The Bangalore bench of Income Tax Appellate Tribunal recently rejected the plea for setting off of unabsorbed depreciation since Hospitals can’t be treated as an industrial undertaking for the purpose of section Section 72A(7) of the Income Tax Act, 1961.
There are two appeals filed by the assessee which are directed against separate two orders of CIT (A)-3, Bangalore for Assessment Years 2009-10 and 2010-11.
The ground raised by assessee in the instant appeal was AO and CIT (A) erred in denying carry forward of unabsorbed depreciation loss under section 72A of the Income Tax Act, 1961, on the ground that the amalgamating company, M/s Banashankari Medical Oncology Research Centre Limited is not an “industrial undertaking” as per the provisions of the said section.
During the hearing the counsel for revenue contended in respect of provision of clause (aa) of sub section 7 of section 72A is relevant which says that the company owning 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 or, as the case may be, allowance for depreciation of the amalgamated company for the previous year in which the amalgamation was effected.
On contrary, the counsel for revenue relied upon the decision of lower authorities and the tribunal while considering the rival submission, reproduced the provisions of sub section 1 and 7 of section 72A of the IT Act, 1961.
According to this provision it is the case of amalgamation of a company owning an industrial undertaking which has been defined as per clause (aa) of sub section 7 of section 72A and the undertaking should be engaged in manufacture or processing of goods.
The assessee had furnished certain additional evidences in which stated that it was held by Commissioner of Central Excise that in respect of FDG cleared by the assessee company, excise duty is payable therefore, it has to be accepted that the assessee is engaged in manufacture of goods or processing of goods.
Based on this aforesaid contention the tribunal bench found that the assessee engaged in small activity of some manufacturing also, it cannot be said that the assessee is an industrial undertaking. The considered opinion of bench comprising of judicial member and accountant member was that the primary activity of the assessee undertaking should be of manufacture and processing of goods and merely because a supporting or ancillary activity is such, it cannot be said that it is an industrial undertaking. Hence, even after considering the additional evidence, the assessee does not get any help.
Finally bench considered the applicability of judgment cited by revenue in the case of ACIT Vs. Apollo Hospitals Enterprises Ltd. (supra). The Hon’ble Madras High Court were held that neither Apollo Hospitals Enterprises Ltd. nor DHCL (amalgamating company) are industrial undertaking within the meaning of section 72A of the IT Act and therefore, the set off of unabsorbed depreciation is not allowable.
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