2022 (12) TMI 393 - AT - Income Tax

Tribunal Upholds CIT(A) Decision Allowing Set Off of Losses Against Business Income

The Tribunal upheld the CIT(A)'s decision, dismissing the Assessing Officer's appeal and confirming the allowance of set off of losses against business ... Rectification of mistake u/s 154 - Set-off of Losses of 10A Unit against the adjustment u/s 92CA and 40(a)(i) - As per AO set off of business loss being the loss of Chennai and Gurgoan undertakings, which was directed by CIT(A) to be set off, resulted into business loss being set off against the income from other sources and therefore, there is a mistake apparent from the record which needs to be rectified - Whether TP adjustment and the disallowance is question in altogether a separate adjustment/disallowance, which cannot be apportioned to a specific unit? - HELD THAT:- We have carefully considered the rival contentions and orders of the lower authorities. Fact shows that order giving effect to the order of the ld.CIT(A) was passed on 08.03.2012. According to that order, the loss incurred by the assessee was set off against other business income of ₹10,54,26,341/-. Therefore, in fact the business loss incurred by the assessee is set off against the business income of the assessee for the same year. The ld. CIT(A) has a followed three decisions of Hon’ble jurisdiction of High Court in M/S. GALAXY SURFACTANTS LTD. [2012 (3) TMI 101 - BOMBAY HIGH COURT], PATNI COMPUTER SYSTEMS LTD. [2013 (10) TMI 293 - BOMBAY HIGH COURT] and M/S. HINDUSTAN LEVER LTD. [2014 (4) TMI 1012 - BOMBAY HIGH COURT] DR could not show us any reason why the provisions of section 70 cannot be given effect to and how the order of the ld. CIT(A) is erroneous.In view of this, we confirm the order of the ld. CIT(A) and dismiss the appeal of the ld. Assessing Officer. Issues Involved:1. Rectification order passed under section 154 of The Income Tax Act, 1961 disallowing set off of losses against other income.2. Direction by CIT(A) to allow set off of losses against adjustments made under Section 92CA and Section 40(a)(i) of the Act.3. Interpretation of provisions under Section 70 and 71 of the Act regarding set off of losses.4. Applicability of High Court decisions on allowing set off of losses against business income.Analysis:1. The appeal was filed by the DCIT against the Appellate order passed by the CIT(A) for A.Y. 2007-08, challenging the rectification order disallowing the set off of losses. The AO raised grounds questioning the correctness of the directions given by the CIT(A) regarding adjustments under different sections of the Act. The AO argued that the TP adjustment and disallowance were separate and could not be apportioned to a specific unit.2. The assessee also filed an appeal raising grounds to allow set off of losses against adjustments made under Section 92CA and Section 40(a)(i) of the Act. The CO highlighted that the directions by CIT(A) were in accordance with the provisions for set-off of losses under Section 70 of the Act. The CO further clarified that the directions were not contrary to the earlier order of CIT(A) regarding set off of losses against profits of other units.3. The case involved the interpretation of provisions under Section 70 and 71 of the Act concerning the set off of losses against business income. The AO disallowed the set off of losses incurred by the assessee against other income, leading to a dispute regarding the correct application of these provisions. The assessee argued that the set off of losses of 10A units was in line with transfer pricing adjustments and disallowances confirmed by the CIT(A).4. The CIT(A) allowed the appeal of the assessee based on the decisions of the Hon'ble Bombay High Court, emphasizing that the losses of eligible units should be treated as business losses. The CIT(A) held that such losses could be set off against other business income of the assessee and, if insufficient, against other income as well. The Tribunal confirmed the CIT(A)'s order, citing the provisions of section 70 and the absence of any prohibition on adjusting transfer pricing resulting in income not available for set off.In conclusion, the Tribunal upheld the CIT(A)'s decision, dismissing the appeal of the Assessing Officer and confirming the allowance of set off of losses against business income as directed by the CIT(A). The Tribunal's decision was based on the application of relevant provisions of the Act and the precedents set by the High Court decisions.