Income Tax Appellate Tribunal - DelhiMesse Dusseldorf India (P) Ltd., New ... vs Department Of Income Tax on 25 March, 2015IN THE INCOME TAX APPELLATE TRIBUNAL
                (DELHI BENCH ' E', NEW DELHI)

      BEFORE SHRI G. C. GUPTA, HON'BLE VICE PRESIDENT
         AND SHRI T.S. KAPOOR, ACCOUNTANT MEMBER
                     I.T.A. No.2642 /Del/2013
                     Assessment year : 2009-10
DCIT, Circle 6(1),          Vs. Messe Dusseldorf India (P) Ltd.
New Delhi                        1, Commercial Complex,
                                 Pocket H & J, Sarita Vihar,
                                 New Delhi
GIR / PAN: AABCC4880E
         (Appellant)                    (Respondent)

                   Appellant by :     Shri Piyush Kaushik, Adv.
                   Respondent by :    Shri P Dam Kanunjha, Sr. DR

      Date of hearing       :         16.03.2015
      Date of pronouncement :         25.03.2015

                                      ORDER

PER T.S. KAPOOR, AM:This is an appeal filed by Revenue against the order of Ld. CIT(A)
dated 21.12.2011. The only grievance raised by Revenue was against action
by Ld. CIT(A) by which he has allowed claim of brought forward of
unabsorbed depreciation.2.    At the outset, the Ld. D.R. invited our attention to assessment order
and submitted that the assessee had already exhausted the carry forward
losses and moreover, there was change in shareholding and therefore, the
claim of brought forward loss was not allowedu/s 79of the I. T. Act, 1961.3.    Ld. A.R. on the other hand invited our attention to the relevant finding
of Ld. CIT(A) and submitted that brought forward losses were due to2              ITA No.2642/Del/2013unabsorbed depreciation and were not carry forward losses and, therefore,
Section 79 was not applicable. It was submitted that Hon'ble Supreme Court
in the case ofCIT Vs Shubh Laxmi Mills Ltd.249 ITR 795 S.C. has clearly
held that Section 79 applies only to carry forward of set off of losses and
does not include carry forward of depreciation and unabsorbed depreciation.
Ld. A.R. submitted that various High Courts including Kerala and Madras
High Courts have followed Hon'ble Supreme Court's order and in this
respect our attention was invited to paper book pages 3-17.4.    We have hard rival parties and have gone through the material placed
on record. We find that Ld. CIT(A) had called for report for Assessment
Year 2009-10 and from the records he found that assessee had claimed set
off of depreciation for the income and its brought forward claimed were not
on account of business losses. The Hon'ble Supreme Court in the case ofCIT Vs Subhlaxmi Mills Ltd.(supra) has held as under:"So far as question No.2 is concerned, the question is whether in
      applyingsection 79of the Act, only the business loss should be taken
      into account and not the unabsorbed depreciation or unabsorbed
      development rebate. The High Court has answered the question
      saying that when section 79 speaks of loss, it does not include
      unabsorbed depreciation or unabsorbed development rebate. We
      agree with the High Court."5.    Ld. CIT(A) has already looked into the case law relied by assessee
and for the sake of convenience, findings of Ld. CIT(A) are reproduced
below:"4. Before the undersigned the appellant has submitted:"The assessee has thus claimed set off from brought forward
      "unabsorbed depreciation" only as noted by the AO itself in its order.
      The year wise details of "unabsorbed depreciation" of RS.6,236,736/-
      were duly stated in the Return of Income being in record of the AO.3                ITA No.2642/Del/2013Computation forming part of Return of Income for A.Y. 2009-10
enclosed. From the said computation forming part of return of income
it is thus abundantly clear that the assessee has claimed set off in
respect of "unabsorbed depreciation" only without claiming any set
off in respect of losses". From the extract of Tax audit report filed
before the AO being Annexure 4 of the letter dated 24.10.11 before
the AD it is clear that even though the asses e - w s having brought
forward balance of "business losses" also, however the assessee has
claimed set off in respect of "unabsorbed depreciation" only which is
abundantly clear from theReturn of Income(supra) and this fact has
itself been admitted by the AO in the first line of its order. The
assessee has thus not claimed any set off on account of "business
losses" as a matter of fact and record. In the process of disallowance
(as aforesaid) by the AO, the AO fails to take a note of the legal
position as to whether "unabsorbed depreciation" being a item
distinct from losses can at all fall under the clutches of section 79.
