2012 (3) TMI 589 - AT - Income Tax

Tribunal allows partial appeal, directs Assessing Officer to permit carry forward losses, exemption under section 11 inapplicable.

The tribunal partially allowed the appeal, directing the Assessing Officer to permit the quantified carry forward losses against the assessee's income. As ... Carry forward of losses and unabsorbed depreciation - set-off of carried forward losses against current year income - effect of set-off on claim for exemption under section 11 - consequence of prior rejection of registration/exemption on carry forwardCarry forward of losses and unabsorbed depreciation - consequence of prior rejection of registration/exemption on carry forward - Allowance of carry forward losses/deficit and unabsorbed depreciation to the assessee for set-off against income of Assessment Year 2008-09 - HELD THAT: - The Tribunal examined earlier assessment orders on record which showed that assessing officers had allowed the assessee's net deficits to be carried forward in prior years. On that basis the Tribunal held there was no reason to refuse the benefit of quantified carry forward losses/deficit for the year under consideration. The Tribunal directed the Assessing Officer to allow the benefit of the carry forward losses to the assessee and permit their set-off against the assessee's income for the year. The Tribunal noted that the assessee had earlier applied for exemption under provision relating to registration/exemption but that prior rejection did not preclude the carry forward which had been allowed in earlier assessments. [Paras 6, 8]Carry forward losses/deficit and unabsorbed depreciation are to be allowed and set off against the assessee's income for AY 2008-09; AO directed to give effect.Set-off of carried forward losses against current year income - effect of set-off on claim for exemption under section 11 - Consequences of allowing carry forward losses on the assessee's claim for exemption under section 11 for Assessment Year 2008-09 - HELD THAT: - The Tribunal recorded that for the year under consideration the assessee had returned a positive income and had claimed exemption under section 11. It observed that if the carry forward losses are allowed and set off, the resulting computation would convert the income into a negative figure, thereby rendering the claim for exemption under section 11 inapplicable for that year. The assessee's counsel conceded that allowance of carry forward losses would make other grounds academic. Accordingly, having allowed the carry forward, the Tribunal treated the remaining grounds as infructuous. [Paras 9]Allowance of carry forward losses will negate the income for AY 2008-09 and thus the claimed exemption under section 11 cannot be allowed; other grounds dismissed as academic.Final Conclusion: The appeal is allowed in part: the Tribunal directed the Assessing Officer to allow the quantified carry forward losses/unabsorbed depreciation for AY 2008-09 and to give effect to their set-off; consequent claims for exemption under section 11 become inapplicable and the remaining grounds are dismissed as infructuous. Issues:1. Appeal against the order of ld. CIT (A) for assessment year 2008-09.2. Benefit of carry forward losses and unabsorbed depreciation under section 32(2) and exemption under section 11.3. Charging of interest under section 234B.Analysis:1. The appeal was made by the assessee against the order of ld. CIT (A) for assessment year 2008-09. The assessee raised various grounds in the appeal, with specific focus on Ground No. 8 related to the benefit of carry forward losses and unabsorbed depreciation under section 32(2) and exemption under section 11 of the Act.2. The counsel of the assessee argued that if Ground No. 8 is allowed, other grounds would become academic. Ground No. 8 contested the non-allowance of the benefit of carry forward losses and unabsorbed depreciation, along with the denial of exemption under section 11 to the appellant society.3. The tribunal examined the submissions and assessed the material on record. It was observed that in earlier years, the assessing officers had permitted the carry forward of net deficit in the respective assessment orders. Consequently, the tribunal directed the Assessing Officer (AO) to allow the benefit of quantified carry forward losses to the assessee against its income.4. It was noted that for the year under consideration, there was a positive income, and the assessee had filed a return claiming exemption under section 11. However, if the carry forward losses were set off, the income would turn negative, rendering exemption under section 11 inapplicable. As Ground No. 8 was decided in favor of the assessee, all other grounds were deemed academic and were dismissed.5. The tribunal partially allowed the appeal of the assessee, emphasizing the allowance of carry forward losses and addressing the issue of exemption under section 11. The order was pronounced in open court on a specified date, concluding the matter for assessment year 2008-09.