Tribunal grants set-off of carried forward losses for multiple assessment years

The Tribunal allowed the assessee's plea, directing the Assessing Officer to permit the set off of the loss carried forward from AY 2014-15 for AY 2016-17 and AY 2017-18. The Tribunal clarified that this direction does not mandate immediate refunds, and the Assessing Officer must assess refund eligibility under Section 240 after granting a hearing to the assessee. The same ruling applied to another assessee, Shelf Drilling J T Angel Limited, with adjustments in figures. All four appeals were granted on 5th January 2021.

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Issues Involved:
1. Claim of set off of unabsorbed business losses for AY 2014-15 against income for AYs 2016-17 and 2017-18.
2. Legitimacy of the Assessing Officer's action in declining the set off of losses during the pendency of remanded assessment proceedings.
3. Interpretation of Section 240 regarding the refund process during pending assessment proceedings.

Issue-wise Detailed Analysis:

1. Claim of Set Off of Unabsorbed Business Losses:
The primary issue revolves around whether the assessee can claim the set off of unabsorbed business losses from AY 2014-15 in subsequent assessment years (AY 2016-17 and AY 2017-18) while the assessment for AY 2014-15 is still pending. The assessee had claimed losses of Rs. 80,99,58,751 for AY 2014-15, which were converted into a positive income of Rs. 6,55,22,160 by the Assessing Officer. The assessee sought to set off these losses in AY 2016-17 and AY 2017-18, which the Assessing Officer denied, stating that the unabsorbed loss for AY 2014-15 does not exist as the assessment was completed with a positive income.

2. Legitimacy of the Assessing Officer's Action:
The Tribunal considered whether the Assessing Officer's denial of the set off was justified. The assessee argued that the denial of set off during the pendency of remanded assessment proceedings was premature and without legal authority. The Tribunal agreed, stating that the determination of tax liability based on the assumption that the loss claim is untenable is uncalled for and premature. The Tribunal held that the set off of the loss claimed by the assessee cannot be declined at this stage.

3. Interpretation of Section 240:
The Tribunal examined whether the refund process should be deferred until the finalization of the remanded assessment proceedings. The Tribunal referred to Section 240, which provides that refunds become due only on the making of fresh assessments when the original assessment is set aside or cancelled. The Tribunal noted that the refunds for the present assessment years became due as a result of the appellate order dated 4th October 2019, and the law does not require the assessment in which the refund arises to be the one set aside. The Tribunal concluded that the Assessing Officer's apprehension about the refund process was ill-conceived and that the set off should be allowed temporarily, subject to adjustments after the finalization of the remanded assessment.

Conclusion:
The Tribunal upheld the assessee's plea, directing the Assessing Officer to allow the set off of the loss brought forward from AY 2014-15 for AY 2016-17 and AY 2017-18. However, it clarified that this direction should not be construed as a directive for granting refunds, and the Assessing Officer must consider the refund's permissibility under Section 240 after providing a reasonable opportunity for hearing to the assessee. The same directions were applied to the other assessee, Shelf Drilling J T Angel Limited, with variations in figures.

Result:
All four appeals were allowed in the terms indicated above, with the judgment pronounced on 5th January 2021.

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