2015 (1) TMI 572 - AT - Income Tax

Carry forward and set off of brought forward business losses and unabsorbed depreciation Held that - CIT (A) has correctly held the assessee company to be entitled to carry forward its losses only from AY 2001-02, while the losses for earlier years are not so entitled - the unabsorbed depreciation has also been correctly allowed to be carried forward by the CIT (A) holding the provisions of Section 32 (2) of the Act, rather than those of Section 79, to be applicable. Expenses under VRS disallowed Expenses on spares, stores and tools consumed by the assessee - Held that - At no stage either during assessment proceedings or during remand proceedings or during appellate proceedings the amount of claim got verified by any authority and, therefore, this issue also needed to go back to the AO who, on the basis of documents to be submitted by the assessee needed to arrive at the amount of claim and, further, needed to verify as to how the two claims made by the assesse were different Decided in favour of assessee.

Summary

Issues:
1. Eligibility of the assessee for carry forward and set off of losses under Section 79 of the IT Act.
2. Disallowance of expenses incurred under Voluntary Retirement Scheme.
3. Disallowance of expenses towards spares, stores, and tools consumed by the assessee.

Analysis:
1. The first issue revolved around the eligibility of the assessee for carry forward and set off of losses under Section 79 of the IT Act. The Judicial Member held that the assessee was entitled to carry forward losses only from AY 2001-02, while the Accountant Member emphasized the need for verification to determine if the conditions for carry forward of losses were met. The Accountant Member stressed the importance of verifying the percentage of shares held by a specific entity in relevant years to allow the claim. Ultimately, the Third Member concurred with the Judicial Member's opinion, leading to the dismissal of the Department's appeal.

2. The second issue concerned the disallowance of Rs. 10 crores out of expenses incurred under the Voluntary Retirement Scheme. The Judicial Member deleted this disallowance, citing findings supporting the assessee's claim. However, the Accountant Member suggested sending the issue back to the Assessing Officer for verification of the amount before allowing the claim. The matter was referred to the Third Member, who agreed with the Judicial Member's decision, ultimately resulting in the allowance of the assessee's appeal.

3. The third issue pertained to the disallowance of Rs. 8,70,00,000/- for expenses related to spares, stores, and tools consumed by the assessee. The Accountant Member highlighted the lack of verification of the claim amount by any authority throughout the proceedings. It was suggested that the issue needed to be sent back to the Assessing Officer for proper verification and clarification on the differences between the two claims made by the assessee. The Third Member, acting as the Accountant Member, supported the need for verification, leading to the allowance of the assessee's appeal.

In conclusion, the judgment addressed various grounds of appeal, emphasizing the importance of verification and adherence to legal provisions in determining the eligibility of the assessee for certain claims and expenses. The decision was made based on a thorough analysis of the facts and legal principles involved, ultimately resulting in the dismissal of the Department's appeal and the allowance of the assessee's appeal.