PR. COMMISSIONER OF INCOME TAX CENTRAL vs. M/S MIRAJ TRADECOM PVT. LTD.

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ITA/4/2018HC RajasthanRJHC01017725201821 January 2020Author: SANGEET LODHA,PUSHPENDRA SINGH BHATI3 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that the provisions of Section 115BBE, as they existed prior to the amendment, did not disallow set-off of losses against the income referred to therein. The amendment, which explicitly introduced the restriction on set-off of losses, was made to dispel existing uncertainty and could not be applied retrospectively. The Court further noted that CBDT Circular No. 11/2019 unequivocally clarified that the phrase 'or set off of any loss' was inserted by the Finance Act, 2016, effective April 1, 2017. Therefore, an assessee is entitled to claim set-off of losses against income determined under Section 115BBE until Assessment Year 2016-17. The Court found the Revenue's contention to be unsustainable in light of this clarification. No other grounds were pressed by the appellant. Consequently, the appeal was dismissed.

What were the facts?

The Revenue appealed against an ITAT order that dismissed its appeal against the CIT(A)'s decision. The CIT(A) had held that the assessee's deemed income of Rs. 6,50,00,000 for Assessment Year 2014-15 was taxable under 'Income from Other Sources'. The CIT(A) allowed set-off of current year business loss (Rs. 3,82,37,792) and brought forward business loss (Rs. 2,67,62,208) against this deemed income. The CIT(A) also ruled that the Finance Bill 2016 amendment to Section 115BBE was not applicable retrospectively. The Revenue's appeal to the ITAT was dismissed, leading to the present appeal before the High Court.

What were the issues?

1. Whether the provisions of Section 115BBE of the Income Tax Act, 1961, which disallow set-off of any loss against deemed income under Sections 68, 69, 69A to 69D, were applicable to Assessment Year 2014-15, thereby invalidating the set-off of losses allowed to the assessee. Assessee's Contention: The provisions of Section 115BBE, as substituted by the Taxation Laws (Second Amendment) Act, 2016, with effect from April 1, 2017, are not applicable to Assessment Year 2014-15. The assessee relied on CBDT Circular No. 11/2019, which clarified that the phrase 'or set off of any loss' was inserted effective April 1, 2017, meaning set-off of loss against income under Section 115BBE was permissible until Assessment Year 2016-17. Revenue's Contention: The ITAT erred in holding that Section 115BBE was not applicable to Assessment Year 2014-15, and the set-off of losses allowed to the assessee was unjustified, ignoring the provisions of Section 115BBE.

Which sections of the Income-tax Act were involved?

Section 260A,Section 115BBE,Section 68,Section 69,Section 69A,Section 69D

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
HIGH COURT OF JUDICATURE FOR RAJASTHAN AT JODHPUR D.B. Income Tax Appeal No. 4/2018 Pr. Commissioner Of Income Tax-Central, Jaipur. ----Appellant Versus Aacharan Enterprises Pvt. Ltd having its Registered Office at N.H.8, Lal Madri, Nathdwara, Rajsamand, Rajasthan-313 301 through its Authorized Representative Sanjeev Joshi s/o Shri Trilok Kumar Joshi, aged about 49 years. ----Respondent For Appellant(s) : Mr. K.K.Bissa For Respondent(s) : Mr.Abhishek Mehta HON'BLE MR. JUSTICE SANGEET LODHA HON'BLE DR. JUSTICE PUSHPENDRA SINGH BHATI

Judgment 21/01/2020

1.

This appeal preferred under Section 260A of Income Tax Act, 1961 (for short “the Act”) is directed against order dated 3.7.17 of the Income Tax Appellate Tribunal (ITAT), Jodhpur Bench, Jodhpur (‘ITAT’), passed in ITA No.124/Jodh./2017, whereby an appeal preferred by the Revenue against the order dated 29.12.16 passed by the Commissioner of Income Tax (Appeals) [CIT (A)] for Assessment Year 2014-15, has been dismissed. By order dated 29.12.16, the CIT (A) held that the deemed income of Rs.6,50,00,000 of the respondent assessee is chargeable to tax under the head ‘Income from Other Sources’ and allowed the intra head adjustment/set off towards the current year business loss to the extent of Rs.3,82,37,792/- and brought forward business loss to the extent of Rs.2,67,62,208/- out of the said income while

(2 of 3) [ITA-4/2018] rejecting the contention of the assessee that the said sums are taxable as income from business or profession. The CIT (A) further held that amendment made by Finance Bill 2016 to the provisions of Section 115BBE of the Act cannot be applied retrospectively.

2.

Learned counsel appearing for the appellant contended that the ITAT has seriously erred in holding that the provisions of Section 115BBE of the Act providing that no set off of any loss shall be allowed to the assessee against the deemed income under Section 68, 69, 69A to 69(2), is not applicable to the Assessment Year 2014-15 and thus, set off of the loss allowed to the assessee ignoring the provisions of Section 115BBE is absolutely unjustified.

3.

On the other hand, the counsel appearing for the respondent contended that provisions of Section 115BBE substituted by the Taxation Laws (Second Amendment) Act, 2016 w.e.f. 1.4.17 cannot be applied to the Assessment Year 2014-15 inasmuch as, the same shall be applicable only to the Assessment Year 2017-18 onwards and thus, the ITAT has committed no error in affirming the order passed by the CIT (A). Learned counsel submitted that as a matter of fact, vide circular No.11/2019, the Central Board of Direct Taxes (CBDT) has already clarified the term ‘set off any loss’ which was specifically inserted only vide Finance Act, 2016 w.e.f. 1.4.17 and an assessee is entitled to claim set off of loss against income determined under Section 115BBE of the Act till the Assessment Year 2016-17 and therefore, the contention sought to be raised on behalf of the Revenue is absolutely unjustified.

4.

We have considered the submissions of the learned counsel and perused the material on record.

(3 of 3) [ITA-4/2018]

5.

Indisputably, the provisions of Section 115BBE as existed prior to the amendment does not provide that the losses shall not be allowed to be set off against the income referred in Section 115BBE and it is only to dispel the uncertainty prevailing on the issue, the provision was amended. A bare perusal of the provisions makes it abundantly clear that it cannot be applied retrospectively. Moreover, now vide circular No.11/2019, the CBDT has clarified in unequivocal terms that the term ‘or set off of any loss’ was inserted vide the Finance Act, 2016 w.e.f. 1.4.17 and therefore, an assessee is entitled to claim set off of loss against the income determined under Section Section 115BBE of the Act till the Assessment Year 2016-17. It is further clarified that the pending assessment and litigation on this issue shall be handled accordingly. In this view of the matter, the contention sought to be raised by the Revenue as aforesaid, cannot be countenanced by this Court.

6.

No other ground is pressed by the appellant before this Court.

7.

Consequently, the appeal preferred by the Revenue is dismissed. No order as to costs. (PUSHPENDRA SINGH BHATI),J (SANGEET LODHA),J 55-Aditya/-

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