Tribunal upholds CIT(A) decisions on carry forward of losses & MAT credit in demerger case.

The Tribunal upheld the CIT(A)'s decisions in both issues, allowing the set off of carry forward of loss of capital gains and the carry forward and set off of brought forward MAT credit in the case of demerger. The Revenue's appeal was ultimately dismissed by the Tribunal.

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Issues:
1. Allowance of set off of carry forward of loss of capital gains in the case of demerger.
2. Allowance of carry forward and set off of brought forward MAT credit in the case of demerger.

Issue 1: Allowance of set off of carry forward of loss of capital gains in the case of demerger:
The appeal by the Revenue challenged the CIT(A)'s decision to allow the set off of carry forward of loss of capital gains in the case of demerger. The assessee company demerged a part of its business during AY 2011-12, and the AO denied the set off of long term capital loss against long term capital gain under the head tenancy rights. The CIT(A) allowed the claim of the assessee, emphasizing that the amalgamating company was entitled to set off the loss, contrary to the amalgamated company. The Tribunal upheld the CIT(A)'s decision, stating that there was no specific provision prohibiting the set off of such loss in the hands of the assessee itself. The Tribunal differentiated this case from the Clariant Chemicals (I) Ltd. case, where loss of an amalgamating company was set off post-amalgamation in the hands of the amalgamated company. The Tribunal concluded that the CIT(A) rightly allowed the claim of the assessee, dismissing the Revenue's appeal.

Issue 2: Allowance of carry forward and set off of brought forward MAT credit in the case of demerger:
The AO disallowed the carry forward and set off of MAT credit claimed by the assessee, similar to the treatment of capital loss in the case of demerger. The CIT(A) allowed the claim of the assessee, pointing out that there was no specific provision barring the carry forward of MAT credit in the case of demerger. The Tribunal agreed with the CIT(A), emphasizing that the MAT credit belonged to the assessee itself and not the demerged company. Section 115JAA did not prohibit the carry forward of MAT credit of the assessee in such cases. The Tribunal found no fault in the CIT(A)'s decision and dismissed the Revenue's appeal.

In conclusion, the Tribunal upheld the decisions of the CIT(A) in both issues, allowing the set off of carry forward of loss of capital gains and the carry forward and set off of brought forward MAT credit in the case of demerger. The Revenue's appeal was ultimately dismissed by the Tribunal.

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