2017 (11) TMI 1555 - HC - Income Tax

Court affirms ITAT's allowance of loss carry forward for assessee-company based on BIFR extension

Principal Commissioner of Income-Tax Versus Rajasthan Explosives And Chemicals Ltd.

The court upheld the decision of the Income-tax Appellate Tribunal (ITAT) to allow the carry forward of losses and depreciation for the assessment year ... Rectification of mistake - Denying the carry forward of losses and depreciation - returns filed by the assessee were rejected as belated assessee-company which had been declared sick and was facing the supervision under BIFR - application filed under section 154 contending that the period for filing returns was extended by the BIFR by one year till December 31, 2001 - Held that:- The court is of the opinion that both the lower authorities did not give sufficient weightage to the fact that BIFR extended the period for filing the returns till December 31, 2001. This was expressly recognizing the fact that a new management had taken charge in 1996 pursuant to the freshly approved scheme and furthermore that the carry forward of losses and depreciation was an important component and rehabilitation plan contemplated by the parties. Thus Income-tax Appellate Tribunal, in our opinion, correctly inferred that the denial of the benefit to the assessee was not justified. No substantial question of law arises Issues:1. Appeal under section 260A of the Income-tax Act, 1961 questioning the decision of the Income-tax Appellate Tribunal regarding the carry forward of losses and depreciation for the assessment year 2001-02.Analysis:The judgment concerns an appeal by the Revenue against the decision of the Income-tax Appellate Tribunal (ITAT) regarding the denial of carry forward of losses and depreciation for the assessment year 2001-02. The ITAT had set aside the findings of the lower authorities, which had denied these benefits to the assessee-company on the grounds that it had been declared sick and was under the supervision of the Board for Industrial and Financial Reconstruction (BIFR) until March 31, 2000. The returns filed by the assessee were rejected as belated, leading to the initial denial of the benefits.The assessee had applied under section 154, arguing that the period for filing returns had been extended by the BIFR until December 31, 2001, following due process, including notifying the Income-tax Department. It was highlighted that a new management had taken over in 1996, and a fresh scheme had been approved in 1996, justifying the need for carrying forward losses and depreciation in the interest of justice and as part of the rehabilitation plan.The court noted that the lower authorities had not given enough weight to the fact that the BIFR had extended the filing period until December 31, 2001, recognizing the change in management and the importance of carrying forward losses and depreciation for the rehabilitation plan. The judgment concluded that the ITAT had correctly inferred that denying the benefits to the assessee was unjustified, leading to the dismissal of the appeal. It was held that no substantial question of law arose from the case, affirming the decision in favor of the assessee.