Aster Rail Private Limited , Hyderabad V. Dy. Commissioner of Income Tax , Circle-1(1), Hyderabad

ITA 1788/Hyd/2018

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 1248 (ITAT-HYDERABAD)
• Duration Of Justice: 3 year(s) 9 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-06-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB-B
• Assessment Year: 2014-2015
• Appeal Filed On: 04-09-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: Y.V.S.T. SAI
• Keywords: Share purchase agreement
• Section: 143(3)

Judgement Text

आयकर अपील य अ धकरण , हैदराबाद पीठ म IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES “B”, HYDERABAD BEFORE SHRI RAMA KANTA PANDA, ACCOUNTANT MEMBER & SHRI K.NARASIMHA CHARY, JUDICIAL MEMBER आ.अपी.सं / ITA No. 1788/Hyd/2018 ( नधा रण वष / Assessment Year: 2014-15) Aster Rail Private Limited, Hyderabad [PAN No. AAGCA3410P] Vs. Dy. Commissioner of Income Tax, Circle-1(1), Hyderabad अपीलाथ / Appellant यथ / Respondent नधा रती वारा/Assessee by: Shri C.S.Subrahmanyam, AR राज व वारा/Revenue by: Shri Y.V.S.T.Sai, CIT-DR स ु नवाई क तार ख/Date of hearing: 20/06/2022 घोषणा क तार ख/Pronouncement on: 30/06/2022 आदे श / ORDER PER K. NARASIMHA CHARY, JM: Aggrieved by the order dated 20/06/2018, passed by the Learned Commissioner of Income Tax (Appeals)-1, Hyderabad (“Ld. CIT(A)”) in the case of M/s. Aster Rail Private Limited (“the assessee”) for the AY.2014-15, assessee filed this appeal. 2. Brief facts of the case are that the assessee M/s Aster Rail Private Ltd., is engaged in the business of designing, manufacturing, erecting, ITA No.1788/Hyd/2018 Page 2 of 5 installation of railway equipment including signalling. For the assessment year 2014-15, they have filed their return of income on 28/11/2014 declaring a loss of Rs. 1,99,32,403/- under the normal provisions of the Income Tax Act, 1961 (for short “the Act”) and book loss at Rs. 2,17,39,577/-. Assessment under section 143(3) of the Act was complete by order dated 30/12/2016 by making addition of Rs. 1,98,52,871/- by disallowing the loss under section 79 of the Act. Reason for such disallowance by the learned Assessing Officer is that during the previous year there is change in shareholding of the assessee company. 3. Aggrieved by such an act of the learned Assessing Officer, assessee preferred appeal and pleaded that they change in the shareholding took place pursuant to the agreement dated 30/07/2013, the payment in respect of which was made in the month of August 2013 and, therefore, only the brought forward losses are not entitled to be carried forward in the case of changes in the shareholding but not the current year losses. Ld. CIT(A), however, observed that the entire process of transition was complete during the previous year relevant to the assessment year 2014- 15 and, therefore, the stand taken by the learned Assessing Officer in making disallowance of the losses for the assessment year 2014-15 was correct. On this premise, Ld. CIT(A) dismissed the appeal of the assessee. 4. Aggrieved by the order of the Ld. CIT(A), assessee preferred this appeal stating that the application of the provisions of section 79 of the Act is improper to the current year losses, inasmuch as the project itself clearly states that no loss incurred in any year prior to the previous year in which the change in the shareholding took place shall be carried forward and set off against the income of the previous year. According to the Ld. ITA No.1788/Hyd/2018 Page 3 of 5 AR, the losses that were incurred prior to the financial year 2012-13 are not entitled to be carried forward and set off against the current year income but this section does not prevent the carry forward of the current year losses to the future. 5. Ld. DR placing reliance on the orders of the authorities below and argued on the lines of reasoning given by them. 6. We have gone through the record in the light of the submissions made on either side. Insofar as the fact of change in shareholding is concerned, absolutely there is no dispute that such exchange took place pursuant to the share purchase agreement dated 30/07/2013. It means as on 31/03/2014 the holding company, namely, M/s. NCC Ltd. acquired hundred percent stake in the assessee company. As on 31/03/2014, there was a loss to the tune of Rs. 1,99,32,403/-. 7. Section 79 of the Act reads that where a change in shareholding has taken place in any previous year in the case of a company, not being a company in which the public are substantially interested, 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, but subject to certain conditions. Here in this case the previous year is 2013-14 and the relevant assessment year is 2014-15. With reference to these, the losses that are not allowable to be carried forward to be set off against the income of the assessment year 2014-15 or the losses relating to the period prior to the assessment year 2014-15. It means that any loss that is coming from the assessment year 2013-14 is not allowable against the income of the assessment year 2014-15. This does not mean that the losses incurred during the ITA No.1788/Hyd/2018 Page 4 of 5 assessment year 2014-15 (in the financial year 2013-14) are not to be allowed to be carried forward. With this view of the matter, we find that the observations of the authorities below that the current year losses are not to be allowed to be carried forward further are untenable. We accordingly allowing the grounds of appeal, direct the learned Assessing Officer to delete the disallowance made under section 79 of the Act. 8. In the result, appeal of the assessee is allowed. Order pronounced in the open court on this the 30 th day of June, 2022 Sd/- Sd/- (RAMA KANTA PANDA) (K. NARASIMHA CHARY) ACCOUNTANT MEMBER JUDICIAL MEMBER TNMM Hyderabad, Dated: 30/06/2022 ITA No.1788/Hyd/2018 Page 5 of 5 Copy forwarded to: 1. M/s.Aster Rail Private Limited, Survey No.64, NCC House, Madhapur, Hyderabad. 2. Dy.Commissioner of Income Tax, Circle-1(1), Hyderabad. 3. The CIT(Appeals)-1, Hyderabad. 4. The Pr.CIT-1, Hyderabad. 5. DR, ITAT, Hyderabad. 6. GUARD FILE TRUE COPY ASSISTANT REGISTRAR ITAT, HYDERABAD