SIMPLEX PAPERS LIMITED,MUMBAI vs. DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 4(4), MUMBAI

आदेश / ORDER PER PAWAN SINGH, JUDICIAL MEMBER: 1. This appeal is filed by the Assessee against the order of Ld. CIT(A)-54,

Mumbai dated 27.11.2025 for the Assessment Year (AY) 2015-2016. The

Appellant/Assessee has raised the following grounds of appeal:

1) On the facts and circumstances of the case and in law, the learned Commissioner of Income Tax (Appeals), CIT(A) 54, Mumbai [“the learned CIT(A)] erred in not allowing set off of brought forward business loss against the Short Term Capital Gain arising from the sale of a depreciable asset u/s.50 amounting to Rs.2,46,91,234/-.

2) Without prejudice to the above, on the facts and circumstances of the case and in law, the learned CIT(A) erred in not concluding that the Short Term Capital Gain arising from the sale of a depreciable asset u/s.50 in principle constitutes Business Income considering the real character of the income although taxing it under the head Capital Gains is merely a computational aspect of ignoring various decisions of the Jurisdictional Tribunal and High Court.” 2. Rival submissions of both the parties have been heard and record perused.

The Learned Authorized Representative (Ld. Ld.AR) of the Assessee submits

that Assessee filed its return of income for the Assessment Year 2015-2016

on 29.09.2015 declaring Nil income after set of off carry forward losses. Case

was selected for scrutiny and assessment was completed under section

143(3) on 16.10.2017 in accepting return of income. Subsequently, the

assessment was revised by Learned Principal Commissioner of Income Tax

(PCIT) by invoking this jurisdiction under Section 263 of the Income Tax Act

by his order dated 14.12.2020. In the revision proceedings, the Learned PCIT

identified two issues for revising Assessment Order. Firstly, sale of stores

items amounting to Rs.61,80,986/- and set off of brought forward business

loss against Short Term Capital Gain (STCG) arising from the sale of

depreciable asset under Section 50. The Ld. AR of Assessee fairly submits

that order under Section 263 of the Act was challenged before Tribunal on

various grounds. However, the same was restored back to the file of PCIT

with direction to allow fair and reasonable opportunity of hearing to the

Assessee. In the meantime the Assessing Officer passed order giving effect

under Section 143(3) rws 263 of the Act on 14.03.2022. The Assessing

Officer in order giving effect made additions/disallowance as per directions of ld PCIT. On appeal before Learned CIT(A), the Assessee was allowed relief

on stores sale items however, the disallowance of set of off short term

capital gain earned on sale of depreciable asset was disallowed by referring

the decision of Mumbai Tribunal in Sabeena Silk Mills Vs. Income-tax Officer

in ITA No.1508/Mum/2025, dated 13.08.2025. The order of Sabeena Silk

Mills (supra) has been subsequently recalled by Tribunal in M.A.

No.378/Mum/2025, dated 11.05.2026. The Learned CIT(A), while confirming

the action of Assessing Officer solely relied upon the decision of in Sabeena

Silk Mills Vs. Income-tax Officer 31(1)(1), Mumbai (Supra) which has been

recalled thus it has lost its reliance value. The ld CIT(A) also relied on the

decision of Mumbai Tribunal in Everest Kanto Cylinder Ltd. in ITA No.

782/Mum/2024 dated 20.01.2025, which is based on different set of facts.

assessee in covered by the ratio of decision of Hon'ble Jurisdiction High Court

in Pr.CIT Vs. Alcon Developers reported in [2021] 128 taxmann.com 371

(Bombay), wherein it was held that Assessee is entitled to claim set up off its

business loss of earlier years against income from capital given earned on

sale of its business undertaking. The Learned Ld.AR of the Assessee also

relied upon decision of Bombay High Court in the case of Commissioner of

Income Tax-5 Vs. Hickson & Dadajee (P.) Ltd. [2020] 122 taxmann.com 93

(Bombay). Further, in CIT Vs Hickson & Dadajee (P.) Ltd. (Supra), the

Revenue has accepted that decision of Mumbai Tribunal in Digital Electronics

Ltd. Vs. Additional Commissioner of Income Tax [2012] 49 SOT 65 (Mumbai)

has been accepted by the Revenue. In Digital Electronics Ltd. (Supra) the Tribunal held that under Section 72 of the Act the loss under head "Profit and

