The Mumbai Bench of Income Tax Appellate Tribunal (ITAT) allowed set off of brought forward losses by holding that change in individual shareholding of the shareholders would also not attract the provisions of Section 79 of the Income Tax Act, 1961.
The assessee Hiranandani Healthcare Pvt. Ltd. declared its total income at Rs.“NIL”, by filing its return of income under Section 143(3) of the Income Tax Act. Subsequently, the case of the assessee was selected for scrutiny and therefore, statutory notices under Section 143(2) and 142(1) of the Income Tax Act were issued.
The Assessing Officer (AO) observed that the assessee being a company is engaged in the business activity of running Hospital business / multispecialty Hospital at Navi Mumbai and during the year under consideration derived its income from “Business & Profession”.
The AO further by observing that during the year the assessee had adjusted the brought forward losses from earlier years against the business income of Rs. 37,09,306 and asked the assessee to furnish the details, in response to which the assessee furnished its submissions.
The brought forward losses adjusted against the income of Rs. 37,09,306 of the assessee were disallowed by the AO and added in the total income of the assessee.
The assessee being aggrieved against the said disallowance of brought forward losses adjusted against the income of Rs. 37,09,306 preferred first appeal before the Commissioner of Income Tax (Appeals)[CIT(A)], which affirmed the disallowance qua brought forward losses adjusted against the income of Rs. 37,09,306 as made by the AO.
Further aggrieved the assessee filed an appeal before the Tribunal.
The Authorised Representative (AR) of the assessee claimed that shareholding of the assessee-company is of M/s. Fortis Healthcare Limited (FHL) and M/s. Fortis Healthcare Holdings Pvt. Limited (FHHPL), holding shares of 40% and 60% respectively.
The assessee issued 30 Lakhs equity shares having face value at Rs.10 each with a premium of Rs.90 per share (totaling to Rs.100 per share) to FHL. As a result, there was a change in share holding pattern between both the shareholders, i.e., the holding of FHL increased to 85%, while holding of FHHPL got reduced to 15%. The Assessee also had accumulated losses remaining to be set off .
The Bench observed that the AO while making the disallowance qua brought forward losses adjusted against the income of Rs. 37,09,306 relied upon the assessment order pertaining to the AY 2012-13, wherein addition under Section 79 of the Income Tax Act was made and carry forward losses were disallowed.
It was noted that the Commissioner as well in the impugned order also noted the said facts as well, and affirmed the action of the AO for not allowing the brought forward losses, against which the Assessee
The Bench comprising of B.R. Baskaran, Accountant Member and N. K. Choudhry, Judicial Member observed that as both the authorities below decided the issue qua brought forward losses, on the basis of assessment order passed for the AY 2012-13, which has been reversed by the Coordinate bench of the Tribunal.
The Tribunal allowed set off of brought forward losses by holding that change in individual shareholding of the shareholders would also not attract the provisions of section 79 of the Income Tax Act and therefore will not be applicable in the facts of the present case.
Therefore the bench inclined to allow the claim of the assessee qua setting off of the brought forward losses, consequently the same is allowed.
Hence, appeal filed by the Assessee was allowed.
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