MULTIFILMS PLASTICS P.LTD, MUMBAI V. DCIT 8(2), MUMBAI

ITA 4363/MUM/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 1063 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 10 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-05-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 20-06-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SUMAN KUMAR
• Assessee Lawyers: SANJAY BANSAL
• Keywords: Gift
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH B, MUMBAI BEFORE SHRI G.S.PANNU, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO.4363/MUM/2014 (AY. 2010-11) MULTIFILMS PLASTICS PVT. LTD., 2, LAXMI NILAYAM, GROUND FLOOR, NANDA PATKAR ROAD, VILE PARLE(E) MUMBAI 400 057 PAN:AAACM3017A ...... APPELLANT VS. THE DCIT 8(2), AAYKAR BHAVAN,M.K.ROAD, MUMBAI -400 020 .... RESPONDE NT APPELLANT BY : SHRI SANJAY BANSAL RESPONDENT BY : SHRI SUMAN KUMAR DATE OF HEARING : 13/04/2017 DATE OF PRONOUNCEMENT : 05/05/2017 ORDER PER G.S.PANNU,A.M: THE CAPTIONED APPEAL FILED BY THE ASSESSEE PERT AINING TO ASSESSMENT YEAR 2010-11 IS DIRECTED AGAINST AN ORDER PASSED BY CIT(A)-17, MUMBAI DATED 17/04/2014, WHICH IN TURN, ARISES OUT OF AN ORDER PASSED BY THE ASSESSING OFFICER UNDER SECTION 143(3) OF THE I NCOME TAX ACT, 1961 (IN SHORT THE ACT) DATED 21/03/2013. 2. IN THIS APPEAL, THE ONLY ISSUE RAISED BY THE AS SESSEE IS AGAINST THE ACTION OF THE INCOME-TAX AUTHORITIES IN DENYING THE SET OFF OF UNABSORBED 2 ITA NO.4363/MUM/2014 (AY. 2010-11) BUSINESS LOSSES OF EARLIER YEARS BY INVOKING THE PR OVISIONS OF SECTION 79 OF THE ACT. 3. BRIEFLY PUT, THE RELEVANT FACTS ARE THAT THE APP ELLANT IS A COMPANY INCORPORATED UNDER THE PROVISIONS OF THE COMPANIES ACT, 1956 AND IS, INTER- ALIA, ENGAGED IN THE BUSINESS OF MANUFACTURING AND DEALING IN MULTILAYER PLASTIC FILMS AND RAW MATERIAL, ETC. IN THE COURSE OF THE ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER NOTED THAT THE SH AREHOLDING PATTERN OF THE ASSESSEE COMPANY HAD UNDERGONE A CHANGE AND, THEREF ORE, HE SHOW-CAUSED THE ASSESSEE AS TO WHY THE PROVISIONS OF SECTION 79 OF THE ACT NOT BE APPLIED IN ORDER TO DENY THE SET-OFF OF BROUGHT FORWARD UN ABSORBED BUSINESS LOSS. NOTABLY, SECTION 79 OF THE ACT, AS IT STOOD FOR THE YEAR UNDER CONSIDERATION, READS AS UNDER:- CARRY FORWARD AND SET OFF OF LOSSES IN THE CASE OF CERTAIN COMPANIES. 