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TMI Blog2015 (9) TMI 1111X X X X Extracts X X X X X X X X Extracts X X X X ..... e facts in AY 2007-08 and hence, taking a consistent view, we delete the disallowance in this year also - Decided against revenue. - I.T.A. No. 970/KOL/ 2012 - - - Dated:- 1-9-2015 - Shri S.V. Mehrotra and Shri Mahavir Singh, JJ For The Department : Shri S.M. Sarfarazut Tauheed, Sr. D.R., For The Assessee : Shri R.N. Bajoria, Sr. Counsel and Shri Ashim Chaudhury, Advocate, ORDER Per S.V. Mehrotra: This appeal has been filed by the Revenue against the order of ld. Commissioner of Income Tax (Appeals)-VI, Kolkata dated 28.03.2012 for the assessment year 2008-09 by taking the following effective grounds of appeal:- 1. That on the facts and the circumstances of the case, Ld. CIT(A) erred in law in holding that the appellant is entitled for set off of unabsorbed business loss and depreciation of ₹ 3,70,17,484/- relating to Neora Hydro Limited amalgamated with the assessee following the judgment of jurisdictional Bench of the ITAT in the case of DCIT vs.- Gujrat NRE Coke Limited (25 SOT 46). The order of the CIT(A) should be reversed and the order of the AO should be deleted. 2. That on the facts and the circumstances of the case, Ld. CIT(A) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be supplied to West Bengal State Electricity Board (in short- WBSEB). The assessee-Company filed along with its reply copy of Selling Agreement with the WBSEB, copy of the Banking and Welling Agreement with Govt. of West Bengal, and copies of audited accounts of Neora from 31.03.2004 till 31.03.2007. The assesese further submitted that Neora commenced its business several years prior to amalgamation with the assessee and that the business commenced before three years (even more than three years) earlier to the date of amalgamation and conditions prescribed under section 72A(2)(a) of the Income Tax Act were satisfied. The Assessing Officer did not accept the assessee s contention and observed that the date of commencement of generation of power was the most important fact to be taken into consideration to conclude when the business commenced. He observed that since this date was 03.04.2006, therefore, he held that the conditions prescribed under section 72A(2)(a) were not satisfied and, therefore, the assessee was not entitled to set off of the said loss of ₹ 3,70,17,484/- relating to Neora Hydro Limited. 4. Ld. CIT(Appeals) relying on the decision dated 29.02.2008 of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ported in 111 CTR (AP) 67 and the decision of the Hon ble Gujarat High Court in the case of Saurashtra Cement Chemical Industries Ltd. reported in 91 ITR 170 (Guj.) observed that from these decisions it emanates that essential activity has to be commenced in the course of carrying on business, then it can be said that the business has commenced. Ld. counsel for the assessee further pointed out that the Tribunal remanded the matter to the file of Assessing Officer because no particulars had been furnished as from when the amalgamating company commenced its business. Neither the assesese had made any submissions nor ld. CIT(Appeals) had given any finding in this regard. The Hon ble Tribunal clearly observed that the date of incorporation alone could not be taken as the date that the business had commenced. Under these facts and circumstances, the matter was restored to the file of Assessing Officer. However, in the present case, as pointed out earlier, the assessee had given all the necessary details and particulars in regard to the activities taken by Neora Hydro Limited. 7. We have considered the rival submissions and have perused the orders of lower authorities as well as the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case, the assessing officer appears to have imported the word production into the statute in place of the word business and thereby changed the entire requirement of the said section. Section 72A(2)(a)(i) clearly uses the word engaged in business and there is no requirement of start of production to be eligible for deduction, there may be many instances where the business may have commenced but the actual production may not have commenced but that would not imply that the business itself had not commenced and that an assessee would not be engaged in production. Therefore, it appears, the A.O. has narrowed down the requirement of the section without there being any such intendment within the section itself.... 8. By considering the totality of the facts and circumstances of the case and respectfully following the decisions cited above, we do not find any reason to interfere with the order of ld. CIT(Appeals) and we uphold the same particularly because in the present case assessee had furnished all the particulars regarding steps taken by amalgamating company towards business, as noted in the chart filed by ld. Senior counsel, and, in any view of the matter, business comme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ufficient funds of its own to advance the loan to sister concern as is evident from the facts of the case discussed above. The assessee also had loans and advances taken on interest at the time when the money was advance to its sister concern NHL. The assessee has been advancing loans from the mixed account in which sale proceeds and profit drawn for the year under consideration were credited. It is also a fact that assessee had 50% shares in NHL and later on it amalgamated with assessee. The assessee has submitted during the appellate proceedings that there was deficiency of electricity and it has entered into an agreement on 22.3.1999 to use the electricity to be produced by NHL electric project. Therefore, there was commercial interest of assessee in Neora Hydro Electric Ltd., for advance in the money. The assessee had 50% shares in NHL while balance 50% was also transferred to the associated concerns of the assessee by 31.3.2005. We find that the assessee has relied on the case of CIT vs. Britannia Industries 280 ITR 525. The Hon'ble Calcutta High Court has held in this case as follows:- In this case, the question that is to be answered is: Whether, on the facts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er sum aggregating to ₹ 7.30 crore to its subsidiaries and during the previous year ended on March 31, 1996, the appellant s cash profit after providing for tax addition and dividend amounted to ₹ 30.37 crore and the said interest-free loans of ₹ 7.30 crore were given out of the said internal accruals of the appellant. The Assessing Officer, however, by order dated March 26, 1999 disallowed the interest expenditure of ₹ 59,32,575/- on the assumption that the interest-free loans to the subsidiaries were made by the appellant out of the borrowed funds. g) Being dissatisfied, the appellant preferred an appeal before the Commissioner of Income-tax (Appeals) required the appellant to work out the interest for the period from the date of clearance of the cheques given to the subsidiaries up to the date when sufficient sale proceeds were deposited in the cash credit accounts to cover the amount of the interest-free loans. . In the case before us, we find that the opening balance of such interest free loans to the subsidiaries for the previous year ending on March 31, 1996 amounted to ₹ 1 crore. During the previous year end on March 31, 1996, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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