2016 (12) TMI 1356 - AT - Income Tax

Set off of unabsorbed depreciation loss of the amalgamating company carried forward - Held that - If the text and context of the relevant provisions of section 72A in this regard are taken into consideration, we find that the period of three or more years as specified therein clearly signifies three or more calendar years and not certainly three or more previous years as defined in section 3 of the Act. The term previous year as defined in section 3 of the Act is altogether different and the same, therefore, cannot be adopted to give meaning to the word year used in the relevant provisions of section 72A going by it text and context. The said word clearly signifies the calendar year and since the amalgamating company in the present case was not engaged in the business, in which the accumulated loss occurred or depreciation remained unabsorbed, for three or more calendar years, we are of the view that the condition stipulated in the relevant provisions of section 72A was not satisfied and the assessee-company being amalgamated company was not entitled to claim set off of the brought forward loss of the amalgamating company against its income for the year under consideration. We, therefore, set aside the impugned order of the ld. CIT(Appeals) giving relief to the assessee on this issue and restore that of the Assessing Officer. Addition on account of belated payment of employees contribution towards P.F. and E.S.I. after the expiry of due dates prescribed in the relevant Statute but before the date of filing the return of income for the year under consideration - Held that - Both the sides have agreed that the same is squarely covered in favour of the assessee, inter alia, by the decision of the Hon ble Supreme Court in the case of CIT -vs.- Alom Extrusions Limited 2009 (11) TMI 27 - SUPREME COURT and CIT -vs.- Vinay Cement Limited 2007 (3) TMI 346 - Supreme Court of India . Respectfully following the ratio laid down by the Hon ble Supreme Court in these cases, we uphold the impugned order of the ld. CIT(Appeals) giving relief to the assessee on this issue Addition on account of short-term capital gain on sale of property by applying the provisions of section 50C - Held that - We find merit in this contention of the ld. D.R. and since the ld. counsel for the assessee also has not raised any objection in this regard, we restore this issue to the file of the Assessing Officer for deciding the same afresh after examining/verifying the contention of the assessee that the property in question transferred during the year under consideration being in the nature of booking rights and not land and building, section 50C has no application. The Cross Objection of the assessee is accordingly treated as allowed for statistical purposes.

Issues Involved:
1. Set off of unabsorbed depreciation loss of the amalgamating company.
2. Disallowance of belated payment of employees' contribution towards P.F. and E.S.I.
3. Addition on account of short-term capital gain by applying the provisions of section 50C.

Issue-wise Detailed Analysis:

1. Set off of unabsorbed depreciation loss of the amalgamating company:

The Revenue challenged the ld. CIT(Appeals) for allowing the assessee to set off the unabsorbed depreciation loss of the amalgamating company, amounting to ?84,22,538/-, against its income. The Assessing Officer disallowed this set off, asserting that the amalgamating company was not engaged in business for three or more years as required by section 72A of the Income Tax Act. The amalgamating company, incorporated on 13.09.2001, was considered not to have commenced business until 31.03.2001. The ld. CIT(Appeals), however, accepted the assessee's argument that the amalgamating company was engaged in setting up a plant from 2001-02, which involved significant capital investment, and thus had been in business for over three years by the effective amalgamation date of 01.04.2004.

Upon review, it was observed that the amalgamating company placed its first machinery order on 13.10.2001. The Tribunal clarified that the term "three or more years" used in section 72A refers to calendar years, not previous years. Given that the amalgamating company was not in business for three calendar years by 01.04.2004, the condition was not met. Therefore, the assessee was not entitled to set off the brought forward loss, and the order of the ld. CIT(Appeals) was set aside, restoring the Assessing Officer's decision.

2. Disallowance of belated payment of employees' contribution towards P.F. and E.S.I.:

The Revenue's second issue involved the deletion by the ld. CIT(Appeals) of the disallowance of ?77,829/- made by the Assessing Officer for late payment of employees' contribution towards P.F. and E.S.I. The payments were made after the statutory due dates but before the filing of the return. Both parties agreed that the issue was covered by the Supreme Court decisions in CIT vs. Alom Extrusions Limited and CIT vs. Vinay Cement Limited, which ruled in favor of the assessee. Consequently, the Tribunal upheld the ld. CIT(Appeals)'s order, dismissing the Revenue's ground.

3. Addition on account of short-term capital gain by applying the provisions of section 50C:

The assessee challenged the addition of ?39,07,500/- made by the Assessing Officer under section 50C, which was upheld by the ld. CIT(Appeals). The Assessing Officer had adopted the stamp duty value of ?3,87,03,700/- as the deemed sale consideration, leading to a higher short-term capital gain computation. The assessee argued that the property transferred was booking rights, not land and building, and thus section 50C did not apply.

The Tribunal noted that this contention was raised for the first time and agreed to remand the issue to the Assessing Officer for verification. The Assessing Officer was tasked with examining the nature of the property and determining the applicability of section 50C. Thus, the Cross Objection of the assessee was allowed for statistical purposes.

Conclusion:

The appeal of the Revenue was partly allowed, and the Cross Objection of the assessee was treated as allowed for statistical purposes. The Tribunal's order was pronounced on September 7th, 2016.

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