79. NOTWITHSTANDING ANYTHING CONTAINED IN THIS CHAP TER, WHERE A CHANGE IN SHAREHOLDING HAS TAKEN PLACE IN A PREVIOUS YEAR IN THE CASE OF A COMPANY, NOT BEING A COMPANY IN WHICH THE PUBLIC ARE SUBSTANTIALLY INTERESTED, NO LOSS IN CURRED IN ANY YEAR PRIOR TO THE PREVIOUS YEAR SHALL BE CARRIED FORWARD AND SET OFF AGAINST T HE INCOME OF THE PREVIOUS YEAR UNLESS (A) ON THE LAST DAY OF THE PREVIOUS YEAR THE SHARE S OF THE COMPANY CARRYING NOT LESS THAN FIFTY-ONE PER CENT OF THE VOTING POWER WERE BENEFIC IALLY HELD BY PERSONS WHO BENEFICIALLY HELD SHARES OF THE COMPANY CARRYING NO T LESS THAN FIFTY-ONE PER CENT OF THE VOTING POWER ON THE LAST DAY OF THE YEAR OR YEARS I N WHICH THE LOSS WAS INCURRED : PROVIDED THAT NOTHING CONTAINED IN THIS SECTION SHA LL APPLY TO A CASE WHERE A CHANGE IN THE SAID VOTING POWER TAKES PLACE IN A PREVIOUS YEAR CONSEQUENT UPON THE DEATH OF A SHAREHOLDER OR ON ACCOUNT OF TRANSFER OF SHARES B Y WAY OF GIFT TO ANY RELATIVE OF THE SHAREHOLDER MAKING SUCH GIFT : PROVIDED FURTHER THAT NOTHING CONTAINED IN THIS SEC TION SHALL APPLY TO ANY CHANGE IN THE SHAREHOLDING OF AN INDIAN COMPANY WHICH IS A SU BSIDIARY OF A FOREIGN COMPANY AS A RESULT OF AMALGAMATION OR DEMERGER OF A FOREIGN C OMPANY SUBJECT TO THE CONDITION THAT FIFTY-ONE PER CENT SHAREHOLDERS OF THE AMALGAM ATING OR DEMERGED FOREIGN COMPANY CONTINUE TO BE THE SHAREHOLDERS OF THE AMAL GAMATED OR THE RESULTING FOREIGN COMPANY. (B) [OMITTED BY THE FINANCE ACT, 1988, W.E.F. 1-4- 1989.] 3 ITA NO.4363/MUM/2014 (AY. 2010-11) 3.1 SECTION 79 OF THE ACT CONTAINS AN EXCEPTION T O THE SCHEME OF CHAPTER VI OF THE ACT WHICH PRESCRIBES FOR CARRY FORWARD A ND SET OFF OF LOSES OF ONE YEAR AGAINST THE INCOME OF THE SUBSEQUENT YEARS. S ECTION 79 OF THE ACT PRESCRIBES THAT IN CASE OF A COMPANY, NOT BEING A COMPANY IN WHICH THE PUBLIC ARE SUBSTANTIALLY INTERESTED, NO LOSS INCUR RED IN ANY YEAR PRIOR TO THE RELEVANT PREVIOUS YEAR SHALL BE CARRIED FORWARD AND SET-OFF AGAINST THE INCOME OF THE RELEVANT PREVIOUS YEAR, UNLESS ON THE LAST DAY OF THE RELEVANT PREVIOUS YEAR, THE SHARES OF THE COMPANY CARRYING NOT LESS T HAN FIFTY-ONE PER CENT OF THE VOTING POWER WERE BENEFICIALLY HELD BY PERSONS WHO BENEFICIALLY HELD SHARES OF THE COMPANY CARRYING NOT LESS THAN FIFTY- ONE PER CENT OF THE VOTING POWER ON THE LAST DAY OF THE YEAR OR YEARS IN WHICH THE LOSS WAS INCURRED. IN OTHER WORDS, THE PRESCRIPTION OF SECTION 79 OF THE ACT IS THAT SET-OFF OF BROUGHT FORWARD LOSS CAN BE ALLOWED ONLY IF ON THE LAST DAY OF THE PREVIOUS YEAR IN WHICH THE SET-OFF IS CLAIMED AS WELL ON T HE LAST DAY OF THE YEAR OR YEARS IN WHICH THE LOSS WAS INCURRED, THE SHARES OF THE COMPANY CARRYING NOT LESS THAN 51% OF THE VOTING POWER ARE BENEFICIALLY HELD BY THE SAME PERSONS. IN THE PRESENT CASE, THE ASSESSING OFFICER HAS COMP ARED SHARE HOLDING