ACIT 9(3), MUMBAI V. THE INIDAN HOTELS COMPANY LTD ( SUCCESSOR TO TAJ LANDS END LTD), MUMBAI

ITA 7135/MUM/2010

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 5672 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 4 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-02-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: I
• Next Hearing Date: 27-02-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 18-10-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: O P SINGH
• Keywords: Tax effect

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL I BENCH, MUMBAI BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER AND SHRI VIVEK VARMA, JUDICIAL MEMBER ./I.T.A. NO. 7135/M/2010 ( AY: 2006 - 200 7 ) ACIT - 9(3), 2 ND FLOOR, R.NO. 229, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI 400 020. / VS. THE INDIAN HOTELS COMPANY LTD (SUCCESSOR TO TAJ LANDS END LTD), MANDLIK HOUSE, 3 RD FLOOR, MANDILK ROAD, MUMBAI 01. ./ PAN : AAACT 3957 G ( / APPELLANT) .. ( / RESPONDENT ) / APPELLANT BY : SHRI O.P. SINGH , CIT - DR / RESPONDENT BY : SHRI DHARMESH SHAH / DATE OF HEARING : 27 .2.2014 / DATE OF PRONOUNCEMENT :27 .2.2014 / O R D E R PER D. KARUNAKARA RAO, AM: THIS APPEAL FILED BY THE REVENUE ON 18.10.2010 IS AGAINST THE ORDER OF THE CIT (A) - 20, MUMBAI DATED 26.8.2010 FOR THE ASSESSMENT YEAR 2006 - 2007. 2. IN THIS APPEAL, REVENUE RAISED THE FOLLOWING GROUNDS WHICH READ AS UNDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT (A) ERRED IN DELETING THE DISALLOWANCE OF RS. 4,97,55,360/ - WHICH REPRESENTS INTEREST DISALLOWANCE BY ASSESSING OFFICER U/S 36(1 )(III) READ WITH EXPLANATION 8 TO SECTION 43(1) OF THE ACT, 1961. 2. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT (A) BE SET ASIDE ON THE GROUNDS MENTIONED ABOVE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 3. AT THE OUTSET, SHRI DHARMESH SHAH, LD COUN SEL FOR THE ASSESSEE BROUGHT OUR ATTENTION TO THE GROUNDS AS WELL AS THE FACTS OF THE CASE AND MENTIONED THAT THE ISSUE IS NOW COVERED BY THE ORDER OF THE TRIBUNAL IN THE CASE OF M/S. ACIT VS. TAJ LAND END LTD VIDE ITA NO.3047 & 3048/MUM/2010 FOR THE AYS 2004 - 05 AND 2005 - 06 DATED 27.7.2012. AS PER THE LD COUNSEL, ON THE PARTICULAR FACTS OF THIS CASE, THE APPEAL IS NOT MAINTAIN ABLE CONSIDERING THE CBDT CIRCULAR ON THE TAX EFFECT, WHEREIN 2 THE TAX LIMITS ARE PRESCRIBED. IN THIS REGARD, LD COUNSEL MENTIONED THAT CONSIDERING THE PROVISIONS OF SECTION 17(1), WHICH ARE APPLICABLE TO THE ASSESSEE, THE LOSS DISALLOWED BY THE AO BECOMES TAX NEUTRAL. IN FACT, THE ADDITION MADE BY THE AO IS NIL AND THEREFORE, THE TAX EFFECT IS BELOW RS. 3 LAKHS AS PRESCRIBED BY THE CBDT IN ITS CIRCULARS. HE FURTHER MENTIONED THAT AN IDENTICAL ISSUE WAS ADJUDICATED BY THE TRIBUNAL FOR THE ASSESSMENT YEAR 2004 - 05 AND 2005 - 06 (SUPRA) AND PARA 5 TO 7 OF THE SAID ORDER OF THE TRIBUNAL DATED 27.7.2012 ARE RELEVANT. 4. ON THE OTHER HAND, L D DR RELIED ON THE ORDERS OF THE REVENUE AUTHORITIES. 5. