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2020 (10) TMI 748
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....sses was denied by the Assessing Officer in A.Y.2006-07 invoking the provisions of section 79 of the Act. 4. Briefly stated the facts are that, during the A.Y. 2006-07 assessee incurred business loss as per the return of income filed. Assessee also incurred business loss in earlier assessment years aggregating to Rs..18.96 Crores and had sought to carry forward the said losses to be set off against business income of subsequent assessment years. However, the claim for carry forward of losses was denied by the Assessing Officer by invoking the provisions of section 79 of the Act, which was sustained by the Ld.CIT(A) and also by the Tribunal in ITA.No. 5760/Mum/2009 dated 05.06.2013. Assessee carried the matter before the Hon'ble High Court and the appeal was admitted by the Hon'ble High Court on the following question of law: - "(a) Whether the Tribunal ought to have held that the provisions of section 79 of the Act will not have any application for the year under consideration as the Appellant is not seeking set off of the brought forward business loss in this year? (b) Whether the Tribunal ought to have held that the Appellant's case is covered by ....
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.... 20,00,000 100.00 9. It was contended that the assessment for the A.Y. 2006-07 was made on the assumption that Inter Gold India Pvt. Ltd. has transferred its entire shareholding to Rosy Blue (India) Pvt. Ltd. However, the factual position was that the said Inter Gold India Pvt. Ltd. had retained 4,000 shares of assessee which it continues to be held by it till date. It was contended that this fact was also confirmed by the annual returns filed by the assessee with the Registrar of Companies as well the audited accounts of Inter Gold India Pvt. Ltd. Therefore, it was contended that based on the mistaken information submitted by the assessee during assessment proceedings for A.Y. 2006-07 it was held that in F. Y 2005-06 there was a change in shareholding of the assessee Company and as a result of which shares carrying more than 51% of the voting power are not beneficially held by the persons who beneficially held shares carrying not less than 51% of the voting power in the year in which such loss was incurred. Accordingly, the Assessing Officer by invoking the provisions of Section 79 of the Act, did not allow the loss of Rs..18.96 Crores assessed up to A.Y. 2005-06 to be carr....
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....olders of the assessee as on March 31, 2005 continued to hold 51% of the shares at the end of the financial year in which such losses are set off. Therefore, it is submitted that the provisions of section 79 can be attracted only in the year in which the loss is sought to be set off. 12. The Ld. Counsel for the assessee submitted that the factual position of shareholding at the end of 31.03.2005 and as on 31.03.2013 are as under: - Name of the Shareholder As on March 31, 2005 No. of % shares As on March 31, 2013 No. of % shares Inter Gold India Pvt. Ltd. 10,99,850 54.99 4,000 00.20 Rosy Blue (India) Pvt. Ltd, 5,99,900 30.00 16,95,850 84.79 Vijay N. Jain 2,00,000 10.00 2,00,000 10.00 Kajal Jain 1,00,000 05.00 1,00,000 05.00 Total 19,99,750 99.99 19,99,850 99.99 13. Learned Counsel for the assessee submitted that assessee's case is covered by exception provided in section 79 of the Act as more than 51% of its shares were held by the same group of shareholders as on 31st March 2005 and 31st March 2013. Learned Counsel for the assessee submitted that the denial of carry forward of losses in the as....
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....assessee also placed reliance on the decision of the Hon'ble Supreme Court in the case of CIT v. Italindia Cotton Co. Pvt. Ltd. [174 ITR 160] and submitted that as per clause (a) of section 79, as it stood for the year under consideration, the said provision would not apply where shares carrying more than 51% of the voting power were beneficially held by the same group of shareholders on the last day of the year in which the loss was incurred and the year in which the loss is sought to be set off. Ld. Counsel for the assessee therefore submits that in the present case more than 99% of the shares of the assessee company was held by Inter Gold India Pvt. Ltd., Soignee Kothari, Rosy Blue (India) Pvt. Ltd., Vijay Jain and Kajal Jain, both at the time when the loss was incurred and also when it was sought to be set off. Therefore, it was submitted by the Ld. Counsel for the assessee that the disabling provision of section 79 of the Act should not apply to the present case. It was submitted that the provisions of section 79 of the Act does not apply to those cases where there is a interse change in shareholding, provided the transferor of shares continues as a shareholder. 17. Ld.....
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....4(2) of the Income-tax Act, as it was not a business loss. The Income-tax officer has under section 24(3) to notify to the assessee the amount of loss as computed by him, if it is established in the course of assessment of the total income that the assessee has suffered loss of profits. Section 24(2) confers a statutory right (subject to certain conditions which are not material) upon the assessee who sustains a loss of profits in any year in any business, profession or vocation to carry forward the loss as is not set off under sub-section (1) to the following year, and to set off against his profits and gains, if any, from the same business, profession or vocation for that year. Whether the loss of profits or gains in any year may be carried forward to the following year and set off against the profits and against the same business, profession or vocation under s. 24(2) has to be determined by the Income-tax Officer who deals with, the assessment of the subsequent year. It is for the Income-tax Officer dealing with the assessment in the subsequent year to determine whether the loss of the previous year may be set off against the profits of that year. A decision recorded b....
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....that the claim of the assessee has to be examined by the Assessing Officer in the year in which such claim for set off was made by the assessee in the return of income. Following the decision of the Hon'ble Apex Court, the Tribunal in this case decided the appeals against the assessee. 23. The ratio of the decision of the Hon'ble Supreme Court in the case of CIT v. Manmohan Das (supra) applies squarely to the facts of the assessee's case. On a reading of the Tribunal order in ITA.No.5760/Mum/2009 dated 05.06.2013 passed for the A.Y. 2006-07 wherein the claim for carry forward of losses were denied invoking provisions of section 79 of the Act, we observed that the decision of the Hon'ble Supreme Court in CIT v. Manmohan Das (supra) was not brought to the notice of the Tribunal and the Tribunal had no occasion to examine the effect of this decision. Therefore, we are of the considered view that in view of the decision of the Hon'ble Supreme Court in the case of CIT v. Manmohan Das (supra) the decision of the Tribunal for the A.Y.2006-07 sustaining the action of the Assessing Officer in not carrying forward the loss to be set off against the profits of the subsequen....
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....ood not reconciled. During the course of assessment proceedings, the assessee had explained that assessee engaged in the business of manufacture and trading of Diamonds, Precious and semi-precious stone studded jewellery and also gold jewellery, the assessee had totally handled 14,103.06 carats of diamond, out of which only 5.16 carats of diamond could not be explained. Assessee had submitted that this minor difference which contribute to 0.036% of total material handled had arouse on account of weighing error and incidental normal loss. The Ld. Assessing Officer however did not agree to this explanation of the assessee and made an estimated addition of Rs..50,000/- towards 5.16 carats of diamond which was also upheld by the Ld.CIT(A). 26. During the course of assessment proceedings, the assessee had explained that 3,42,130 grams of gold that were handled by the assessee during the year in the regular course of its business, only 361.94 grams of gold could not be reconciled which contribute to 0.105% of the total material handled. The assessee had also given a plausible explanation that this minor difference had arouse on account of recovery from dust from repair centre et....