2013 (12) TMI 1207 - HC - Income Tax

Whether loss of unit entitled to deduction under Section 10-B be set off against business profits earned by the assessee - Held that - Following Goetze (India) Ltd. v. CIT 2006 (3) TMI 75 - SUPREME Court - The Tribunal has held that on the date relevant to the present controversy, the Act did not prescribe any impediment prohibiting the assessee from setting off the loss in the manner allowed by the Tribunal - The revenue is unable to refer to any statutory provision or precedent, relevant to the assessment year, that would enable us to hold to the contrary - The order passed by the Income Tax Appellate Tribunal granting relief to the assessee is in accordance with law - Decided against Revenue.

Summary

Issues:
- Allowance of set off of loss of one unit against profits of another unit under Section 10-B of the Income Tax Act, 1961.
- Validity of the order passed by the Income Tax Appellate Tribunal and subsequent proceedings.

Analysis:
The primary issue in this case revolves around the allowance of set off of loss of one unit against profits of another unit under Section 10-B of the Income Tax Act, 1961. The question of law raised was whether the Income Tax Appellate Tribunal was correct in allowing the set off of a loss of Rs.2,74,47,311 suffered by a specific unit against the business profits earned by the assessee. The revenue contended that the set off was wrongly allowed as no such plea was raised before the Assessing Officer during the initial assessment. However, the assessee argued that it is settled law that there is no prohibition in the Income Tax Act against setting off the loss of a unit entitled to deduction under Section 10-B against profits of another unit.

Regarding the validity of the order passed by the Income Tax Appellate Tribunal and subsequent proceedings, it was noted that in the initial round of litigation, the Tribunal allowed the assessee to raise an additional ground and set aside the assessment order, remitting the matter to the Assessing Officer for reconsideration. The revenue did not challenge this order in that instance. Subsequently, when the Assessing Officer declined relief to the assessee, the Commissioner of Income Tax (Appeals) dismissed the appeal. However, the Income Tax Appellate Tribunal reversed these decisions, emphasizing that the Assessing Officer and the Commissioner of Income Tax (Appeals) had no jurisdiction to disallow relief after the Tribunal allowed the assessee to raise an additional ground. The Tribunal highlighted that there was no statutory provision or precedent prohibiting the set off as allowed.

The Tribunal's decision was based on the fact that on the relevant date, there was no impediment in the Act preventing the assessee from setting off the loss in the manner approved. Consequently, the Tribunal found no substantial question of law for adjudication and dismissed the appeal. The judgment underscores the importance of adhering to legal procedures and statutory provisions while considering set off provisions under the Income Tax Act, ultimately upholding the Tribunal's decision in favor of the assessee.