In the present case the assessee has claimed set off in respect of
"unabsorbed depreciation" only as a matter of fact as admitted by the
AO itself in the first line of its order. No set off was claimed in respect
of "business losses". It is a settled legal position that even in those
cases where the provisions of section 79 are held to be applicable the
disallowance will be confined to "business losses" only and will not
extend to "unabsorbed depreciation".The decision of Hon'ble
Supreme Court in the case ofCIT Vs Subhulaxmi Mills Ltd.249 ITR
795 SC (pages 17-18 paper book): The Hon'ble Supreme Court in this
case very clearly held as under:"So far as question No. 2 is concerned, the question is whether in
applyingsection 79of the Act, only the business loss should be taken
into account and not the unabsorbed depreciation or unabsorbed
development rebate. The High Court has answered the question
saying that when section 79 speaks of loss, it does not include
unabsorbed depreciation or unabsorbed development rebate. We
agree with the High Court".5. The records of the appellant for A.Y. 2009-10 were called for. From
the record, it is seen that in the computation of total income filed by
the appellant it has claimed brought forward and set off of
depreciation of RS.62,36,736/- from the income of Rs.93,25,494/- as
shown in the P&L account. It has returned the gross total income of
Rs.30,88,758/-. The ITR 6 on the file shows in the Schedule BFLA,4              ITA No.2642/Del/2013(giving details of income after set off of brought forward losses of
      earlier years) that the appellant had not claimed brought forward loss
      set off, in fact it had claimed brought forward depreciation set off of
      Rs.62,36,736/-. In reply to noticeu/s 143(2)/142(1)of the Act dated
      21.07.2011 the assessee had replied to the AO on 24.08.2011 stating
      clearly at point 4 "clause 18 of your notice: There in no loss carried
      forward for the A.Y. 2009-10."6. The legal proposition in the case ofCIT Vs Subhulaxmi Mills Ltd.249 ITR 795 (SC) states that section 79 applies only to carry forward
      and set off of losses in the case of certain companies and does not
      apply to the case of carry forward / unabsorbed depreciation. In the
      present case, the assessee is not carrying forward and setting off any
      loss but has unabsorbed depreciation, which is guided by the
      provisions ofsection 32(2)and not section 79. In view of the factual
      position on record of the AO, the submissions made before the
      undersigned and in view of theratiolaid down inthe case of
      Subhulaxmi Mills Ltd. by the Hon'ble Supreme Court the grounds of
      appeal are allowed. The AO is directed to allow the appellant the
      claim of set off of carried forward "unabsorbed depreciation" of
      Rs.62,36,736/-."6.    We find that Ld. CIT(A) has duly verified the facts and had arrived at
the conclusion that the carry forward loss was on account of unabsorbed
depreciation only and therefore, as decided by Hon'ble Supreme Court in the
case ofCIT Vs. Shubhlaxmi Mills Ltd., Section79 was not applicable and in
view of the above, we do not find any infirmity in the order of Ld. CIT(A),
therefore, appeal filed by Revenue is dismissed.7.    Order pronounced in the open court on 25th March, 2015.Sd./-                                              Sd./-
 ( G. C. GUPTA)                                    (T.S. KAPOOR)
VICE PRESIDENT                               ACCOUNTANT MEMBER
Date: 25th March, 2015
Sp5             ITA No.2642/Del/2013Copy forwarded to:-
   1. The appellant
   2. The respondent
   3. The CIT
   4. The CIT (A)-, New Delhi.5. The DR, ITAT, Loknayak Bhawan, Khan Market, New Delhi.True copy.                   By Order (ITAT, New Delhi).


S.No.                    Details                 Date      Initials   Designation
  1     Draft dictated on                           18/3               Sr. PS/PS
  2     Draft placed before author              19,23,24               Sr. PS/PS
        Draft proposed & placed before the
 3                                                                      JM/AM
        Second Member
        Draft discussed/approved by Second
 4                                                                     AM/AM
        Member
 5      Approved Draft comes to the Sr. PS/PS      25/3               Sr. PS/PS
 6      Kept for pronouncement                     25/3               Sr. PS/PS
 7      File sent to Bench Clerk                   25/3               Sr. PS/PS
        Date on which the file goes to Head8Clerk
 9      Date on which file goes to A.R.
 10     Date of Dispatch of order