THE DCIT, CIRCLE-1(1)(1), AHMEDABAD vs. M/S. ASMAN INVESTMENTS LTD., AHMEDABAD

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ITA 3138/AHD/2015Status: DisposedITAT Ahmedabad04 October 2018AY 2011-124 pages
AI SummaryDismissed

What did the Tribunal hold?

The tribunal held that the disallowance under Section 14A cannot exceed the exempt income, upholding the CIT(A)'s decision. Regarding capital gains, it ruled that the deeming fiction under Section 50 does not extend to Section 74 for set-off purposes, also upholding the CIT(A)'s order.

What were the facts?

The Revenue appealed against the CIT(A)'s order deleting disallowances made under Section 14A and regarding the set-off of short-term capital gains against brought-forward long-term capital loss. The assessee argued that Section 14A disallowance cannot exceed exempt income, and capital gains under Section 50 should be treated as long-term for set-off purposes.

What were the issues?

Whether disallowance under Section 14A can exceed exempt income, and whether capital gains under Section 50 are treated as long-term for set-off purposes against brought-forward losses.

Which sections of the Income-tax Act were involved?

Section 14A,Section 143(3),Section 50,Section 74

AI-generated summary — verify with the full judgment below

Cases cited in this judgment(4)Show list

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Income Tax Appellate Tribunal, “B” BENCH, AHMEDABAD

Before: SHRI PRADIP KUMAR KEDIA & SHRI MAHAVIR PRASAD, JUDICIAL MEMEBR

For Appellant: Shri Apoorva Bhardwaj, Sr, Shri P. M. Mehta, A.R

आदेश/O R D E R

PER PRADIP KUMAR KEDIA - AM:

The captioned appeal has been filed at the instance of the Revenue against the order of the CIT(A)-3, Ahmedabad (‘CIT(A)’ in short), dated 03.09.2013 arising in the assessment order dated 14.03.2014 passed by the Assessing Officer (AO) under s. 143(3) of the Income Tax Act, 1961 (the Act) concerning assessment year 2011-12.

ITA No. 3138/Ahd/15 [DCIT vs. M/s. Asman Investments Ltd.] A.Y. 2011-12 - 2 -

2.

The grounds of appeal raised by the Revenue reads as under:-

“(1) That the ld. CIT(A) has erred in law and facts in deleting the disallowance of Rs.69,36,145/-. (2) That the ld. CIT(A) has erred in law and facts in deleting the disallowance of claim of set off of Short Term Capital Gain of Rs.25,79,530/- against brought forward Long Term Capital Loss.”

3.

Ground No.1 concerns disallowance under s.14A of the Act.

4.

The learned DR for the Revenue relied upon the order of the AO and submitted that the disallowance as per Rule 8D amounts to Rs.69,36,145/- and there was no justification for the CIT(A) to restrict the same to the extent of exempt income by way of dividend amounting to Rs.41,250/-. We find that the issue is squarely covered in favour of the assessee by the decision of the Hon’ble Delhi High Court in the case of Joint Investments Pvt.Ltd. vs. CIT reported in 372 ITR 692 (Delhi) as relied upon on behalf of the assessee. Hon’ble Delhi High Court in the aforesaid decision has ruled that disallowance under s.14A of the Act cannot exceed the amount of tax exempt income. Therefore, in the wake of the aforesaid decision, we find no infirmity in the order of the CIT(A).

5.

Ground No.1 of the Revenue’s appeal is dismissed.

6.

Ground No.2 concerns claim of set off of short term capital gain against brought forward long term capital loss.

7.

It is the case on behalf of the assessee that the short term capital gain of Rs.25,79,530/- arises out of depreciable assets sold

ITA No. 3138/Ahd/15 [DCIT vs. M/s. Asman Investments Ltd.] A.Y. 2011-12 - 3 -

after a period of 36 months from the date of their acquisition. Therefore, the capital gain arising thereon was worked out as per the provisions of Section 50 of the Act which is a special provision for computation of capital gains in the case of depreciable assets. The assessee claimed that the aforesaid capital gain arising from long term capital gain under s.50 of the Act is entitled to be set off against long term capital gains for the reason that even though for the purposes of Section 50 of the Act, the capital gains is deemed to be short term capital gain but wherever the assets have been held for a period of more than 36 months. Such capital gains for all other purposes of the Income Tax Act including for the purposes of set off has to be treated as long term capital gain and accordingly must be set off against brought forward long term capital loss. For this proposition, the learned AR for the assessee relied upon the decision of the Hon’ble Gujarat High Court in the case of CIT vs. Polestar Industries Ltd. [2014] 41 taxmann.com 237 (Guj) and CIT vs. Aditya Medisales Ltd. [2013] 38 taxmann.com 244 (Guj). The learned AR thereafter refers to the decision of Hon’ble Bombay High Court in the case of CIT vs. Manali Investment [2013] 39 taxmann.com 4(Bom) wherein the decision of Tribunal in Manali Investment vs. ACIT [2011] 10 taxmann.com 293 (Mum) was approved in the matter of set off of losses under s.74 of the Act.

8.

Per contra, learned DR relied upon the order of the AO.

9.

We have carefully considered the rival submissions on the issue. In view of the decision of the Hon’ble Gujarat High Court in the case of Polestar Industries (supra); Aditya Medisales Ltd.

ITA No. 3138/Ahd/15 [DCIT vs. M/s. Asman Investments Ltd.] A.Y. 2011-12 - 4 -

(supra); and Manali Investment (supra), the deeming fiction for computation of capital gains in the case of depreciable asset created under s.50 of the Act do not extend to the provisions of Section 74 of the Act for the purposes of set off of capital losses and carry forward thereafter. Therefore, we find no infirmity in the order of the CIT(A).

10.

In the result, Ground No.2 of the Revenue’s appeal is dismissed.

11.

In the result, the appeal of the Revenue is dismissed.

This Order pronounced in Open Court on 04/10/2018

Sd/- Sd/- (MAHAVIR PRASAD) (PRADIP KUMAR KEDIA) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad: Dated 04/10/2018 True Copy S. K. SINHA आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. राज�व / Revenue 2. आवेदक / Assessee 3. संबं�धत आयकर आयु�त / Concerned CIT 4. आयकर आयु�त- अपील / CIT (A) 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड� फाइल / Guard file. By order/आदेश से,

उप/सहायक पंजीकार आयकर अपील�य अ�धकरण, अहमदाबाद ।

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