Orra Fine Jewellery Pvt. Ltd. Vs DCIT (ITAT Mumbai)
The substantial issue for consideration now before us for the A.Y. 2012-13 is whether the provisions of section 79 of the Act can be invoked and examined in the assessment year in which the assessee claimed for carry forward of losses or in the assessment year in which the assessee actually claimed set off of carry forward losses against the profits of that year. The assessee contends that the Assessing Officer can examine the applicability of the provisions of section 79 of the Act only in the year in which the loss is set off and not in the year in which the assessee claims the loss to be carried forward. In the present case during the A.Y. 2006-07 the Assessing Officer invoking the provisions of section 79 of the Act denied carry forward of losses prior to the A.Y. 2006-07. Assessee carried the matter unsuccessfully before the appellate authorities and the matter is now pending before the Hon’ble High Court.
In the case of CIT v. Manmohan Das [59 ITR 699] the following question which came up before the Hon’ble Allahabad High Court has been examined by the Hon’ble Supreme Court in the appeal preferred by the revenue.
“Whether the assessee could claim a set off of the loss suffered by him in the preceding year 1950-51 against his profits in the year under consideration, i.e., 1951-52, having failed to prefer an appeal against the refusal by the Income-tax Officer making the assessment for the year 1950-51 to allow the assessee to carry forward the loss under section 24(2) of the Act ?”
The Hon’ble Supreme Court held as under: –
“3. The second question presents little difficulty. In making his order of assessment for the year 1950-51, the Income-tax Officer declared that the loss computed in that year could not be carried forward to the next year under section 24(2) of the Income-tax Act, as it was not a business loss. The Income-tax officer has under section 24(3) to notify to the assessee the amount of loss as computed by him, if it is established in the course of assessment of the total income that the assessee has suffered loss of profits. Section 24(2) confers a statutory right (subject to certain conditions which are not material) upon the assessee who sustains a loss of profits in any year in any business, profession or vocation to carry forward the loss as is not set off under sub-section (1) to the following year, and to set off against his profits and gains, if any, from the same business, profession or vocation for that year. Whether the loss of profits or gains in any year may be carried forward to the following year and set off against the profits and against the same business, profession or vocation under s. 24(2) has to be determined by the Income-tax Officer who deals with, the assessment of the subsequent year. It is for the Income-tax Officer dealing with the assessment in the subsequent year to determine whether the loss of the previous year may be set off against the profits of that year. A decision recorded by the Income-tax Officer who computes the loss in the previous year under s. 24(3) that the loss cannot be set off against the income of the subsequent year is not binding on the assessee. ”
The ratio of the decision of the Hon’ble Supreme Court in the case of CIT v. Manmohan Das (supra) applies squarely to the facts of the Assessee’s case. On a reading of the Tribunal order in ITA.No.5760/Mum/2009 dated 05.06.2013 passed for the A.Y. 2006-07 wherein the claim for carry forward of losses were denied invoking provisions of section 79 of the Act, we observed that the decision of the Hon’ble Supreme Court in CIT v. Manmohan Das (supra) was not brought to the notice of the Tribunal and the Tribunal had no occasion to examine the effect of this decision. Therefore, we are of the considered view that in view of the decision of the Hon’ble Supreme Court in the case of CIT v. Manmohan Das (supra) the decision of the Tribunal for the A.Y.2006-07 sustaining the action of the Assessing Officer in not carrying forward the loss to be set off against the profits of the subsequent years has no relevance and the findings given therein has no application for the assessment year under consideration. We are also of the view that the decision of the Tribunal cannot be considered as a binding precedent as the Tribunal did not consider the decision of the Hon’ble Supreme Court in the case of CIT v. Manmohan Das (supra). In the facts and circumstances, thus respectfully following the decision of the Hon’ble Supreme Court in the case of CIT v. Manmohan Das (supra) we hold that the claim for set off of carry forward of losses prior to assessment years 2006-07 against the profits of the current assessment year i.e. A.Y.2012-13 vis-à-vis the provisions of section 79 of the Act has to be examined by the Assessing Officer only in the assessment year in which the assessee claimed such set off of losses in the return of income. In the present case since the assessee has claimed set off of carry forward of losses against the income of the current assessment year i.e. A.Y. 2012-13 and also in the subsequent assessment years this claim of the assessee has to be examined only during the assessment year 2012-13 and subsequent assessment years. Thus, the grounds raised in this regard are restored to the file of the Assessing Officer who shall decide the implication of section 79 of the Act in the light of our above said findings and observations. The grounds raised are disposed off accordingly.
FULL TEXT OF THE ITAT JUDGEMENT
1. These two appeals are filed by the assessee against different orders of the Learned Commissioner of Income Tax (Appeals) – 50, Mumbai [hereinafter in short “Ld.CIT(A)”] dated 21.04.2014 and 31.06.2016 for the A.Y.2012-13 & A.Y. 2013-14 respectively.
2. As the issues being identical, these appeals are disposed of by way of this common order for the sake of convenience.
3. The common issue in both these appeals is regarding the Ld.CIT(A) confirming the action of the Assessing Officer in denying set off of unabsorbed business loss on the ground that carry forward of losses was denied by the Assessing Officer in A.Y.2006-07 invoking the provisions of section 79 of the Act.
4. Briefly stated the facts are that, during the A.Y. 2006-07 assessee incurred business loss as per the return of income filed. Assessee also incurred business loss in earlier assessment years aggregating to ₹.18.96 Crores and had sought to carry forward the said losses to be set off against business income of subsequent assessment years. However, the claim for carry forward of losses was denied by the Assessing Officer by invoking the provisions of section 79 of the Act, which was sustained by the Ld.CIT(A) and also by the Tribunal in ITA.No. 5760/Mum/2009 dated 05.06.2013. Assessee carried the matter before the Hon’ble High Court and the appeal was admitted by the Hon’ble High Court on the following question of law: –
“(a) Whether the Tribunal ought to have held that the provisions of section 79 of the Act will not have any application for the year under consideration as the Appellant is not seeking set off of the brought forward business loss in this year?
(b) Whether the Tribunal ought to have held that the Appellant’s case is covered by the exception to section 79 of the Act?”
5. As the things stood thus, during the assessment year under consideration i.e. A.Y. 2012-13 the assessee in the return of income claimed set off of losses relating to the Assessment Years prior to A.Y.2006-07. However, the Assessing Officer while completing the assessment u/s. 143(3) r.w.s. 153(A) of the Act ignored the claim of the assessee for set off of losses against income for A.Y. 2012-13.
6. The assessee carried the matter before the Ld.CIT(A) and contended that during the A.Y. 2006-07 the Assessing Officer denied carry forward of brought forward losses by invoking provisions of section 79 of the Act. It was contended that the share holding pattern of the assessee company up to 31.03.2015 was as under: –
