Case Law Details
PCIT Vs Burda Druck India Pvt. Ltd. (Delhi High Court)
Introduction: The Delhi High Court, in the case of PCIT vs. Burda Druck India Pvt. Ltd., addressed the issue of whether the Assessing Officer (AO) in a particular assessment year (AY) can decide on the carry forward and set off of business losses incurred in previous years. The case revolves around an observation made by the AO in the assessment order for AY 2014-15, stating that brought forward losses were not allowed to be carried forward. The appeal challenges the legal tenability of this observation.
Background: Burda Druck India Pvt. Ltd., the respondent/assessee, filed its Return of Income for AY 2014-15, declaring a current loss. The AO, in the scrutiny assessment, accepted the loss but made an observation regarding the carry forward of losses. The respondent/assessee carried forward business losses, unabsorbed depreciation, and capital losses from earlier years. The Commissioner of Income Tax (Appeals) [CIT(A)] upheld the AO’s view, relying on Section 79 of the Income Tax Act.
Court’s Analysis: The Delhi High Court examined the Tribunal’s decision to expunge the AO’s remark and considered the argument that a change in shareholding of more than 51% gave the AO jurisdiction over the carry forward issue. The court referred to Section 79 of the Income Tax Act, which restricts the carry forward and set off of losses in the case of a change in shareholding.
The court endorsed the Tribunal’s view that the AO’s role is limited to notifying the assessed loss for the relevant AY. The question of carrying forward and setting off losses against future profits falls within the jurisdiction of the AO dealing with the subsequent year. The court cited the Supreme Court’s decision in Commissioner of Income-tax v. Manmohan Das, emphasizing that an AO’s decision on loss carry forward in the previous year is not binding on the assessee.
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