2020 (8) TMI 241 - HC - Income Tax

Applicability of Section 115BBE - Unabsorbed depreciation denied to be set off against sum chargeable to tax as income u/s.68 - HELD THAT - Circular bearing no.11/2019 dated 19.06.2019 had taken note of the legislative intent behind amendment in Section 115BBE(2), for the purpose of removing any ambiguity of interpretation, observed that vide Finance Act 2016 with effect from 01.04.2017, an assessee is entitled to claim set-off of loss against income determined under Section 115BBE of the Act till the assessment year 2016-2017. In the case on hand, the assessment year pertains to 2006-2007 and therefore, this Court is of the considered view that in the light of the above cited judgment in CHENSING VENTURES. 2007 (4) TMI 204 - MADRAS HIGH COURT as well as the circular, the matter in issue requires further adjudication at the hands of the Income Tax Appellate Tribunal. Substantial Question of Law raised by the appellant is held in affirmative, as it requires further adjudication

Summary

Issues:
1. Challenge to the order of the Income Tax Appellate Tribunal under Section 260-A of the Income Tax Act, 1961.
2. Allowance of set-off of carry forward depreciation loss under Sections 72 and 32 of the Income Tax Act.
3. Legality of the Tribunal's decision on unabsorbed depreciation set-off against income under Section 68.
4. Applicability of the provision of Section 115BBE barring set-off of losses against income determined under Section 68 for the assessment year 2006-07.

Analysis:
1. The appellant, an Assessee, challenged the order of the Income Tax Appellate Tribunal 'C' Bench under Section 260-A of the Income Tax Act, 1961. The appellant filed a return of income for the assessment year 2006-2007, initially declaring 'Nil' income after adjusting brought forward business loss. Subsequently, the Assessing Officer revised the order of assessment, assessing the total income as 'Nil.' However, a notice was issued under Section 148 as income chargeable to tax had escaped assessment. The Tribunal held that unabsorbed depreciation or business loss cannot be set off against sums chargeable to tax as income under Section 68. The Tribunal suggested revision or rectification by the Revenue in case of wrongly assessed sums, leading to the appeal challenging this decision.

2. The Commissioner of Income Tax (Appeals) directed the Assessing Officer to allow set-off of carry forward depreciation loss in accordance with Sections 72 and 32 of the Income Tax Act, citing relevant legal precedents. The Income Tax Appellate Tribunal held that unabsorbed depreciation or business loss cannot be set off against sums chargeable to tax as income under Section 68, as they do not fall under any head of income under Section 14. The Tribunal's decision was based on the course open to the Revenue for rectification or revision in case of wrongly assessed sums, leading to the current appeal challenging this decision.

3. The appellant raised substantial questions of law regarding the Tribunal's decision on the legality of setting off unabsorbed depreciation against income under Section 68 and the application of the provision of Section 115BBE, effective from 01.04.2017, to the assessment year 2006-07. The appellant argued that the Tribunal erred in law by not allowing the set-off and applying a provision that was not in existence for the relevant assessment year. The appellant cited legal precedents and circulars to support their arguments, seeking similar relief as granted in previous cases.

4. The Court considered the arguments presented by both parties and reviewed relevant legal provisions and circulars. Referring to a previous decision and a circular by the Central Board of Direct Taxes, the Court held that the matter required further adjudication at the hands of the Income Tax Appellate Tribunal. The Court allowed the appeal in part, setting aside the Tribunal's order and remanding the matter for further consideration in light of the legal precedents and circulars cited. The Court did not find any substantial question of law arising for consideration in the appeal, ultimately leading to the remand of the case for further adjudication by the Tribunal.