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TMI Blog2014 (1) TMI 655X X X X Extracts X X X X X X X X Extracts X X X X ..... cannot be said to have been actually allowed as the said loss could never be claimed by the assessee in any of the assessment years u/s 72(1) of the Act. The Tribunal held that the non consideration of the alternate contention of the assessee in respect of Ground No. 4 constituted a mistake apparent from the record within the meaning of sec. 254(2) of the Act and the Tribunal recalled the order for the limited purpose for considering and deciding the alternative plea raised in Ground No. 4 which was left unadjudicated in the earlier order dated 6-3-2012. As per the directions of the Tribunal in M.A. the order is recalled and both the parties are heard on the alternate contention on Ground No. 4. 2. We would like to recapitulate the facts to adjudicate the alternate contention taken by the assessee. The assessee is one of the five pilot electric co-operative societies established in the State of Maharashtra by the Government of India during 1969-70. It is stated that the assessee society was entrusted with distribution of the electrical energy exclusively in 183 villages of Shrirampur, Rahuri Taluka fully and Newasa and Sangamner, Rahata Taluka partly. The assessee society purchase ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 72 and hence, the assessee has not in effect got no tax benefit and to the extent of Rs. 140,46,06,586/- and hence, said amount cannot be brought to tax u/s 41(1) out of the total rebate of Rs. 541.80 crores. In short, the rebate to the extent of Rs. 541.86 crores is to be reduced by the said amount of business loss which has lapsed. 4. The Ld. counsel argues that sec. 41(1) of the Act was also existed in Incometax Act 1922 Act as sec. 10(2A). He further argued that sec. 41(1) enacts a legal fiction and is therefore to be strictly construed. If the assessee has not got any tax benefit even by claiming any expenditure then sec. 41(1) cannot be made applicable to the assessee to the extent of expenditure which otherwise resulted into losses. He referred to sec. 41(1) and submits that the said sub-section consists of two parts. The first part of sub-section (1) of sec. 41 contemplates loss, expenditure or trading liability in some former years in which allowance or deduction has been made in the assessment for any year and the second part of the said section contemplates recoupment of such loss or expenditure or benefit in respect of such trading liability by way of remission or ces ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oes not suggest that the assessee must receive some tax benefits and then only the addition can be made. He pleaded for confirming the order of authorities below. 6. We have heard the rival submissions and perused the record. Interestingly, very important argument is advanced by the Ld. counsel. In this case, it is not disputed that the assessee has claimed deduction in respect of tariff payable to the MSEB as per old agreement. There was a revision of the tariff after representation and the assessee could get substantial benefit by way of rebate to the extent of Rs. 541.80 crores from the dues payable to the MSEB after intervention by the Government of Maharashtra. To understand the provision better, we have to consider the section 41(1) which reads as under: "41(1) Where an allowance or deduction has been made in the assessment for any year in respect of loss, expenditure or trading liability incurred by the assessee (hereinafter referred to as the first mentioned person) and subsequently during any previous year,- (a) the first mentioned person has obtained whether in cash or in any other manner whatsoever, any amount in respe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of Narayanan Chettiar Industries Vs. ITO (2005) 277 ITR 426 (Mad), the Hon'ble Madras High following the decision of the Hon'ble Supreme Court in the case of Tirunelveli Motor Bus Service Co. (P) Ltd. Vs. CIT (1970) 78 ITR 55 (SC) held that being it is a deeming provision and creates a legal fiction it is to be strictly complied with if any addition in the income has to be made by the Revenue. The Hon'ble High court has also observed that before applying sec. 41(1) unless an allowance and deduction has been made in the computation of profits or gains of business or profession in respect of such expenditure or trading liability or loss incurred by the assessee, no addition can be made u/s 41(1) of the Act. It is seen that sec. 41(1) is having two limbs and the first limb, in our opinion, it is relevant to decide the alternate contention raised by the assessee. The question before us is because the assessee has claimed deduction but had not received any tax benefit as there was a business loss in the respective assessment years, which we have referred i.e. A.Y. 1978-79 to 1992-93 and the said loss lapsed and assessee could not take the benefit of sec. 72(1), due to period of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... piry of the period of three years referred to in that section, such business is re-established reconstructed or revived by the assessee so much of the loss as is attributable to such business shall be carried forward to the assessment year relevant to the previous year in which the business is so re-established reconstructed or revived; and (a) it shall be set off against the profits and gains, if any, of that business or any other business carried on by him and assessable for that assessment year and (b) If the loss cannot be wholly so set off the amount of loss not so set off shall, in case the business so re-established, reconstructed or revived continues to be carried on by the assessee, be carried forward to the following assessment year and so on for seven assessment years immediately succeeding." 8. Section 72 is the provision which is a part of the provision of computation of gross total income of the assessee. The definition of gross total income is given in sec. 80V(5) which provides that the total income computed in accordance with the provisions of income-tax Act before making any deduction und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4,692,985.00 182,135,821.00 174,504,320.00 7,631,501.00 1990-91 343,737,029.00 236,527,299.00 237,489,980.00 228,692,979.00 8,797,001.00 1991-92 517,290,129.00 410,549,957.00 297,386,666.00 284,850,618.00 12,536,048.00 1992-93 553,890,620.00 416,002,074.00 149,860,865.00 134,789,607.00 15,071,258.00 1978-79 to 1991-92 2,842,526,490.00 2,108,247,384.00 1,545,882,365.00 1,404,606,586.00 141,275,779.00 10. From the above chart, it is seen that the assessee has continuously incurred business loss (other than depreciation) from the A.Y. 1978-79 to 1992-93 to the extent of Rs. 140,46,06,586/-. As per the statement made by the Ld. counsel at the Bar the said loss has lapsed and assessee could not get the benefit due to the period of limitation is provided u/s 72(3) of the Act or by reason of other statutory provisions. The first part of sec. 41(1) contemplates loss, expenditure or trading liability in some former years in which allowance or deduction has been made and the second part of the said section contemplates recoupment of such loss or expenditure or benefit in respect of "such" trading liability by way of remission or cessation in some subsequent years ..... X X X X Extracts X X X X X X X X Extracts X X X X
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