Itxa/1188/2016 Of Pr Commissioner Of Income Tax-1 v. Tata Communications Ltd

IN THE HIGH COURT OF JUDICATURE AT BOMBAYORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO. 1188 OF 2016 Pr. Commissioner of Income Tax-1 v/s. M/s. Tata Communications Ltd. .. Appellant .. Respondent Mr. Suresh Kumar for the appellant Mr. Jehangir D. Mistri, Senior Counsel a/w Mr. Anil R. Wani, Ms.Supriya S. Devergudi I/b ANS Law Associates for the respondent P.C. CORAM : AKIL KURESHI & M.S. SANKLECHA, J.J. DATED : 21[st] JANUARY, 2019 1.The Revenue is in appeal against the judgment of the Income TaxAppellate Tribunal ("the Tribunal" for short). The issues concern therespondent assessee company for the Assessment Year 2001-02. TheRevenue has framed multiple questions. However, the principal issuesraised by the Revenue before us are three, which can be summarized interms of following questions. (i)Whether on the facts and in the circumstances of the caseand in law, the Tribunal was right in allowing a sum ofRs.5,17,29,000/- by way of capital loss ? (ii) Whether on the facts and in the circumstances of the caseand in law, the Tribunal was right in deleting disallowance of aclaim under Section 80IA of the Income Tax Act, 1961? (iii) Whether on the facts and in the circumstances of the caseand in law, the Tribunal was right in deleting disallowance of depreciation of Rs.1.07 crores made by the Assessing Officer byadjusting the Written Down Value (WDV) of certain assets ofthe company ? 2.Question no.(i) noted above was the most hotly contestedquestion by the Revenue and it revolves around the assessee's claim ofRs.5.17 crores (rounded of). The assessee having claimed such loss asa business loss pointing out that the assessee had made investment inthe shares in one M/s. New ICO Global Ltd. During the period relevantto the period under consideration, the assessee had written offinvestment to the tune of Rs.5.17 crores on account of diminishing ofvalue of the shares and claimed the same as a business loss. TheAssessing Officer and CIT(A) rejected such a claim. When the issue,therefore, reached to the Tribunal, the assessee first contended that theloss was a revenue loss and, therefore, should be granted as a businessloss. The Tribunal rejected such a contention of the assessee holdingthat the loss suffered was on capital account. The assessee raised analternative contention and argued that in any case, such loss cannot bedenied as a capital loss. Against the decision of the Tribunal holdingthat the loss was on capital account, the assessee has filed Income TaxAppeal No.111 of 2016 and such appeal is admitted. The Tribunalhowever, accepted the assessee's alternative contention.In the process,the Tribunal rejected the Revenue's contention that the loss cannot be allowed in view of Section 46(2) of the Income Tax Act, 1961 (“the Act”for short). allowed in view of Section 46(2) of the Income Tax Act, 1961 (“the Act”for short). 3.Having heard learned Counsel for the parities and havingperused documents on record, we notice that the assessee having madeinvestment and suffered losses in the process, had claimed such loss asa business loss. The Tribunal instead treated such loss on capitalaccount and was urged to examine the alternative contention of theassessee that such loss in any case, would be recognized as a capitalloss. The Tribunal merely accepted the same making reference to thedecisions of the Supreme Court and also referring to Section 46(2) ofthe Act. We do not find any error in the view of the Tribunal. If theloss suffered by the assessee was treated as capital loss, there is nothingon record to hold that the assessee was not entitled to claim the same assuch. Claim of the assessee would also get support from Section 46(2)of the Act. Section 46(1) of the Act provides that notwithstandinganything contained in Section 45, where the assets of a company aredistributed to its shareholders on its liquidation, such distribution shallnot be regarded as a transfer by the company for the purposes ofSection 45. In this context, Section 46(2) of the Act provides asunder :- “46(2) Where a shareholder on the liquidation of a companyreceives any money or other assets from the company, he shall bechargeable to income-tax under the head "Capital gains", inrespect of the money so received or the market value of the otherassets on the date of distribution, as reduced by the amountassessed as dividend within the meaning of sub-clause (c) ofclause (22) of section 2 and the sum so arrived at shall bedeemed to be the full value of the consideration for the purposesof section 48.” 4.Coming to question no.(ii), we notice that the Tribunal hasmerely remanded the issue before the Assessing Officer for freshconsideration after making necessary verification, as was done in theearlier years. No question of law in this respect, therefore, arises. 5.Question no. (iii) pertains to rejection of claim of depreciableasset made by the Assessing Officer and confirmed by the CIT(A). Theassessee has pointed out that in any case, such adjustment was carriedout in the subsequent year. The Tribunal noted that in the later year,the assessee had suo-moto made necessary adjustment and reduced itscost of depreciable asset. The Tribunal, therefore, held that therewould be no revenue loss. The Tribunal, therefore, while acceptingthe assessee's contention, directed the Assessing Officer to verifynecessary facts before granting relief. We do not find any reason to interfere. The Revenue does not dispute that the assessee had madeadjustment in the claim of its depreciable asset in the later year. In thelater year, the Revenue having accepted such adjustment, enforcingsuch adjustment in the present year also may amount to taxation thesame income twice. In any case, the Tribunal recorded the issue isremained neutral. No question of law arises. 6.Tax appeal is dismissed. (M.S. SANKLECHA, J.) (AKIL KURESHI, J.)