Tribunal Upholds Commissioner's Decision on Set-off of Losses

The Tribunal upheld the Commissioner's decision to allow the set off of losses for the assessee in compliance with Section 72A, based on the relaxation granted by the CBDT regarding the production level requirement under Rule 9C. The Tribunal found no illegality in the orders and dismissed the revenue's appeal, concluding that there were no merits to support it.

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Issues:
Compliance with conditions under Rule 9C for allowing carry forward of losses.

Analysis:
The appeal pertains to the order of the learned Commissioner of Income-tax (Appeals)-1, New Delhi, regarding the allowance of brought forward losses claimed by the assessee for the assessment year 2011-12. The case involved the amalgamation of M/S KNG Guruswamy Oil Mills with the assessee, and the applicability of Section 72A of the Income Tax Act, 1961, which allows for the carry forward and set off of losses and unabsorbed depreciation of the amalgamating company under certain conditions. One such condition, as per Rule 9C of the Income Tax Rules, 1962, is that the amalgamated company must achieve at least 50% of the installed production capacity of the amalgamating undertaking within a specified period.

The assessee fell short of the prescribed production level in the fourth year of amalgamation but exceeded it in the subsequent year. The assessee had applied for relaxation of the production level condition with the Central Board Of Direct Taxes, which was pending approval. The Assessing Officer disallowed the claim for brought forward losses citing non-compliance with Rule 9C. However, the assessee argued that the CBDT had considered their application and relaxed the production level requirement to 47%.

The learned Commissioner of Income-tax (Appeals) accepted the assessee's compliance with the conditions under Section 72A based on the CBDT's order and allowed the set off of losses. The revenue challenged this decision before the Appellate Tribunal. The Tribunal noted that if the assessee obtains relaxation of conditions from the CBDT as provided in Rule 9C, it would suffice as compliance with Section 72A. Since there was no denial of the relaxation order by the CBDT, the Tribunal upheld the decision of the Commissioner and dismissed the appeal, finding no illegality or irregularity in the impugned orders.

Ultimately, the Tribunal concluded that there were no merits in the revenue's appeal and dismissed it accordingly. The decision was pronounced in open court on 5th November 2018.

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