2017 (9) TMI 1726 - AT - Income Tax

Denial of carry forward of loss for set-off in the subsequent years based on Sec. 79 - jurisdiction of AO - Held that - Hon ble Supreme Court in the case of Manmohan Das (Deceased) (1965 (11) TMI 33 - SUPREME COURT) held whether the loss in any year may be carried forward to the following year and set-off against the income of the subsequent year is liable to be determined by the Assessing Officer who deals with the assessment of such subsequent year. Also further noted that a decision recorded by the Assessing Officer who computes the loss in a previous year that the loss cannot be set-off against the income of the subsequent year is not binding on the assessee in the subsequent actual year of set-off Assessing Officer in the instant year had no jurisdiction to give a finding that the loss of ₹ 7,96,21,402/- cannot be carried forward and set-off against the income of the subsequent year. Therefore, such observations/directions of AO in our view, are bereft of jurisdiction and are accordingly directed to be removed. Our aforesaid decision should not be understood as any reflection on the merit or otherwise of invoking of Sec. 79 of the Act prohibiting carry forward and set-off of loss in certain situations. The application of Sec. 79 shall be open to be considered by the Assessing Officer in the subsequent year while evaluating the claim of the assessee for set-off of the impugned business loss. As a consequence of our aforesaid discussion, we set-aside the order of CIT(A) and direct the Assessing Officer to remove the directions relating to denial of carry forward and set-off of loss of ₹ 7,96,21,402/-. Thus, on this aspect, assessee succeeds for statistical purposes.

Summary

Issues involved:
1. Denial of carry forward of loss for set-off based on Sec. 79 of the Income Tax Act.

Analysis:
1. The appeal was against the denial of carry forward of loss of ?7,96,21,402 for set-off in subsequent years under Sec. 79 of the Act.
2. The appellant, a private limited company engaged in the IT park business, filed a return declaring a loss of ?19,50,79,979 for the Assessment Year 2010-11.
3. The Assessing Officer accepted the loss but noted a change in shareholding, invoking Sec. 79 to disallow carrying forward the business loss.
4. The appellant challenged the decision, citing the judgment in the case of Manmohan Das (Deceased) (59 ITR 699) to argue that the Assessing Officer of the subsequent year should determine carry forward eligibility.
5. The Hon'ble Supreme Court precedent supported the appellant's position, stating that the Assessing Officer of the subsequent year decides on loss carry forward and set-off.
6. The Tribunal found the Assessing Officer lacked jurisdiction to deny carry forward and set-off, directing removal of such directions and emphasizing that the application of Sec. 79 could be considered in the subsequent year.
7. The order of the CIT(A) was set aside, and the Assessing Officer was directed to remove the denial of carry forward and set-off of the loss, granting success to the appellant for statistical purposes.
8. No other issues were raised or argued, leading to the allowance of the appeal solely on the carry forward issue.

This detailed analysis of the judgment highlights the key arguments, legal principles, and the Tribunal's decision regarding the denial of carry forward of loss for set-off under Sec. 79 of the Income Tax Act.