Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, DELHI “E” BENCH: NEW DELHI
Before: SHRI KUL BHARAT & SHRI O.P.KANT
ORDER PER KUL BHARAT, JM :
This appeal filed by the assessee for the assessment year 2013-14 is directed against the order of Ld. CIT(A)-2, Gurgaon dated 01.02.2018. The assessee has raised following grounds of appeal:-
1. "The learned CIT(Appeals) has erred in law and facts in not allowing the set off of Business Loss and unabsorbed depreciation of scooter business as held to be eligible for carried forward against Property Dealing income of Rs.25,00,000/- for the year.
That Learned CIT(A) has erred in law and facts in computing the income from Property Dealing Business under Deemed Income in place of Income from Business. 3. That appellant craves leave to add, alter, amend or to substitute the above grounds of appeal either before or at the time of hearing of case.”
2. The only effective ground raised by the assessee in this appeal is against the declining the claim of set off of Business Loss and unabsorbed depreciation of scooter business against property dealing income of Rs.25,00,000/-.
The facts giving rise to the present appeal are that a survey operation u/s 133A of the Income Tax Act, 1961 (“the Act”) was conducted at the premises of the assessee firm on 04.09.2012. Subsequently, the case of the assessee was picked up for scrutiny assessment. The Assessing Officer observed that the assessee firm claimed gross profit of Rs.7,07,208/- and net loss of Rs.4,99,856/- in the Profit & Loss A/c. Further, in the computation of income u/s 68 of the Act amounting to Rs.25,00,000/- which was surrendered during the course of survey, has been added in the business income. He further observed that the assessee after surrendering income, filed return of income and claimed set off of the current year business loss against the surrendered income. The Assessing Officer after considering the submissions of the assessee held that the set off could not be allowed hence, he made addition of Rs.25,00,000/-.
4. Aggrieved against this, the assessee preferred appeal before Ld.CIT(A) who after considering the submissions, sustained the addition.
Ld. Counsel for the assessee vehemently argued that the authorities below were not justified in sustaining the addition. He submitted that the surrendered income was disclosed as business income therefore, the assessee had rightly claimed set off of loss against this income.
Per contra, Ld.CIT DR opposed these submissions and supported the decision of authorities below. Ld.CIT DR took us through the impugned order to buttress the contentions that there is no infirmity into the findings of authorities below.
Ld. Counsel for the assessee placed reliance on the judgement of Hon’ble Supreme Court in the case of Lakshmichand Baijnath v.
Commissioner of Income-tax, [1959] 35 ITR 416 (SC). Ld. Counsel for the assessee further submitted that under the identical facts, in the case of M/s. Kirtiman Cements Packaging Industries Ltd. vs ACIT in 2778/Del/2017 order dated 15.05.2018 relating to Assessment Years 2012- 13 & 2013-14 wherein the Tribunal was pleased to allow set off all the losses which were denied by the authorities below. He contended that CBDT vide its Circular No.11/2019 has clarified that prior to 01.04.2017 set off of losses against the deemed income is allowable. Ld. Counsel for the assessee also placed reliance on the decision of ACE Infracity Developers P. Ltd. Vs DCIT in ITA No.1087/Del/2018 order dated 05.03.2021.
