2017 (12) TMI 1472

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....t forward loss Rs. 22.64 crores) which stood as per record before the demerger. 3. On the facts and in the circumstances of the case, the CIT(A) erred in upholding the Assessing Officer's view that for bifurcation of those deficiencies the case would be governed by section 72A(40(b) and he further erred in not upholding the assessee's claim that this case was covered by section 72A(4)(a)." 3. The issue in appeal lies in a narrow compass of material facts. It is a case of demerger, under the scheme approved by Hon'ble Gujarat High Court vide order dated 13.06.2007, and the short dispute before us is with respect of bifurcation of brought forward deficiencies, i.e. unabsorbed losses and depreciation, for computing the same in the hands of the assessee before us, i.e. demerged company. Under the scheme of demerger, the demerged company (i.e. the assessee) was left with the assets worth Rs. 17,12,758/-, whereas the resulting company (i.e. Advantage Retail Pvt Ltd) was transferred the assets worth Rs. 108,53,15,071/-. It was in this backdrop that the Assessing Officer was of the view that the brought forward losses and unabsorbed depreciation was required to be bifurcated be....

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.... 0.17 crores it has claimed the entire unabsorbed deprecation and brought forward losses aggregating to Rs. 37.22 crores in its return of income. Moreover, the assessee-company has set-off the current year's business income amounting to Rs. 1,99,21,607/- against these brought forward losses. Whereas, the assessee-company was required to carry forward the losses consequent to the demerger as per the provisions of section 72A(4)(b) of the Act. The assesseecompany in violation of the provisions as clearly laid down in the Act has claimed the entiic losses in the demerged company. 2.17 The assessee-company has not maintained separate accounts for the two divisions viz. B2B & B2C. This fact is clear from the fact that the assesseecompany has not submitted separate account for the two undertakings but, a 'working of bifurcation'. Further, on examination of the records of the assesseecompany available with this office for the earlier years it is dear that it has neither maintained separate accounts for the two divisions nor has computed losses and depreciation separately as per the provisions of the Act. 2.18 The working provided by the assessee-company consequen....

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....see-company has not maintained separate accounts for the demerged undertaking and the resulting undertaking on a year to basis and the claim of the assessee-company that certain losses and depreciation is directly relatable to the demerged company is an afterthought devoid of any basis and merit, the provisions of clause (a) of sub section 4 of section 72A of the Act does not apply in the present case. 2.23 As per the discussion held above, no brought forward loss and unabsorbed depreciation is directly relatable to the undertaking transferred and the resulting company. Thus, the provisions of clause (b) of sub section 4 of section 72A of the Act are squarely applicable in the present case." 4. Aggrieved, assessee carried the matter in appeal before the CIT(A) but without any success. Learned CIT(A) approved and justified the approach of the Assessing Officer, and observed as follows:- "3.3 I have considered the facts of the case; assessment order and appellant's submission. The undisputed facts are- substantial business of the appellant is demerged in a separate entity and before demerger, separate accounts or even final accounts In respect of demerged and....

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....n not directly relatable to the undertaking transferred, the same is to be apportioned in the ratio of assets of the two undertakings. Assessing officer has done the same and there is no dispute as far as apportionment of unabsorbed depreciation and brought for business losses in clause (b) is concerned. In view of the facts mentioned in the assessment order and discussion in preceding para, I uphold the view taken by the assessing officer and dismiss these grounds as not sustainable." 5. The assessee is not satisfied, and is in further appeal before us. 6. We have heard the rival contentions, perused the material on record and duly considered facts of the case in the light of applicable legal position. 7. Section 72A(4), which provides for the legal basis for bifurcation of brought forward losses and unabsorbed depreciation, provides as follows:- "72A... (4) Notwithstanding anything contained in any other provisions of this Act, in the case of a demerger, the accumulated loss and the allowance for unabsorbed depreciation of the demerged company shall- (a) where such loss or unabsorbed depreciation is directly relatable to the undertakings transf....