Recently, in the case of M/s. Healthcare Global Enterprises Ltd Vs. The Joint Commissioner of Income Tax, the Tribunal bench of Bangalore recently ruled that since the hospital is not an industrial undertaking within the meaning of section 72A of the Income Tax Act, the set off of unabsorbed depreciation is not allowable.
In instant case, the sole issue was regarding the denial of carrying forward of unabsorbed depreciation of loss on the ground that amalgamating company, M/s. Banashankari Medical Oncology Research Centre Limited (BMORCL) is not an industrial undertaking as per 72A of the Income Tax Act.
The advocate for assessee submitted that clause (aa) of sub-section 7 of section 72A is relevant which says that the company owns an industrial undertaking or a ship or a hotel with another company, then, notwithstanding anything contained in any other provision of this Act, the accumulated loss and the unabsorbed depreciation of the amalgamating company shall be deemed to be the loss of the amalgamated company.
On contrary, the advocate for Revenue B.R Ramesh relied on the lower authorities’ decision and placed support on the decision of Madras High Court rendered in the case of ACIT Vs. Apollo Hospitals Enterprises Ltd which later found favor to the revenue.
The ITAT bench comprising Lalit Kumar (Judicial Member) and Arun Kumar Garodia (Accountant Member) opinioned that an undertaking to be considered as an industrial undertaking, the total activities of the undertaking should be that of manufacturing or processing of goods and even if the undertaking is engaged in some other activities also, the primary activity of the said undertaking should be that of manufacturing or processing of goods.
The Tribunal bench noticed the judgment cited by the assessee wherein bench members concluded that each decision would not be applicable to present issue.
While considering the applicability of judgment rendered by revenue in the case of ACIT Vs. Apollo Hospitals Enterprises Ltd., wherein the Madras High Court held that neither Apollo Hospitals Enterprises Ltd. nor DHCL is industrial undertaking within the meaning of section 72A of the IT Act and therefore, the set off of unabsorbed depreciation is not allowable.
Accordingly, the tribunal bench confirmed the decision of CIT (A) and rejected this appeal on the ground that the said concern is not an industrial concern eventually carry forward of unabsorbed depreciation is not possible.
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