ACIT Vs Ginza Industries Private Limited (ITAT Kolkata)
The appeals filed by the Revenue and the Cross Objections filed by the assessee arose from orders passed by the National Faceless Appeal Centre (NFAC), Delhi, for Assessment Years 2017-18 and 2018-19.
Assessment Year 2017-18
The Revenue challenged the order of the Commissioner of Income Tax (Appeals) [CIT(A)] deleting the disallowance of set-off of brought forward losses amounting to Rs.5,19,10,684. The Assessing Officer (AO) had held that the assessee company was not entitled to claim the losses of the amalgamating company, M/s Sunsilk Dyeing & Printing Mills Pvt. Ltd., as the conditions prescribed under Section 72A(2) of the Income-tax Act were allegedly not satisfied.
The assessment had originally been completed under Section 143(3) and was subsequently revised under Section 263. During the reassessment proceedings, the AO observed that the assessee had claimed brought forward losses and unabsorbed depreciation pertaining to the amalgamating company. According to the AO, the assessee had failed to continue the business of the amalgamating company and had not fulfilled the conditions of Section 72A(2). Consequently, the set-off was disallowed.
The CIT(A), however, examined the facts and evidence in detail. It was noted that the amalgamating company had been engaged in the business of processing art silk cloth on a job work basis for more than three years before amalgamation. The appellate authority also found that the prescribed condition relating to retention of at least 75% of the book value of fixed assets had been satisfied. Further, evidence showed that the assessee had acquired the business assets of the amalgamating company and had continued the business for the required period following amalgamation.
