2017 (4) TMI 449 - AT - Income Tax

Tribunal Upholds Commissioner's Decisions in Tax Appeal; Allows Carry Forward of Losses

ITO., Ward-1 (3), Kolkata Versus M/s GKW Ltd.

The tribunal upheld the Commissioner of Income Tax (Appeals) decisions in the case. It condoned the delay in filing the appeal, deleted the double ... Disallowance of property expenses - Held that:- We find that the ld DR did not advance any argument on the subject mentioned deletion of disallowance. On the contrary, the ld AR relied on the order of the ld CIT(A). We find that the assessee had submitted that the expenses were incurred towards maintenance of property located at King’s Court, Calcutta which is situated just adjacent to the registered office of the assessee and it was used for the purpose of business only. We find that the ld CIT(A) had observed that on perusal of the details filed thereon, the said expenses related to mainly salaries to the maintenance staff, staff uniform including washing charges, service charges for lift, municipal taxes etc. We find that the said expenses are not in the nature of capital expenditure and also not personal in nature. Hence the same are squarely allowable as deduction u/s 37 of the Act. Carry forward of losses of amalgamating company in the hands of the amalgamated company - Held that:- The amendment brought in section 72A(2)(ii) of the Act is only procedural in nature. The amendment brought in section 72A(2)(ii) of the Act had shifted from stringent measures to be complied with to the relaxation scheme for the benefit of the assessee. Hence the same is a beneficial provision intended to cure the genuine hardship that had been hitherto created to the assessee. Hence the same would have to be held retrospective in operation. We have already held the purpose of the amendment brought in section 72A(2)(ii) of the Act hereinabove and the amendment brought in thereon is only procedural in nature and hence respectfully following the aforesaid Hon’ble Supreme Court and Hon’ble Jurisdictional High Court decisions supra, we hold that the procedural amendment would have to be retrospective in nature and hence the same is applicable for the Asst. Year 1996-97 in the hands of the amalgamated company and accordingly the loss of the amalgamating company shall be eligible to be carried forward in the hands of the amalgamated company. We hold that the ld CIT(A) had rightly granted relief to the assessee by allowing the benefit of carry forward of losses pertaining to the amalgamating company in the hands of the amalgamated company (assessee herein). Accordingly, the grounds raised by the revenue are dismissed. Issues Involved:1. Condonation of delay in filing the appeal.2. Deletion of disallowance under Section 40A(3) of the Income Tax Act.3. Deletion of disallowance of property expenses.4. Allowing the carry forward of losses of the amalgamating company.Detailed Analysis:1. Condonation of Delay in Filing the Appeal:At the outset, the tribunal noted a delay of 7 days in filing the appeal by the Revenue. Considering the concession given by the Assessee's Representative (AR) and the reasons for the delay, the tribunal condoned the delay and admitted the appeal for adjudication.2. Deletion of Disallowance under Section 40A(3):The first issue was whether the Commissioner of Income Tax (Appeals) [CIT(A)] was justified in deleting the disallowance of Rs. 74,635/- under Section 40A(3) of the Income Tax Act. The Assessee had already disallowed this amount suo moto in the return of income. The Assessing Officer (AO) disallowed the same amount again, leading to double disallowance. The CIT(A) deleted the double disallowance, and the tribunal found no infirmity in this decision, dismissing the Revenue's ground.3. Deletion of Disallowance of Property Expenses:The next issue was whether the CIT(A) was justified in deleting the disallowance of property expenses amounting to Rs. 1,62,747/-. The Assessee had debited this amount towards maintenance of property under 'Miscellaneous Expenses'. The AO disallowed the expenses, contending they were not related to the business. The CIT(A) found that the AO did not provide a specific finding on how the expenses were unrelated to the business and noted that the expenses were not capital in nature and were related to the business. The tribunal agreed with the CIT(A), stating the expenses were allowable under Section 37 of the Act, and dismissed the Revenue's ground.4. Allowing the Carry Forward of Losses of the Amalgamating Company:The final issue was whether the CIT(A) was justified in allowing the carry forward of losses amounting to Rs. 9,93,82,438/- of the amalgamating company in the hands of the amalgamated company. M/s Powmex Steels Limited (PSL) merged with the Assessee company, and the Assessee applied for a certificate from the specified authority to carry forward the losses. The AO disallowed the claim, stating no order had been passed by the authority.The CIT(A) deleted the disallowance, noting:- The unabsorbed losses of PSL were approved by the High Court to be carried forward.- The Assessee had applied for the certificate and responded to all queries.- The Assessee fulfilled all conditions for carrying forward losses in case of amalgamation.- The amendment to Section 72A, removing the requirement of obtaining a certificate, was procedural and had retrospective application.The tribunal found that all conditions of Section 72A were complied with, and the losses should be allowed to be carried forward. It noted that the amendment to Section 72A was procedural and intended to cure genuine hardship, thus having retrospective application. The tribunal cited several judicial precedents supporting this view and concluded that the CIT(A) rightly granted relief to the Assessee. The Revenue's grounds were dismissed.Conclusion:The tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s decisions on all issues. The order was pronounced on 05.04.2017.