Gains of business or Profession" can be carried forward and same can be set

off against loss under the head "Profit of any business or profession". There

is no requirements of Section 72 of the Act that such gain or profit must be

taxable under the head "Profit and gains of business or profession". The

carry forward business loss set off against "Short Term Capital Gain" of sale

of building. Similar view was taken by the Hon'ble Karnataka High Court in the

case of Nandi Steels Ltd. Vs. Assistant Commissioner of Income Tax,

Circle 12(2), Bangalore [2021] 128 taxmann.com267 (Karnataka), dated

23.02.2021 wherein it was held that Assessee was entitled to set off carry

forward business loss of earlier years against income declared under head

"Income from capital gain" arising out of sale of land alongwith building and

bore well which were business assets of assessee. The Learned Ld.AR of the

Assessee submits that issue at present is covered by various decisions he has

relied upon. It was argued that no further appeal is filed by Revenue against

the relief allowed by the Learned CIT(A) on the issue of sale of store items,

now the short issue is only with regard to set off of business loss against

capital gain earned on sale of part of depreciable asset.

(Ld. DR) for the Revenue supported the order of Assessing Officer/ Learned

CIT(A). The Learned Sr. DR for the revenue submits that he will have to

verify about the status of decision of the Tribunal in the case of Digital

Electronics Ltd. (Supra) which has been allegedly accepted by Standing

Counsel before the Hon'ble High Court.

through the orders of lower authorities below. On perusal of record the lower

authorities, we find that Learned AR of the assessee while making his

submissions has correctly explained the fact. Before us, a very limited issue is

for our consideration, that is, if the Assessee is eligible for claiming set off of

brought forward business loss of Rs.2.46 Crores against the short term

capital gain earned on sale of depreciable assets under the head "Short Term

Capital Gain". We find that Learned CIT(A) while confirming the action of

Assessing Officer relied upon decision of in Sabeena Silk Mills Vs. Income-tax

Officer 31(1)(1), Mumbai (Supra), we find that decision of Tribunal in the case

of in Sabeena Silk Mills Vs. Income-tax Officer (supra) has been recalled

in M.A.No.378/Mum/2025. Thus, in our considered view such decision has

lost its reliance/reference value. The ld CIT(A) also relied upon the decision

of Mumbai Tribunal in the case of Everest Kanto Cylinder Ltd. Vs. DCIT

(supra). On careful perusal of such decisions, we find that fact of the case in

Everest Kanto Cylinder Ltd. Vs. DCIT (Supra) the Assessee showed

depreciable asset at a value lower than written down value of the asset

resulting into loss and the said Assessee claimed business loss, however, the

case in our hand is at diagonally opposite.

Jurisdictional High Court in the case of Pr.CIT Vs. Alcon Developers

(Supra) wherein it has been held that Assessee is entitled to claim set off of

its business loss of earlier years "Income from Capital Gain" earned by the

Assessee from selling its business undertaking. Similar view has been taken by Hon'ble Karnataka High Court in the case of Nandi Steels Ltd. Vs. ACIT

(supra). We also find that decision of Mumbai Tribunal in Digital Electronics

Vs. Add CIT (Supra) it was held that held that under Section 72 of the Act

the loss under head "Profit and Gains of business or Profession" can be

carried forward and same can be set off against a loss under the head "Profit

of any business or profession". There is no requirements of Section 72 of the

Act that such gain or profit must be taxable under the head "Profit and gains

of business or profession". The carry forward business loss set off against

"Short Term Capital Gain" of sale of building. The decision in Digital

Electronics Vs Add CIT (supra) has been accepted by the Revenue of such

Act is at variance. Moreover, there is no reference of decision of Jurisdictional

Bombay High Court in the case of Pr CIT Vs Alcon Developers (Supra) and

CIT Vs. Hickson & Dadajee (P.) Ltd. (Supra) wherein the decision of Mumbai

Tribunal in Digital Electronics Vs. Additional Commissioner of Income Tax

(Supra) has been accepted by the Revenue. Thus, in view of the aforesaid

factual and legal discussion the ground of appeal raised by Assessee is

allowed.

Order pronounced in the open court on 15.10.2026.

Sd/- Sd/- RAKESH KUMAR LODHA PAWAN SINGH ACCOUNTANT MEMBER JUDICIAL MEMBER

Mumbai Dated:15.10.2026 Milan Patil Copy to: Simplex Papers Limited 2nd Floor, Simplex Mills Compound, 30, 1 Keshavrao Khadye Marg, Jacob Circle, Mumbai – 400011, Maharashtra. Deputy Commissioner of Income Tax, Central Circle 4(4) 2 Room No.424, 4th Floor, Kautilya Bhavan, Bandra Kurla Complex, Bandra East , Mumbai – 400051 Maharashtra. 3 THE PCIT / CIT, 4 THE D.R., ITAT, MUMBAIBENCH 5 GUARD FILE