2018 (11) TMI 1590 - AT - Income Tax

Claim of set off of brought forward losses - assessee had fully complied with the conditions prescribed u/s 72A of the Act and the ground raised was allowed in favour of the assessee - scheme of amalgamation - HELD THAT - Rule 9C of the Rules prescribes that the amalgamated company, owning an industrial undertaking of the amalgamating company by way of amalgamation, shall achieve the level of production of at least fifty per cent of the installed capacity of the said undertaking before the end of four years from the date of amalgamation and continue to maintain the said minimum level of production till the end of five years from the date of amalgamation - the Central Government, on an application made by the amalgamated company, may relax the condition of achieving the level of production or the period during which the same is to be achieved or both in suitable cases having regard to the genuine efforts made by the amalgamated company to attain the prescribed level of production and the circumstances preventing such efforts from achieving the same. As clear that if the assessee obtains the relaxation of the conditions from the CBDT, it would be sufficient compliance with the requirements of section 72A. In this matter, there is no denial of the facts recorded by the CIT(A), and it is not the case of the revenue that the assessee did not obtain the orders of relaxation from the CBDT as provided in Rule 9C. We have gone through the copy of this order filed before us. In this factual situation we do not find anything illegality or irregularity in the impugned orders. There is no need to interfere with the same and we accordingly upheld it. - Decided against revenue.

Summary

Issues:
Compliance with conditions under Rule 9C for allowing carry forward of losses.

Analysis:
The appeal pertains to the order of the learned Commissioner of Income-tax (Appeals)-1, New Delhi, regarding the allowance of brought forward losses claimed by the assessee for the assessment year 2011-12. The case involved the amalgamation of M/S KNG Guruswamy Oil Mills with the assessee, and the applicability of Section 72A of the Income Tax Act, 1961, which allows for the carry forward and set off of losses and unabsorbed depreciation of the amalgamating company under certain conditions. One such condition, as per Rule 9C of the Income Tax Rules, 1962, is that the amalgamated company must achieve at least 50% of the installed production capacity of the amalgamating undertaking within a specified period.

The assessee fell short of the prescribed production level in the fourth year of amalgamation but exceeded it in the subsequent year. The assessee had applied for relaxation of the production level condition with the Central Board Of Direct Taxes, which was pending approval. The Assessing Officer disallowed the claim for brought forward losses citing non-compliance with Rule 9C. However, the assessee argued that the CBDT had considered their application and relaxed the production level requirement to 47%.

The learned Commissioner of Income-tax (Appeals) accepted the assessee's compliance with the conditions under Section 72A based on the CBDT's order and allowed the set off of losses. The revenue challenged this decision before the Appellate Tribunal. The Tribunal noted that if the assessee obtains relaxation of conditions from the CBDT as provided in Rule 9C, it would suffice as compliance with Section 72A. Since there was no denial of the relaxation order by the CBDT, the Tribunal upheld the decision of the Commissioner and dismissed the appeal, finding no illegality or irregularity in the impugned orders.

Ultimately, the Tribunal concluded that there were no merits in the revenue's appeal and dismissed it accordingly. The decision was pronounced in open court on 5th November 2018.