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE ORDERS OF THE REVENUE AUTHORITIES AS WELL AS THE CITED ORDER OF THE TRIBUNAL (SUPRA). ON PERUSAL OF THE SAID ORDER OF THE TRIBUNAL, WE ARE OF THE OPINI ON THAT PARA 5 TO 7 ARE RELEVANT IN THIS REGARD AND THE SAME ARE READ AS UNDER: WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS THE RELEVANT MATERIAL ON RECORD. THE RETURNED INCOME AND ASSESSED INCOME FOR BOTH THE YEARS ARE AS UNDER: ASSESSMENT YEAR RETURNED INCOME / LOSS ASSESSED INCOME / LOSS 2004 - 05 31,77,12,979/ - 21,42,38,006/ - 2005 - 06 25,86,96,170/ - 19,78,44,515/ - 5.1. THERE IS NO DISPUTE THAT THE RETURNED INCOME AS WELL AS THE ASSESSED INCOME ARE NEGATIVE, BEING A LOSS FOR BOTH THE YEARS. THERE IS NO DISPUTE THAT FOR APPLYING THE INSTRUCTIONS REGARDING THE LIMIT PRESCRIBED BY THE CBDT FOR FILING OF THE APPEAL BY THE REVENUE. THE EFFECT OF DISALLOWANCE MADE BY THE ASSESSING OFFICER AND DELETED BY THE CIT (A) HAS TO BE TAKEN INTO ACCOUNT. B UT WHEN THE NET RESULT IS LOSS AND BY VIRTUE OF SECTION 79, THE SAID LOSS SHALL NOT BE CARRIED FORWARDED AND SET OFF AGAINST THE INCOME OF THE SUBSEQUENT YEARS BY THE REASON OF CHANGE OF MORE THAN 51% OF SHAREHOLDINGS OF THE ASSESSEE COMPANY, THEN IN SUCH A SITUATION, IF THE TAX EFFECT IS LESS THAN THE LIMIT PRESCRIBED UNDER THE INSTRUCTIONS BY THE CBDT, THE APPEALS FILED BY THE REVENUE ARE NOT MAINTAINABLE AND LIABLE TO BE DISMISSED ON THIS GROUND ALONG. 5.2. T HE ASESSEE HAS FILED THE DETAILS OF SHAREHOLD INGS DURING THE RELEVANT PERIOD AS UNDER: SL.NO. DATE OF AGM NAME OF THE SHAREHOLDER NO. OF SHARES % OF HOLDING FINANCIAL YEAR END 1 9.9.04 IHCL ICICI EQUITY FUND 23,780,500 95,719,500 119,500,500 20% 80% MARCH, 31, 2004 2 28.07.05 IHCL IL & FS TRUST CO. LTD 23,780,500 95,719,500 119,500,500 20% 80% MARCH, 31, 2005 3 15.9.2006 IHCL 119,500,500 5.3. AS IT IS CLEAR FROM THE DETAILS OF SHAREHOLDING THAT MORE THAN 51% OF THE SHARE HOLDING / VOTING RIGHTS HAVE CHANGED HANDS AND THEREFORE, THE BUSINESS LOSS FOR 3 BOTH THESE YEARS IS NOT ELIGIBLE TO SET OFF IN THE SUBSEQUENT YEAR AS STIPULATED IN THE PROVISIO NS OF SECTION 79 OF THE ACT. 6. ACCORDINGLY, WE HOLD THAT HE APPEAL FILED BY THE REVENUE CANNOT BE TAKEN UP FOR DECISION ON MERITS AS THE TAX EFFECT IN THIS CASE IS ADMITTEDLY LESS THAN THE LIMIT PRESCRIBED IN THE CBDT CIRCULAR. WE, THEREFORE, DISMISS THE APPEALS FILED BY THE REVENUE AS NOT MAINTAINABLE. 7. WE MAY CLARIFY THAT THE ASSESSEE ITSELF HAS CLAIMED THAT THE LOSS OF THE YEARS UNDER CONSIDERATION CANNOT BE CARRIED FORWARDED AND SET OFF IN THE SUBSEQUENT YEAR. THEREFORE, THE ASSESSEE IS NOT PERMITT ED TO MAKE ANY SUCH CLAIM IN THE SUBSEQUENT YEAR. 6. CONSIDERING THE ABOVE, WE ARE OF THE OPINION THAT THE APPEAL OF THE REVENUE CANNOT BE TAKEN FOR DECISION ON MERITS AS THE TAX LIMIT IS LESS THAN THE LIMIT PRESCRIBED IN THE CBDT CIRCULAR . ACCORDINGLY, GROUNDS RAISED BY THE REVENUE ARE DISMISSED . 7. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON 2 7 TH FEBRUARY, 2014. SD/ - SD/ - (VIVEK VARMA) (D. KA RUNAKARA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; 27 .2 .2014 . . ./ OKK , 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 . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI