS. THE WORD SUC H APPEARING IN THE SECOND PART OF SUB-SECTION (1) OF SEC. 41 IS SIGNIFICANT IN THE CONTEXT THAT THE WORD SUCH SIGNIFIES THAT THE RECOUPMENT OR BENEFIT MUST BE IN RESPECT O F LOSS OR EXPENDITURE OR TRADING LIABILITY MENTIONED IN THE FIRST PART OF THE SAID S UB-SECTION. THE ARGUMENT OF THE LD. COUNSEL IS THAT TO EXTENT OF THE LOSSES FROM THE A. Y. 1978-79 TO 1992-93 AGGREGATING TO RS. 140.46,06,586/-, SECTION 41(1) CANNOT BE APP LIED BEING IT IS A DEEMING PROVISION AS THE ASSESSEE HAS NOT GOT ANY BENEFIT I N TAX LIABILITY UNDER THE CHARGING PROVISIONS. 11. WE FIND FORCE IN THE ARGUMENT OF THE LD. COUNSE L. IN SEC. 41(1), THE LEGISLATURE HAS USED THE WORDS LOSS ALSO. IF THE ASSESSEE CLAIMS EXPENDITURE BUT ULTIMATELY IF THERE IS A LOSS AND SUCH LOSS CAN NOT BE SET OFF U/S 72 OF THE ACT, IN SUCH A SITUATION, IN OUR OPINION, SECTION 41(1) OF THE ACT CANNOT BE INVOKED. IN THIS CASE THE ENTIRE REBATE IS TREATED AS CESSATION OF L IABILITY TO THE EXTENT OF RS. 541.80 CRORES AND THE ADDITION IS MADE IN THE A.Y. 2002-03 . THE ASSESSEE COULD GET THE BENEFIT OF THE BROUGHT FORWARD BUSINESS LOSSES FROM THE A.Y. 1993-94 AS WELL AS DEPRECIATION ALLOWANCE AND THE TAX LIABILITY OF THE ASSESSEE IS REDUCED. SO FAR AS THESE FIFTEEN ASSESSMENT YEARS ARE CONCERNED, EVEN IF THE REBATE RELATES TO THE TARIFF 10 ITA NO. 1308/PN/2010 THE MULA PRAVARA ELECTRIC CO-OP. SOCIETY LTD. A.Y. 2002-03 WHICH IS DEBITED TO THE P & L A/C IN THE RESPECTIVE ASSESSMENT YEARS BUT THE FACT REMAINS THAT THE LOSSES WHICH WERE WORKED OUT AFTER DEBITING THE SAID TARIFF HAD LAPSED. BOTH THE PARTIES HAVE NOT BROUGHT TO OUR N OTICE ANY DIRECT DECISION ON THIS CRUCIAL ISSUE BUT TO OUR CONSCIOUS, CONSIDERING THE INTENTION OF THE PARLIAMENT TO ENACT SEC. 41(1) CREATING FICTION IS NOT TO PUT ANY EXTRA BURDEN OF TAX ON THE ASSESSEE BUT TO TAKE AWAY THE BENEFIT WHICH IS ENJOYED BY TH E ASSESSEE BY REDUCING THE TAX LIABILITY UNDER THE CHARGING PROVISIONS OF THE ACT. WE THEREFORE, HOLD THAT TO THE EXTENT OF RS. 140,46,06,586/- SEC. 41(1) CANNOT BE APPLIED AND THE SAID AMOUNT HAS TO BE REDUCED FROM THE TOTAL REBATE OF RS. 541.80 C RORES WHICH IS BROUGHT TO TAX IN THE A.Y. 2002-03. WE ACCORDINGLY DIRECT THE AO TO V ERIFY THE RECORD AND REDUCE ABOVE AMOUNT FROM ADDITION MADE U/S 41(1) IN THIS Y EAR. 12. IN THE RESULT, GROUND NO. 4 TAKEN BY THE ASSESS EE IS PARTLY ALLOWED ON THIS ALTERNATE CONTENTION. 13. SO FAR AS THE OTHER GROUNDS ARE CONCERNED, THE REASONING AND FINDING ON THOSE GROUNDS GIVEN IN THE ORIGINAL ORDER DATED 6-3 -2012 STAND AND THERE IS NO CHANGE. 14. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST MAY 2013 SD/- SD/- (G.S. PANNU) (R.S. PADVEKAR) ACCOUNTANT MEMBER JUDICIAL MEMBER PUNE, DATED THE 31 ST MAY 2013 ANKAM COPY OF THE ORDER IS FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT II PUNE 4. THE CIT(A)- II PUNE 4. THE D.R. B BENCH, PUNE 5. GUARD FILE BY ORDER 11 ITA NO. 1308/PN/2010 THE MULA PRAVARA ELECTRIC CO-OP. SOCIETY LTD. A.Y. 2002-03 SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL PUNE