PATTERN ON THE LAST DAY OF THE INSTANT PREVIOUS YEA R WITH THE SHAREHOLDING PATTERN AS ON THE LAST DAY OF THE PRECEDING ASSESSM ENT YEAR OF 2009-10 WHEN THE LOSS WAS INCURRED. THE RELEVANT TABULATION REP RODUCED BY THE ASSESSING OFFICER IN PARA 8.1 OF HIS ORDER IS AS UNDER:- SR. NO. NAME OF THE SHAREHOLDER % OF SHAREHOLDING IN F.Y.08-09 (A.Y 09-10) % OF SHAREHOLDING IN F.Y 09-10 (A.Y.10-11) 1. SUDHIR S. BHANDIWADEKAR 66.6 1 4.89 2. MANISHA BHANDIWADEKAR 0.06 0.00 3. HBL PLASTICS LTD. 5.95 0.44 4. MAHAL PLASTICS & FIBRES P. LTD. 5.95 0.44 5. ELITE AGENCIES P. LTD. 10.1 2 23.56 6. D.S.AGRO FARMS PVT. LTD. - 23.56 4 ITA NO.4363/MUM/2014 (AY. 2010-11) 7. RESHAM RESHA P. LTD. 4.76 23.56 8. S.M. SETHI SEVA P. LTD. 6.55 23.56 9. PAWANKUMAR SANWARMAL - 0.00 TOTAL 100.00 100. 00 4. ON THE BASIS OF THE AFORESAID, THE ASSESSING OFF ICER CAME TO CONCLUDE THAT THE PERSONS HOLDING NOT LESS THAN 51% OF THE VOTING POWER ON THE LAST DAY OF THE INSTANT PREVIOUS YEAR WERE NOT HOLDING NOT LESS THAN 51% OF THE VOTING POWER ON THE LAST DAY OF THE PREVIOUS YEAR R ELEVANT TO THE EARLIER ASSESSMENT YEAR OF 2009-10. THEREFORE, HE INVOKED THE PROVISIONS OF SECTION 79 OF THE ACT AND DENIED THE SET-OFF OF THE BROUGH T FORWARD BUSINESS LOSES. THE CIT(A) HAS ALSO AFFIRMED THE STAND OF THE ASSES SING OFFICER SO FAR AS IT RELATES TO THE CARRY FORWARD OF BUSINESS LOSS. ACC ORDINGLY, ASSESSEE IS IN APPEAL BEFORE US. 5. BEFORE THE LOWER AUTHORITIES AS WELL AS BEFORE U S, THE SHORT PLEA OF THE ASSESSEE IS THAT THE SHAREHOLDERS APPEARING AT SERI AL NO.1 TO 5, 7 AND 8 HOLD 100% OF THE VOTING POWER AT THE END OF THE PREVIOUS YEAR RELEVANT TO THE PRECEDING ASSESSMENT YEAR 2009-10 AND THAT THE SAM E SET OF SHAREHOLDERS CONTINUE TO HOLD THE SHARES CARRYING NOT LESS THAN 51% OF THE VOTING POWER AS ON THE LAST DAY OF THE PREVIOUS YEAR UNDER CONSIDER ATION I.E. 76.44%. AT THE TIME OF HEARING, THE LD.REPRESENTATIVE FOR THE ASSE SSEE POINTED OUT THAT THE REQUIREMENT OF SECTION 79 AS UNDERSTOOD IN PLAIN T ERMS, IS THAT THE SAME SET OF SHAREHOLDERS SHOULD HOLD SHARES CARRYING NOT LES S THAN 51% OF THE VOTING POWER IN THE ASSESSMENT YEAR IN WHICH THE LOSS WAS INCURRED AS WELL AS IN THE ASSESSMENT YEAR IN WHICH THE LOSS IS SOUGHT TO BE SET OFF. ACCORDING TO HIM, VIEWED IN THE AFORESAID LIGHT, THE REQUIREMENT OF S ECTION 79 OF THE ACT IS MET IN THE PRESENT CASE. 5 ITA NO.4363/MUM/2014 (AY. 2010-11) 6. ON THE OTHER HAND, LD. REPRESENTATIVE FOR THE RE VENUE POINTED OUT THAT THE SHAREHOLDING PATTERN ITSELF DEMONSTRATES T HAT IN THE EARLIER PREVIOUS YEAR, RELEVANT TO THE A.Y 