Tax tribunal allows carry forward of unabsorbed depreciation but denies business loss carry forward

The tribunal partly allowed both the Revenue's appeal and the assessee's Cross Objections. The assessee was permitted to carry forward and set off unabsorbed depreciation. However, the carry forward of business losses for AY 2007-08 to 2010-11 was disallowed due to changes in shareholding, while it was allowed for AY 2011-12 and 2012-13 as there were no further changes.

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Issues Involved:
1. Condonation of delay in filing Cross Objections (CO).
2. Addition of Rs. 6461 based on Form No. 26AS.
3. Carry forward and set off of brought forward losses and unabsorbed depreciation.

Detailed Analysis:

1. Condonation of Delay in Filing Cross Objections (CO):
The assessee's CO was delayed by 17 days. The assessee submitted an affidavit and an application for condonation of delay, citing bona fide reasons for the delay, including seeking proper advice from counsel and chartered accountants. The tribunal, considering the substantial interest of justice, condoned the delay, referencing the Supreme Court's decision in National Thermal Power Company Limited v. CIT (1998) 229 ITR 383 (SC). The tribunal emphasized that technicalities should not obstruct justice, citing the Supreme Court's decision in Collector, Land Acquisition v. Mst. Katiji 1987 taxman.com 1072 (SC).

2. Addition of Rs. 6461 Based on Form No. 26AS:
The AO added Rs. 6461 to the assessee's income based on an entry in Form No. 26AS, reflecting undisclosed TDS. The CIT(A) directed the AO to verify the assessee's contention that the income did not pertain to it. The tribunal upheld the CIT(A)'s order, directing the AO to verify the factual aspects and pass orders on merits, ensuring the assessee is granted an adequate opportunity to present its case.

3. Carry Forward and Set Off of Brought Forward Losses and Unabsorbed Depreciation:
The assessee claimed brought forward losses of Rs. 5,32,99,080 from AY 2007-08 to 2011-12. The AO disallowed these losses, citing a change in shareholding pattern in AY 2012-13, invoking Section 79 of the Income-tax Act, 1961. The CIT(A) allowed the carry forward of losses, holding that the assessee, being a subsidiary of HDFC Ltd., a public limited company, was not subject to Section 79. The tribunal examined the shareholding changes and the applicability of Section 79.

Unabsorbed Depreciation:
The tribunal held that Section 79 does not apply to unabsorbed depreciation, referencing the Supreme Court's decision in CIT v. Shri Subhulaxmi Mills Limited (2001) 249 ITR 795 (SC). Thus, the assessee was entitled to carry forward and set off unabsorbed depreciation from AY 2007-08 to 2012-13.

Business Losses:
The tribunal analyzed the shareholding changes:
- Until AY 2009-10, Mr. Ajay Bohora and Mr. Anil Bohora held 100% shares.
- In AY 2010-11, HDFC Ltd. acquired 25.64% shares, reducing the Bohoras' combined shareholding to 74.36%.
- In AY 2011-12, HDFC Ltd.'s shareholding increased to 62.28%, reducing the Bohoras' shareholding to 37.72%.

The tribunal concluded that the assessee was hit by Section 79 for AY 2007-08 to 2010-11 due to the change in shareholding, disallowing the carry forward of losses for these years. However, for AY 2011-12 and 2012-13, the tribunal allowed the carry forward of losses as there was no further change in shareholding.

Conclusion:
The tribunal partly allowed both the Revenue's appeal and the assessee's CO. The assessee was allowed to carry forward and set off unabsorbed depreciation but was restricted from carrying forward business losses for AY 2007-08 to 2010-11 due to the change in shareholding pattern.

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