Commissioner of Income Tax vs Chapparai Transport (P.) Ltd.

Thanikkachalam, J.—At the instance of the Department, the Tribunal referred the following question for our opinion u/s 256(1) of the

Income Tax Act, 1961 :

Whether, on the facts and in the circumstances of the case and having regard to the provisions of section 79(a) of the Income Tax Act, 1961, the

Appellate Tribunal was justified in holding that the earlier years'' losses and unabsorbed depreciation should be carried forward and considered in

future years ?

The assessee is a private limited company. There was a change in its shareholdings during the accounting year relevant for the assessment year

1977-78 in which not less than 51 per cent. of the voting power was transferred to and held by persons other than the previous shareholders. The

Income Tax Officer, while completing the assessment, refused to carry forward the loss of the earlier years besides unabsorbed depreciation to

future years. According to the Income Tax Officer, the assessee violated the conditions laid down in clause (a) of section 79 of the Income Tax

Act.

However, on appeal, the Commissioner of Income Tax (Appeals), following the decision of the Bombay High Court in Italindia Cotton Co. P.

Ltd. Vs. Commissioner of Income Tax, , held that the Income Tax Officer was not justified in refusing to carry forward the loss as well as the

unabsorbed depreciation. The Commissioner of Income Tax (Appeals) further held that the unabsorbed depreciation should be given the same

treatment as that of the current depreciation as per section 32(2) of the Act. On further appeal, the Appellate Tribunal upheld the order passed by

the Commissioner of Income Tax (Appeals). The question of carry forward of the loss of the earlier years was decided in favour of the assessee

applying the decision of the Bombay High Court in Italindia Cotton Co. P. Ltd. Vs. Commissioner of Income Tax, . Subsequently, the said

decision has been approved by the Supreme Court in the decision in Commissioner of Income Tax, Bombay Vs. Italindia Cotton Co. (P) Ltd., .

So also, the question of carry forward of unabsorbed depreciation to future years is covered in favour of the assessee by a decision of this court in

Commissioner of Income Tax Vs. Concord Industries Limited, . Accordingly, we answer the question referred to us in the affirmative and against

the Revenue. There will be no order as to costs.