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TMI Blog2019 (12) TMI 743X X X X Extracts X X X X X X X X Extracts X X X X ..... the order of the ld. AO could not be construed as erroneous. Denial of set off of brought forward losses of earlier years against the income of the assessee for the year under consideration - HELD THAT:- The issue is directly settled in favour of the assessee in the case of CLP Power India (P) Ltd. vs. DCIT [ 2018 (4) TMI 1282 - ITAT AHMEDABAD] as find considerable merits in the plea on behalf of the assessee that section 79 has not application in the absence of change in beneficial voting power. This being so, we see no error in the order of the AO on this score. This apart, once these facts were brought to the notice of Pr.CIT, the Pr.CIT ought to have appreciated the case of the assessee objectively in perspective and could not shrink his sacrosanct obligations and resort to simply set aside a completed assessment on non-existent ground. Thus, the prerequisites of section 263 are not satisfied. CIT had directed the ld. AO to directly disallow the benefit of set off of losses of earlier years against the income of current year on the ground that assessee had not complied with provisions of Section 79 of the Act, ignoring the various arguments made by the assessee before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the revision of the same by the Hon'ble PCIT u/s. 263 of the Act is erroneous and bad in law. 1.4 On the facts and circumstances of the case and in law, the Appellant prays that the impugned Order passed u/s. 263 of the Act by the Learned PCIT is to be struck down. Without prejudice to the aforesaid: 2. Re: Denial of carry forward and set off of losses and unabsorbed depreciation of INR 18,11.68.666 pursuant to the provisions of section 79 of the Act: 2.1 On the facts and circumstances of the case and in law, the Hon'ble PCIT has erred in holding that the Appellant is not entitled to carry forward and set off of the losses pertaining to earlier years in the current assessment year by applying the provisions of section 79 of the Act. 2.2 The Appellant submits that considering the facts and circumstances of the case and the law prevailing on the subject the provisions of section 79 are not applicable in the instant case and the stand taken by the Hon'ble PCIT is incorrect. 2.3 The Appellant submits that it should be allowed to set-off the brought forward losses against its total income for the year under consid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l that the ld. AO be directed to dispose off the 154 petition pending before him so that there would be no tax payable by the assessee. The ld. AR stated that this Tribunal directed the ld. AO accordingly. We would like to point out that even though this was stated by the ld AR before us but no order passed by this Tribunal was placed on record for our perusal. Later, the ld. AO vide its order dated 21/02/2018 passed an order u/s.154 of the Act accepting the plea of the assessee and determined the total income for the A.Y.2012-13 at Rs. Nil and determined the refund due to assessee including interest u/s.244A of the Act thereon. In the said order, the ld. AO had recorded as under:- It has been brought to my notice by application dated 25/01/2018 that the following mistake has occurred in the intimation dated 31/01/2017 u/s.143(3) of the Income Tax Act, 1961 which is apparent from record. B/fd losses not given By considering the statement and examining the records, total income and demand are rectified as under: (Underlining provided by us) 3.2 We find that the ld. Administrative CIT had sought to revise this order passed u/s.154 of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not less than fifty-one per cent of the voting power were beneficially held by persons who beneficially held shares of the company carrying not less than fifty-one per cent of the voting power on the Vast day of the year or years in which the loss was incurred : Provided that nothing contained in this section shall apply to a case where a change in the said voting power takes place in a previous year consequent upon the death of a shareholder or on account of transfer of shares by way of gift to any relative of the shareholder making such gift: Provided further that nothing contained in this section shall apply to any change in - the shareholding of an Indian company which is a subsidiary of a foreign company as a result of amalgamation or demerger of a foreign company subject to the condition that fifty-one per cent shareholders of the amalgamating or demerged foreign company continue to be the shareholders of the amalgamated or the resulting foreign company. (b)[***] Provided that nothing contained in this section shall apply to a case where a change in the said voting power and shareholding takes place in a previous year consequent upon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Number of share Amt. in Rs. Number of shares Amt in Rs. (a) Authorised Equity shares of ₹ 100/- (b) Issued Subscribed and fully paid up Equity shares of ₹ 100/- each fully paid up 9,000,000 900,000,000 4,000,000 400,000,000 8,873,920 887,392,000 3,743,920 374,392,000 Total 8,873,920 887,392,000 3,743,920 374,392,000 Details of shares held by each shareholder holding more than 5% shares: Particulars As at 31 March. 2012 As at 31 March, 2011 Number of share % Number of shares % TracHoldings, LLC Rustic Cany ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Particulars Trac AR HOV ARM Total Acquisition Cost 456,822,379 56,177,621 513,000,000 Less: Reserves Equity share capital (80,917,756) 100,000 145,865,960 100,000 64,988,204 200,000 Goodwill/(Capital Reserve) 537,640,135 (89,788,339) 447,851,796 Less: Post-Merger Adjustments Deferred tax liability reversal Excess income tax provision -- -- -- -- 1,105,054 1,232,251 Net Goodwill / (Capital Reserve) -- -- 445,514,491 * By issue of 5,130,000 equity shares of &# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t proceedings as well as in the proceedings u/s.154 of the Act. Hence, having considered those facts and the ld. AO have taking a view thereon, the logical conclusion that could be drawn is that the ld AO ad taken one of the possible views on the matter, which cannot be the subject matter of revisionary jurisdiction u/s. 263 of the Act by the ld. CIT. The law is very well settled in this regard by various decisions of Hon ble High Courts and Hon ble Supreme Court. Hence, it could be safely concluded that the order of the ld. AO could not be construed as erroneous. 9. We find even on merits, with regard to denial of set off of brought forward losses of earlier years against the income of the assessee for the year under consideration, the issue is directly settled in favour of the assessee by the Co-ordinate Bench decision of Ahmedabad Tribunal in the case of CLP Power India (P) Ltd. vs. DCIT reported in 170 ITD 744(Ahmedabad Tribunal) dated 23/04/2018. The facts and the decision rendered thereon are as under:- 3. The relevant facts in brief are that the assessment under s.143(3) of the Act for AY 2011-12 was completed by the AO vide its order dated 21/03/2014 de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Pr.CIT that as per the tax audit report filed by assessee, it is manifest that there is a change in share holding of the assessee-company by more than 51% of the voting power during the previous year of change in shareholding pattern relevant to assessment year attracting the embargo placed in section 79 of the Act whereby loss incurred in any year prior to previous year shall not be allowed to be carried forward for set off in subsequent assessment year(s). The Pr.CIT alleged that the AO has failed to apply the correct position of law enjoined by section 79 of the Act and has overlooked and failed to make proper verification and enquiry in this regard. The Pr.CIT accordingly cancelled the assessment framed under s.143(3) of the Act and set aside the above issue to the file of the AO for de novo adjudication. 5. Aggrieved by the action of the Pr.CIT, the assessee is in appeal before the Tribunal agitating the jurisdiction usurped by the Pr.CIT under s.263 of the Act. 6. The Ld.AR for the assessee at the outset submitted that the assessment order sought to be impugned under s.263 of the Act has been passed after taking into account relevant facts placed on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the authorities below and material placed on record. The supervisory jurisdiction conferred upon the Pr.CIT under s.263 of the Act has been invoked in the present case and the assessment order passed by the AO under s.143(3) for AY 2011-12 has been set aside on the ground that the business loss occurred prior to the change of share holding is not permissible to be carried forward for set off against future losses in view of the restrictions placed under s.79 of the Act. Consequently, the Pr.CIT quantified the irregular allowance of carry forward business loss as well as purported short levy of tax thereon. The Pr.CIT has also alleged that the assessment has been completed in a perfunctory manner endorsing the claim of carry forward of business losses for set off in future assessment year without conducting any enquiry necessitated in this regard in the light of section 79 of the Act. 9. To begin with, we shall examine the central issue as to whether the embargo placed under s.79 of the Act is applicable in the facts of the case or not. As pointed out, the 100% voting power was earlier held by the ultimate holding company GPEC Mauritius itself. The voting power (shareh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee objectively in perspective and could not shrink his sacrosanct obligations and resort to simply set aside a completed assessment on non-existent ground. Thus, the prerequisites of section 263 are not satisfied. 11. We also do not visualize any merit in the plea on behalf of the Revenue about the lack of enquiry on the factual aspects. In the absence of any change in the beneficial ownership, we are unable to comprehend the nature of enquiry sought by the Pr.CIT in this regard. Hence, we are disposed to hold that the action of the Pr.CIT is devoid of sanction of law. Consequently, the order passed under s.263 of the Act by the Pr.CIT is required to be cancelled. We do so accordingly. 12. In the result, appeal of the assessee is allowed. 10. We also find that on merits, the assessee s case is also covered by the decision of Hon ble Karnataka High Court in the case of CIT vs. AMCO Power Systems Ltd., reported in 379 ITR 375 wherein the relevant operative portion are as under:- 17. The fact that ABL is the holding Company of APIL, which is the wholly owned subsidiary of ABL and that Board of Directors of APIL are controlled by ABL, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any violation of provisions of Section 79 of the Act. Hence, the case laws relied upon by the ld. DR on certain Mumbai Tribunal decisions and the Hon ble Delhi High Court decision in 66 Taxman.com 47 does not advance the case of the revenue. We also find that the ld. CIT had directed the ld. AO to directly disallow the benefit of set off of losses of earlier years against the income of current year on the ground that assessee had not complied with provisions of Section 79 of the Act, ignoring the various arguments made by the assessee before him, which are part of the paper book and the materials available on record. Moreover, we find that the ld CIT should have made proper enquiries on the impugned issue before reaching to such conclusion in the light of materials available on record and decided case laws thereon, which he had failed to do so in the instant case. Once he directs the ld AO to make certain disallowance, the ld AO is bound by that and the assessee would not get any chance to adjudicate the issue on merits. In this factual background, we had to address the issue on merits also and adjudicate the issue hereinabove. We find that the ld. CIT had only tried to substitute ..... X X X X Extracts X X X X X X X X Extracts X X X X
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