TMI Blog2009 (2) TMI 42X X X X Extracts X X X X X X X X Extracts X X X X ..... bunal (hereinafter referred to as the „Tribunal‟) in ITA No. 1705/Del/2002 pertaining to assessment year 1995-96. Vide the impugned judgment the Tribunal has also disposed of ITA No.1704/Del/2002 pertaining to assessment year 1994-95 with which we are not concerned in the present appeal. 1.1 By our order dated 7.11.2008 we had admitted the appeal and framed the following question of law:- "(i) whether the loss determined by the Assessing Officer, being different from the loss as claimed by the assessee in the return, can be carried forward in view of the provisions of Section 80 read with Section 139(3) of the Income Tax Act, 1961? (ii) Whether in the facts and circumstances of the present case, the tribunal has erred in law in holding that the Assessing Officer had exceeded its jurisdiction in not allowing the carrying forward of the loss after the tribunal had issued directions in the earlier round?" 2. In order to adjudicate upon the appeal the following facts require to be noted:- 2.1 The assessee is an investment company holding shares amongst others in Jindal Iron Steel Co. Ltd. (hereinafter referred to as "JISCO"). There are four other companies ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CDs opened on 21.11.1994 with 19.12.1994 as the date of closure. In order to attract a large number of subscribers to the rights issue JISCO attached a fixed DW with each debenture with a face value of Rs 10 and a premium of Rs 190/-. JISCO being aware of the fact that in order to make the rights issue a success it had to ensure availability of finance to its investors. In order to achieve the said purpose JISCO entered into an arrangement with Unit Trust of India (hereinafter referred to as "UTI‟) whereby UTI agreed to pay the balance sum of Rs 389/- per SRNCD on behalf of the allottees to JISCO. The assessee being an existing stake-holder applied to the rights issue made by JISCO. In accordance with the conditions of the issue, the assessee paid an application money of Rs 111/- per debenture. As arranged UTI paid the balance sum of Rs 389/- to JISCO whereupon JISCO issued a DW in favour of the assessee as well as other investees including Abhinandan Investment Ltd. (i.e. appellant in ITA No. 480/07). 4.1 It is also admitted that the assessee as well as other investors (which includes Abhinandan Investments Ltd) transferred the said SRNCD having a face value of Rs 500 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es have sulfide (suffered) a loss @ Rs 111/- per NCD on their sale to UTI and such loss being business loss was allowable deduction. We accordingly direct the AD (AO) to allow deduction of the loss Rs 111/- per NCD on their sale." 8. In view of the direction contained in the order of the Tribunal dated 05.06.2000 the Assessing Officer issued a notice calling upon the assessee to furnish details of the aforementioned loss on sale of SRNCDs to UTI. In response thereto on 30.08.2000 the assessee furnished the details. The Assessing Officer by an order dated 27.10.2000 gave effect to the order of the Tribunal dated 05.06.2000 by observing as under:- "In view of the directions of the ITAT the loss on NCDs is allowed as follow:- Income as per order u/s 143(3) dated 27.3.1998 7,01,96,195 Less: Loss on sale 11,98,000 NCDs @ 111/- each 13,29,78,000 Assessed Loss: 6,27,81,805" By the very same order the Assessing Officer observed that since the loss on the SRNCD had been determined by him pursuant to an order of the Tribunal, it was not a loss determined in pursuance of a return filed under Section 139(3) of the Act and hence, the said assessed loss on Rs 6,27,81,805/- shall not be allow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the impugned judgment both with regard to the maintainability of the appeal before the CIT(A), as well as the jurisdiction of the Assessing Officer, while giving effect to the order of the Tribunal passed in appeal, and also its observations on merits:- "As regards the maintainability of an appeal before the learned CIT(A) against the order passed by the Assessing Officer giving appeal effects to the Tribunal's order, the learned counsel for the assessee has cited the decision of Hon'ble Calcutta High Court in case of Kooka Sidhwa Co. Vs. CIT-54 ITR 54 wherein it was held that when the Income Tax Officer revises the assessment pursuant to the directions of the Appellate Tribunal in an order u/s 33 of the Indian Income Tax Act 1922 (which is analogous to section 254 of the Indian Income Tax Act 1961), the order passed by the Assessing Officer partakes the character of the fresh assessment order referable only to section 23 of the 1922 Act (which is pari-materia with Section 143(3) of the 1961 Act) and an appeal against the said order would lie to the Appellate Assistant Commissioner u/s 30 of the 1922 Act which is similar to Section 246A of the 1961 Act. In another case of Go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase, were