2009-10, THE SHAREHOLDER AT SERIAL NO.1 WAS HOLDING 66.61% AND IN THE INSTANT YEAR, HIS SHAREHOLDING HA S COME DOWN TO 4.89%, WHICH CLEARLY BRINGS OUT THAT THE SHARES OF THE COM PANY CARRYING NOT LESS THAN 51% OF THE VOTING POWER IS NOT HELD BY THE SAME PER SONS BETWEEN THE TWO DATES I.E. LAST DAY OF THE INSTANT PREVIOUS YEAR AN D LAST DAY OF THE PRECEDING PREVIOUS YEAR CORRESPONDING TO THE A.Y 2009-10. IT WAS, THEREFORE, CONTENDED THAT THE LOWER AUTHORITIES HAVE CORRECTLY INVOKED S ECTION 79 OF THE ACT AND DENIED THE SET-OFF OF BROUGHT FORWARD BUSINESS LOSS . 7. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS. IN THE PRESENT CASE, IT IS QUITE CLEAR THAT ON THE LAST DAY OF THE PREVIOUS YEAR IN WHICH THE LOSS WAS INCURRED, NAMELY, ASSESSMENT YEAR 2009-10, SHRI SUDHIR S. BHANDIWADEKAR HAS HELD 66.61% OF SHAREHOLDING WHE REAS ON THE LAST DAY OF THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION, THE SHAREHOLDING OF THE SAID SHAREHOLDER HAS REDUCED TO 4.89% A SITUATION, WHICH CLEARLY TRIGGERS THE PROHIBITION CONTAINED IN SECT ION 79 OF THE ACT. IT IS QUITE CLEAR THAT THE PERSONS HOLDING NOT LESS THAN 51% OF THE VOTING POWER ARE NOT THE SAME AS ON 31/3/2009 AND 31/3/2010, NAMELY, THE LAST DAY OF THE PREVIOUS YEAR IN WHICH LOSS WAS INCURRED AND THE L AST DAY OF THE INSTANT PREVIOUS YEAR WHEN THE LOSS IS SOUGHT TO BE SET-OFF RESPECTIVELY. THEREFORE, IN THIS VIEW OF THE MATTER, THE ACTION OF THE LOWER AU THORITIES DESERVES TO BE AFFIRMED. WE HOLD SO. 7.1 IN SO FAR AS THE RELIANCE PLACED BY THE ASSESSE E ON THE JUDGMENT OF THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS. SUBHUL AXMI MILL LTD., 249 ITR 795(SC) IS CONCERNED, THE SAME, IN OUR VIEW, DOES N OT HELP THE ASSESSEE. THE 6 ITA NO.4363/MUM/2014 (AY. 2010-11) SAID DECISION OF THE HON'BLE SUPREME COURT WAS IN RELATION TO THE PROVISIONS OF SECTION 79 OF THE ACT, WHICH EXISTED PRIOR TO TH E AMENDMENT BROUGHT IN THE FINANCE ACT, 1988, W.E.F. 1/4/1989 WHEREBY CL AUSE(B) WAS REMOVED THEREFORE, THE SAID DECISION IS INAPPLICABLE IN THE PRESENT CASE, WHEREIN THE EFFECT OF SECTION 79 HAS TO BE DETERMINED AS IT EXI STS FOR THE YEAR UNDER CONSIDERATION. THEREFORE, THE STAND OF THE ASSESSE E IS NEGATED AND ORDER OF THE CIT(A) IS HEREBY AFFIRMED. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 0 5/05/2017 SD/- SD/- (PAWAN SINGH ) (G.S. PANNU) JUDICIAL MEMBER ACCOCUNTANT MEMBER MUMBAI, DATED 05/05/2017 VM , SR. PS COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT , 2. THE RESPONDENT. 3. THE CIT(A)- 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI