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TMI Blog2022 (8) TMI 681X X X X Extracts X X X X X X X X Extracts X X X X ..... view, the said business loss becomes eligible for the set off in the year under consideration only subsequent to decision of the allowability of carry-forward in the case of Kovalam Hotel Ltd. under section 79 of the Act in the favour of assessee. As on date, the assessment order in the case of Kovalam Hotels Ltd. for AY 2006-07 is in operation and which has not been reversed by the CIT(A) or ITAT, thus, said business loss has not been carry forwarded to assessment year 2007-08 and therefore same is not available for set off against different heads of the income of the assessee as per the provisions of section 72A the Act for the assessment year under consideration. The issue of set off of business loss in AY 2007-08 u/s 72A of the Act is consequent to the issue of carry forward of loss in AY 2006-07 in Kovalam Hotels Ltd. in terms of section 79 - CIT(A) in the year under consideration is not justified in deciding the question of carryforward of loss in the case of Kovalam Hotels Ltd. for assessment year 2006-07 invoking section 72A of the Act as that issue has to be adjudicated by the appellate authorities having jurisdiction over the case of Kovalam Hotels Ltd. for AY 2006-07. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the income were cited by the assessee as claim of set off of brought forward losses and the unabsorbed depreciation in respect of M/s Kovalam Hotels Ltd., which amalgamated with the assessee company with effect from 01/04/2006 i.e. during the previous year relevant to the assessment year under consideration. 2.1 The Assessing Officer has reproduced amount of carry forward of business loss and unabsorbed depreciation claimed by the assessee in para 6.2 the assessment order. For ready reference, said detail is extracted as under: 6.2 As stated above, the assessee has claimed set off of ₹25,83,74,068/- representing carry business and unabsorbed depreciation of Kovalam Hotels Ltd. The break-up of this loss is as under: Business Loss (for A.Y. 2002-03, 04-05 and 05-06 13,43,71,999/- Unabsorbed Depreciation (for A.Y. 2002-03, 03-04, 04-05 05-06) 8,26,32,781/- Total 21,70,04,780/- Add: Assessed Business Loss for AY 2006-07 4,09,65,442/- 2.2 The Assessing Officer examined the return of income and Tax Audi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... present A.Y. 2007-08 under consideration. Therefore, out of the total brought forward loss of Rs.25,83,74,068/-, claimed by the assessee as set off representing the brought forward losses and depreciation of Kovalam Hotels Ltd, Rs.13,43,71,999/- is being excluded and the remaining amount of Rs.12,4002,069/- is being allowed as set-off. 3. On further appeal, the Ld. CIT(A) referred to the provisions of section 79 of the Act vis- -vis section 72A of the Act and held that in view of fact that section 72A of the Act being specific provision it has to be preferred over the general provisions of section 79 of the Act, therefore provisions of section 79 are not applicable in the instant case. The relevant finding of the Ld. CIT(A) is reproduced as under: 5.8 It can be seen from the above that the section pertains to amalgamation of a company owing industrial undertaking or a ship or a hotel with another company. which is the case in appeal before me. It has also been held in various case laws that the specific provision will overrule the general provision. Recently in the case of Tata Autocomp System Ltd vs. ACIT 2(3), the Hon'ble ITAT held on April 30, 2012 that specific pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e for A.Y. 2006-07 when the amalgamation had not taken place. Hence, once the amalgamation is approved by Hon'ble High Court of Bombay and the accounts were merged, provisions of section 72A only will come into play and not section 79 as held by the AO. Therefore, it is held that the appellant is eligible for carry forward of losses of Kovalam Hotel Ltd as per section 72A of the Income tax Act, 1961 and the ground of appeal of the appellant is allowed. 4. Before us the Ld. DR submitted that carry forward of the loss has been declined to M/s Kovalam Hotels Ltd. by its Assessing Officer in assessment year 2006-07 whereas M/s Kovalam Hotels Ltd. has amalgamated with the assessee company with effect from assessment year 2007-08 and therefore no loss of Kovalam Hotels Ltd was available with the assessee for set off in the year under consideration. He further submitted that as per section 79 of the Act, if there is a change in shareholding of the closely held company in any previous year, then carryforward of the loss of years prior to the previous year shall not allowed, if on the last day of the previous year 51% of the shareholding is not held beneficially by the shareholder ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... M/s Kovalam Hotels Ltd. became part of the assessee company. The provisions of section 72A of the Act gets attracted in the event of merger/amalgamated, therefore, in the case section 72A comes into picture only at the stage of second event i.e. AY 2007-08. 7.2 In the case of M/s Kovalam Hotels Ltd. for assessment year 2006-07, the assessee claimed carry forward of business loss of earlier years amounting to ₹13,43,71,982/-. The year-wise details of such loss has been tabulated by the Ld. CIT(A) in para 5.3 of the impugned order. For ready reference, said detail is extracted as under: AY Business Loss (In ₹) 2002-03 45,13,758/- 2003-04 8,92,29,786/- 2004-05 2005-06 4,06,28,455/- Total 13,43,71,982/- 7.3 The Assessing Officer in the case of Kovalam Hotels Ltd. for assessment year 2006-07 has rejected the claim for carryforward of the loss of ₹13,43,71,999/-. The assessee has filed copy of the said assessment order, whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acts of the case. 7.5 But the assessee in the year under consideration has claimed the set off of the said loss on the ground that M/s Kovalam Hotels Ltd. has been merged with the assessee company with effect from assessment year 2007-08. 7.6 In our opinion, once the Assessing Officer in the case of Kovalam Hotels Ltd for assessment year 2006-07 has already rejected claim of carry forward of the said business loss in terms of section 79 of the Act, then same cannot be available to the assessee for set off u/s 72A of the Act until and unless said finding of the Assessing Officer is reversed by the higher appellate authorities. The Ld. counsel of the assessee intimated that appeal against the order of the Assessing Officer in the case of Kovalam Hotels Ltd. for AY 2006-07 is pending before the Ld. First Appellate Authority. In our considered view, the said business loss becomes eligible for the set off in the year under consideration only subsequent to decision of the allowability of carryforward in the case of Kovalam Hotel Ltd. under section 79 of the Act in the favour of assessee. As on date, the assessment order in the case of Kovalam Hotels Ltd. for AY 2006-07 is in operat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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