not attracted in the present case. The assessee company thus was entitled to carry forward the loss finally assessed for set off against the income of the subsequent years in accordance with law. As such, considering all the facts and circumstances of the case, we hold that the action of the Assessing Officer in not allowing the carry forward of assessed loss or the year under consideration for setting of against the income of the subsequent year was not sustainable either in law or on facts and the learned CIT(A) was not justified in upholding the same." 11. Having heard the learned counsel for the Revenue as well as the assessee we are of the view that the answers to the questions framed has to be found in favour of the assessee and against Revenue for the reasons given hereinafter. It is clear upon perusal of the facts and circumstances quoted by us hereinabove that if JISCO had to have a successful rights issue it was incumbent that it received a subscription equivalent to at least 90% of the issue. The condition with respect to the same imposed by SEBI while approving the rights issue was quite explicit in that regard. The fact that there was an arrangement betwe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and seek its set off under Section 72(1) or 73(2) or sub-section (1) of Section 74 or 74A(3) except when, the loss has not been determined in pursuance of a return filed in accordance with provisions of sub-section (3) of Section 139. Section 80 of the Act reads as follows:- "Notwithstanding anything contained in this Chapter, no loss which has not been determined in pursuance of a return filed in accordance with the provisions of sub-section (3) of Section 139 shall be carried forward and set off under sub-section (1) of Section 72 or sub-section (2) of section 73 or sub-section (1) or sub-section (3) of section 74 or sub-section (3) of section 74A." 12.1 In the instant case, there is no doubt that the assessee had filed a return under Section 139 of the Act within the prescribed time. It is also not disputed that a loss had been claimed even though the same had been claimed to the extent of Rs 90/- and that too as a capital loss with respect to DWs issued to the assessee, on the assessee investing in the rights issue of JISCO. The assessee carried out a course correction by claiming a loss on sale of SRNCDs to UTI at Rs 111/- per SRNCD as they had sold SRNCDs of a face value ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r dated 05.06.2000 had allowed the assessee‟s claim of loss on sale of SRNCDs at the rate of Rs 111/- per SRNCD as a business loss based on the reasoning that the assessments had to be carried out keeping in mind the real effect of a legal transaction notwithstanding the treatment meted out by the assessee, it would then appear anomalous and incongruous if the Assessing Officer while giving effect to the said order would denude the efficacy of the Tribunal‟s order by, in a manner of speaking, taking away with one hand what was given by the other, that is, even while adjusting loss in assessment year 1995-96, deprive the assessee of a consequent benefit of carry forward and set off of the balance loss in the subsequent year(s). Such an approach would in our view be completely contrary to the directions issued by the Tribunal. We are here reminded of the observations of the Supreme Court in the case of CIT vs J.H. Gotla; (1985) 156 ITR 323 where the Court in respect of a income tax matter has observed that while equity and taxes are strangers an attempt should be made to bring them nearer. The observations of the case are apposite and extracted hereinbelow:- "Though eq ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... must be allowed by the Income Tax Officer, the assessee will lose the right of claiming or will be debarred from being allowed that deduction. Whether the assessee is entitled to a particular deduction or not will depend on the provision of law relating thereto and not on the view which the assessee might take of his rights nor can the existence or absence of entries in the books of account be decisive or conclusive in the matter." 15. As regards the other issue as to whether the Assessing Officer in the second round had exceeded his jurisdiction in observing that the loss of Rs 6,27,81,805/- assessed by him could not be carried forward and set off by the assessee against his future income, we are of the opinion that in view of the line of reasoning taken by us, the Assessing Officer in the second round was required to give full effect to the consequences which flowed from the order of the Tribunal dated 05.06.2000. The Assessing Officer to our minds exceeded his jurisdiction by not applying the provisions of law, keeping in mind the correct perspective of the matter at hand. 16. In view of the discussions above, we answer both the questions in favour of the assessee and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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