ITAT Chennai Dismisses Revenue's Appeal: ₹24 Crore ICDS Adjustment by CPC Deleted, Carried Forward Loss and Prepaid Tax Credits Restored
Background and Overview
The Chennai Bench of the Income Tax Appellate Tribunal delivered a significant ruling in the matter of ACIT Vs Corro Health Infotech Pvt Ltd, dismissing the Revenue's appeal for Assessment Year 2022-23. The dispute originated from adjustments carried out by the Central Processing Centre (CPC) while processing the assessee's return of income under Section 143(1) of the Income-tax Act, 1961. The three core issues before the Tribunal were:
- Deletion of an ICDS-related adjustment amounting to ₹24,00,70,753/-
- Restoration of carried forward loss and unabsorbed depreciation
- Grant of prepaid tax credits worth ₹7,53,32,100/-
The Tribunal, after carefully evaluating the facts and the orders of the lower authorities, found no infirmity in the decision of the Commissioner of Income Tax (Appeals) and dismissed the Revenue's appeal in its entirety.
About the Assessee and Return Filing
Corro Health Infotech Pvt Ltd is a company engaged in offering integrated revenue cycle management services to clients in the global healthcare sector. For Assessment Year 2022-23, the assessee filed its return of income on 30.11.2022, declaring nil taxable income and claiming carried forward unabsorbed depreciation of ₹39,61,86,619/- under the normal provisions of the Income-tax Act, 1961.
How the CPC Adjustment Arose
During the processing of the return under Section 143(1), the CPC identified what it perceived to be a discrepancy between:
- ICDS disclosures in Clause 13(e) of Form 3CD — which reported an ICDS-related increase in profit of ₹69,79,48,694/-
- Schedule ICDS in the return of income — which reflected only ₹45,78,77,941/-
The CPC treated this difference of ₹24,00,70,753/- as income not offered to tax and accordingly made an upward adjustment under Section 143(1). As a direct consequence:
- The carried forward loss and unabsorbed depreciation available to the assessee were reduced
- Prepaid tax credits of ₹7,53,32,100/- were not granted
Proceedings Before CIT(A) and the Rectification Application
Aggrieved by the CPC's adjustments, the assessee preferred an appeal before the CIT(A). Simultaneously, a rectification application was filed under Section 154, pursuant to which the CPC itself acknowledged that the ICDS deviations had been erroneously treated as disallowances. However, the assessee maintained that the rectification order did not completely restore the originally returned loss.
Key Findings of the CIT(A)
The CIT(A) examined the matter in detail and returned the following findings: