2019 (2) TMI 1533 - AT - Income Tax

Claim of set off of brought forward losses - Conditions prescribed u/s 72A - Relaxation of the conditions from the CBDT - scheme of amalgamation - HELD THAT - Condition specified in Rule 9C is that the amalgamated company should achieve at least 50% of the installed production capacity of the amalgamating 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 proviso appended to Rule 9C (a) says that the Central Government, on application made by the amalgamated company, may relax the condition of achieving the level of production and 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 circumstances preventing such efforts from achieving the same- Followed earlier year order - ADM AGRO INDUSTRIES DHARWAD P. LTD. 2018 (11) TMI 1590 - ITAT DELHI We hold that the CIT (Appeals) was correct in allowing the benefit of set off of brought forward losses. We also add that the department s contention that the CIT (Appeals) has contravened provisions of Rule 46A of the Rules by admitting additional evidence is also not substantiated by facts on record and, therefore, this plea is also dismissed. - Decided against revenue.

Summary

Issues:
Whether the Ld. CIT (Appeals) correctly allowed the assessee's claim of set off of brought forward losses.

Analysis:
The case involved the Revenue appealing against the Ld. CIT (Appeals)'s decision to allow the assessee's claim of set off of brought forward losses for the assessment year 2009-10. The assessee, engaged in manufacturing and trading of edible oils, had amalgamated with another company, which had accumulated losses and unabsorbed depreciation. The issue was whether the conditions under Section 72A of the Income Tax Act, 1961 were met for the set off. The Assessing Officer disallowed the set off, stating non-compliance with conditions, but the Ld. CIT (Appeals) ruled in favor of the assessee.

The Revenue raised two grounds of appeal, challenging the Ld. CIT (Appeals)'s decision. The Ld. Sr. DR argued that the conditions under Section 72A were not met and that additional evidence was admitted without following Rule 46A. The Ld. AR contended that the issue was covered in favor of the assessee by a previous ITAT order and denied the allegation of admitting additional evidence improperly.

The ITAT observed that the Assessing Officer's findings were ambiguous regarding non-compliance with Section 72A conditions. Section 72A allows set off of accumulated losses and unabsorbed depreciation subject to specific conditions, including achieving production capacity levels. The ITAT cited a previous order in the assessee's case, where compliance with Rule 9C was discussed, emphasizing that obtaining relaxation from the CBDT would fulfill Section 72A requirements.

Based on the previous order and the lack of evidence supporting the Revenue's contentions, the ITAT upheld the Ld. CIT (Appeals)'s decision to allow the set off of brought forward losses. The ITAT also dismissed the Revenue's claim of Rule 46A violation regarding additional evidence admission.

In conclusion, the ITAT dismissed the Revenue's appeal, affirming the decision to allow the benefit of set off of brought forward losses to the assessee.