We have heard the rival contentions and perused the material available on record. There is no dispute with record to fact that the issue in question is whether the income declared in the course of survey and disclosed in the return of income as business income, could be eligible for set off of loss or not, in the case of M/s. Kirtiman Cements Packaging Industries Ltd. vs ACIT (supra) vide order dated 15.05.2018. The relevant paras are reproduced hereunder for ready-reference:-
10.2. “The ITAT, Delhi Bench in the case of ACIT, Circle-1, Muzaffarnagar vs. M/s. Pushkar Steels P. Ltd., Muzaffarnagar in TA.No.5473/Del./2011 dated 29.02.2012 have directed the A.O. to examine the issue in the light of decision of the Special Bench in the case of DCIT vs. Times of Guaranty Limited (2010) 131 TTJ 257 (Mum.) (SB). The issue is, therefore, covered in favour of the assessee by the above orders of different Benches of the Tribunal. It may also be noted here that A.O. denied the claim of assessee-company because decision of the Chandigadh Bench in the case of M/s. Liberty Plywood Private Ltd., Ambala Cantt. vs. ACIT, Ambala (supra) have not been accepted by the Department and Department intends to file appeal before the Hon’ble Punjab & Haryana High Court. The assessee-company has filed copy of the Judgment of the Hon’ble Punjab & Haryana High Court in the case of CIT vs. M/s. Liberty Plywood Private Ltd., in ITA.No.118 of 2015 dated 25.01.2016 in which the Departmental Appeal have been dismissed on account of low tax effect. Therefore, the only reason given by the A.O. for denying the claim of assessee- company no more survives. It may also be noted here that every income is to be assessed under section 14 of the I.T. Act and loss to be adjusted under section 70 to 72 of the I.T. Act. In order to assess an income under the Head “Income” and there must be some express provision of law as is held by the Hon’ble Supreme Court in the case of D.P. Sindhu 273 ITR 1. Each income is to be assessed under five Heads of income, Otherwise, the same is not taxable at all. Similar provisions for set-off of loss are defined under Sections 70 to 72 of the I.T. Act. As per Section 72, carried forward of business loss is not to be allowed to be set-off against any other head of income other than income from business. Inter Head set-off of business loss is allowed under section 71 against all other income except income from salary. Same head adjustment of business loss against other business income is allowed under section 70 of the Act. As such, provisions of law on unabsorbed deprecation which is allowed as depreciation of current year under section 32(2) fall in Section 71 and not under section 72, as such, allowable as ‘business expenditure’. Therefore, findings of the A.O. is not correct that surrendered income cannot be assessed even under the Head “Income from other sources”. It may also be noted here that after insertion of Section 115BBE, any income assessed under sections 68 to 69D will be taxed under section 115BBE and not under regular provisions w.e.f. A.Y. 2013-2014. Further, Section 115BBE has got amended w.e.f. A.Y. 2017-2018 that loss will not be allowed against such income. Therefore, it is clear that w.e.f. A.Y. 2017-2018 any type of loss will not be allowed deduction and this Amendment is not retrospective in nature. Therefore, claim of assessee-company shall have to be allowed by authorities below. The issue is covered in favour of the assessee-company by the above orders of various Benches of the Tribunal. We, therefore, set aside the orders of the authorities below and direct the A.O. to allow set-off of the depreciation of assessee-company against the income surrendered during the course of survey. The appeal of assessee-company is accordingly allowed.”
Moreover, Para 4 enclosed at Pages 24 to 25 of the CBDT Circular No.11/2019 reads as under:-
“Thus keeping the legislative intent behind amendment in section 115BBE(2) vide the Finance Act, 2016 to remove any ambiguity of interpretation, the Board is of the view that since the term 'or set off of any loss' was specifically inserted only vide the Finance Act 2016, w.e.f. 01.04.2017, 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.”
In the light of the aforesaid decisions and more particular circular issued by CBDT, Circular No.1/2019 dated 18.06.2019, the claim of the assessee for set off of loss would be allowable. As it is clarified by the CBDT that section 115BBE(2) came into statute book w.e.f. 01.04.2017, we hold accordingly. The Assessing Officer is hereby directed to allow the claim of set off of loss against the business income disclosed during the course of survey proceedings. Thus, Ground Nos.1 & 2 raised by the assessee are allowed.
Ground No.3 raised by the assessee is general in nature, needs no adjudication.
It is seen from the submissions made by the assessee in brief of submissions of synopsis regarding Ground No.5 wherein disallowance of salary paid to partner of Rs.1,50,000/-. No such ground is found in Form No.36. Therefore, the submissions of the assessee are rejected.
In the result, the appeal of the assessee is allowed.
Above decision was pronounced on conclusion of Virtual Hearing in the presence of both the parties on 25th August, 2021.