2011 (11) TMI 9 - HC - Income Tax

Carry forward of Business Loss u/s 72 - Expiry of the period of 8 years - Minimum Alternate Tax (MAT) - sick industrial companies - BIFR - Held that - the petitioner is not disputing the applicability and application of Section 115JB of the Income Tax Act, 1961, but the petitioner claims that in case benefit under Section 72 is granted to the petitioner, then the said benefit should be available to the petitioner in terms of sub-section 3 to Section 115JB of the Act. - Held that - What is required is that the respondent authorities must consider the request of the petitioner for grant of concession/relief under Section 72 of the Act in view of their contentions, the statement of profit and the cash flow statement.

Issues:
1. Relief under Section 72 of the Income Tax Act, 1961.
2. Consideration of relief/exemptions for sick industrial companies.
3. Misunderstanding of petitioner's stand by the tax authority.

Analysis:

1. Relief under Section 72 of the Income Tax Act, 1961:
The petitioner sought relief under Section 72 of the Income Tax Act to carry forward business losses for 8 years from a specified date. The tax authority initially rejected the relief, citing that the petitioner had omitted the request for this relief in a letter. However, the High Court found merit in the petitioner's contention that the authority had misunderstood the petitioner's stand. The petitioner had indeed requested relief under Section 72 in previous correspondence, and the High Court noted that the authority failed to consider crucial aspects such as the company's suspended operations due to being declared a sick company. The Court directed the authority to reconsider the relief request based on the details submitted by the petitioner, emphasizing fair and objective assessment by the tax authorities.

2. Consideration of relief/exemptions for sick industrial companies:
The petitioner also sought relief and concessions similar to those granted to other sick industrial companies. The High Court highlighted that the draft and sanctioned scheme by the Board for Industrial and Financial Reconstruction (BIFR) included provisions for tax reliefs and concessions for the petitioner. The Court emphasized that the tax authority should consider the petitioner's request for relief under Section 72 in line with the scheme's provisions. The Court did not issue a mandamus but directed the authorities to objectively evaluate the petitioner's request and act fairly in their decision-making process.

3. Misunderstanding of petitioner's stand by the tax authority:
The tax authority had rejected the relief under Section 72, citing the omission of the request in a letter. However, the High Court found that the petitioner had indeed requested the relief in earlier correspondence and that the authority had not considered all relevant aspects before rejecting the request. The Court emphasized the need for the tax authorities to thoroughly review the petitioner's submissions and reconsider the relief request within a specified timeframe. Additionally, the Court clarified that the decision on granting relief under Section 72 falls within the domain of the tax authorities, who must act promptly and fairly in their assessment.

In conclusion, the High Court set aside the tax authority's order denying relief under Section 72 and directed a reconsideration based on the petitioner's submissions. The Court emphasized the importance of a fair and objective evaluation by the tax authorities and granted liberty to the petitioner to submit further representations if needed. The judgment highlighted the need for a comprehensive review of the petitioner's request in line with the applicable provisions and schemes for sick industrial companies.

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