Swiss Re Healthcare Services Private Limited, Mumbai V. Principal Commissioner of Income Tax, Bangalore

ITA 635/BANG/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 8604 (ITAT-BANGALORE)
• Duration Of Justice: 10 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-03-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 23-02-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 23-04-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: VINAY JAIN
• Keywords: Depreciation; Unabsorbed depreciation
• Section: 32

Judgement Text

IT(TP)A.635/BANG/2015 PAGE - 1 IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH 'A', BANGALORE BEFORE SHRI. ABRAHAM P. GEORGE, ACCOUNTANT MEMBER AND SHRI. VIJAY PAL RAO, JUDICIAL MEMBER I.T(TP).A NO.635/BANG/2015 (ASSESSMENT YEAR : 2009-10) M/S. SWISS RE HEALTHCARE SERVICES P. LTD, [MERGED WITH M/S. SWISS RE SERVICES INDIA P. LTD], 7 TH FLOOR, TOWER A, PENINSULA CORPORATE PARK, GANAPATRAO KADAM MARG, LOWER PAREL, MUMBAI 400 013 .. APPELLANT PAN : AADCP4654P V. PRINCIPAL COMMISSIONER OF INCOME-TAX (A)- 2, BANGALORE .. RESPONDENT ASSESSEE BY : SHRI. VINAY JAIN, CA REVENUE BY : DR. P. K. SRIHARI, ADDL. CIT HEARD ON : 23.02.2016 PRONOUNCED ON : 09.03.2016 O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER : IN THIS APPEAL FILED BY ASSESSEE IT IS AGGRIEVED B Y DENIAL OF SET OFF OF UNABSORBED DEPRECIATION OF RS.36,04,019/-. IT(TP)A.635/BANG/2015 PAGE - 2 02. LD. COUNSEL FOR THE ASSESSEE SUBMITTED AT THE OUTSET THAT THERE WAS A CHANGE IN SHAREHOLDING IN EXCESS OF 49% AS ON 31.03.2007. HOWEVER, AS PER THE LD. AR THOUGH BY VIRTUE OF SECT ION 79 OF THE INCOME- TAX ACT, 1961 (THE ACT IN SHORT) DISENTITLED THE ASSESSEE FROM CLAIMING CARRY FORWARD OF UNABSORBED LOSSES, THE SAID SECTI ON DID NOT APPLY TO CARRY FORWARD AND SET OFF OF UNABSORBED DEPRECIATION. LD . AR ALSO POINTED OUT THAT THIS ISSUE HAD COME UP BEFORE THIS TRIBUNAL IN ASSESSEES OWN CASE FOR A. Y. 2008-09 IN ITA.736/BANG/2014, DT.30.07.2015. AS PER THE LD. AR THIS TRIBUNAL HAD HELD THAT SECTION 79 OF THE ACT A PPLIED ONLY TO BUSINESS LOSS AND NOT TO UNABSORBED DEPRECIATION, RELYING ON THE JUDGMENT OF HONBLE APEX COURT IN THE CASE OF CIT V. SUBHULAXMI MILLS LTD [249 ITR 795]. 03. PER CONTRA, LD. DR SUPPORTED THE ORDERS OF LOWE R AUTHORITIES. 04. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL CONTENTIONS. IN ASSESSEES OWN CASE FOR A. Y.2008-09, A QUESTION A ROSE AS TO THE APPLICATION OF SECTION 79 OF THE ACT, TO UNABSORBED DEPRECIATION. THIS TRIBUNAL HELD AS UNDER AT PARA 9 OF ITS ORDER MENTI ONED SUPRA : 9. THE SECOND ISSUE ARISING OUT OF THIS APPEAL FILE D BY THE ASSESSEE IS WHETHER THE LOWER AUTHORITIES ARE CORRE CT IN NOT ALLOWING THE ASSESSEE TO CARRY FORWARD THE UNABSORB ED IT(TP)A.635/BANG/2015 PAGE - 3 DEPRECIATION OF RS.36,04,019 RELATING TO ASSESSMENT YEAR 2007-08 TO THE SUBSEQUENT ASSESSMENT YEARS OR NOT. WE FIND THAT AS PER SECTION 79 OF THE ACT, THE LOSSES CANNOT BE CARRIED FORWARD WHEN THERE IS CONSIDERABLE CHANGE IN THE SHARE HOLD ING PATTERN OF THE CLOSELY HELD COMPANY. IT IS AN UNDIS PUTED FACT THAT THERE WAS A CHANGE IN THE SHARE HOLDING PATTER N OF THE COMPANY FOR THE FINANCIAL YEAR 2006-07. HOWEVER, WE FIND THAT UNABSORBED DEPRECIATION IS NOT A LOSS BUT ALLOWANCE S UNDER SECTION 32 OF THE ACT. THE HONORABLE SUPREME COURT IN THE CASE OF (CITED SUPRA) WAS DEALING THE CASE HELD AS BELOW: '2. WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE FINDING OF THE TRIBUNAL THAT IN APPLYING SECTION 79 OF THE ACT, ONLY THE BUSINESS LOSS SHOULD BE TAKEN INTO AC COUNT AND NOT THE UNABSORBED DEPRECIATION OR UNABSORBED DEVELOPMENT REBATE, IS ERRONEOUS IN LAW? HELD THAT SO FAR AS QUESTION NO.2 IS CONCERNED, THE QUESTION IS WHETHER IN APPLYING SECTION 79 OF THE ACT, ONLY THE BUSINESS LOSS SHOULD BE TAKEN INTO ACCOUNT AND NOT THE UNABS ORBED DEPRECIATION OR UNABSORBED DEVELOPMENT REBATE. THE HIGH COURT HAS ANSWERED THE QUESTION SAYING THAT WHEN SECTION 79 SPEAKS OF LOSS, IT DOES NOT INCLUDE UNABSORBED DEPRECIATIO N OR UNABSORBED DEVELOPMENT REBATE. WE AGREE WITH THE HI GH COURT.' ALSO HIGH COURTS OF KERALA AND MADRAS HAVE RELIED O N THE ABOVE JUDGEMENT IN CASES (CITED SUPRA) RELIED UPON BY THE ASSESSEE. HENCE, THE ASSESSEE COMPANY IS ALLOWED TO CARRY FOR WARD UNABSORBED DEPRECIATION RELATING TO FINANCIAL YEAR 200607 TO THE SUBSEQUENT ASSESSMENT YEARS THEREFORE WE ALLOW THE GROUNDS RAISED BY THE ASSESSEE ON THIS ISSUE. 05. IN THE IMPUGNED ASSESSMENT YEAR, UNABSORBED DE PRECIATION CARRIED FORWARD BY THE ASSESSEE WAS RS.36,04,019/-, WHICH IS THE SAME IT(TP)A.635/BANG/2015 PAGE - 4 AMOUNT CLAIMED FOR A.Y. 2007-08. HOWEVER, THE SET OFF OF SUCH AMOUNT WAS DISALLOWED BY THE LOWER AUTHORITIES RELYING ON SECTION 79 OF THE ACT. RETURN OF INCOME FILED BY THE ASSESSEE FOR THE IMPU GNED ASSESSMENT YEAR DOES SHOW THAT THERE WAS A CLAIM FOR CARRY FORWARD AND SET OFF OF RS.36,04,109/- AND THE AUDIT REPORT COPY OF WHICH H AS BEEN PLACED AT PAPER BOOK PAGE 80 SHOW THAT SAID AMOUNT RELATED TO UNABS ORBED DEPRECIATION FOR A. Y. 2007-08. THUS, WE ARE OF THE OPINION THAT AS SESSEE WAS WELL ELIGIBLE FOR CLAIM OF SET OFF OF SUCH AMOUNT. SECTION 79 WO ULD NOT INHIBIT THE CLAIM. WE THEREFORE SET ASIDE THE ORDERS OF AUTHOR ITIES BELOW AND DIRECT THE AO TO ALLOW THE CLAIM OF UNABSORBED DEPRECIATION OF RS.36,04,019/- BROUGHT FORWARD BY THE ASSESSEE. 06. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOW ED. ORDER PRONOUNCED IN THE OPEN COURT ON 9 TH DAY OF FEBRUARY, 2016. SD/- SD/- (VIJAY PAL RAO) (ABRAHAM P GEORGE) JUDICIAL MEMBER A CCOUNTANT MEMBER