MANUBHA PRABHATSANG VAGHELA,MEHSANA vs. INCOME TAX OFFICER, WARD-5, PALANPUR

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ITA 966/AHD/2025Status: DisposedITAT Ahmedabad17 September 2025AY 2012-13Bench: DR. B.R.R. KUMAR, VICE-PRESIDENT SHRI SIDDHARTHA NAUTIYAL (Judicial Member)3 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal, relying on CBDT Circular No. 11/2019, held that assessees are entitled to set off losses against income determined under Section 115BBE for assessment years up to 2016-17, given that the restriction was introduced only from 1st April, 2017. Consequently, the Assessing Officer was directed to allow the set-off of losses against business income.

What were the facts?

The assessee filed two appeals against the CIT(A) orders for AYs 2012-13 and 2013-14, which arose from AO orders under Section 144 r.w.s. 147. The primary issue was the set-off of losses against business income, especially concerning deemed income under Section 115BBE of the Income-tax Act, for assessment years prior to 2017-18.

What were the issues?

Whether set-off of losses against deemed income under Section 115BBE of the Income-tax Act is allowable for assessment years prior to 2017-18, in light of CBDT Circular No. 11/2019.

Which sections of the Income-tax Act were involved?

Section 250,Section 144,Section 147,Section 71,Section 115BBE,Section 68,Section 69,Section 69A,Section 69B,Section 69C,Section 69D

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “SMC” BENCH, AHMEDABAD

Before: DR. B.R.R. KUMAR, VICE-SHRI SIDDHARTHA NAUTIYAL

For Appellant: Shri Bhavik Nagori, AR
For Respondent: Shri C. Dharani Nath, Sr DR
Hearing: 16.09.2025Pronounced: 17.09.2025

PER DR. B.R.R. KUMAR, VICE-PRESIDENT:-

1.

These two appeals have been filed by the assessee against the respective orders of the Ld. Commissioner of Income-tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi (hereinafter referred to as "CIT(A)" for short), both dated 11.02.2025, passed under Section 250 of the Income-tax Act, 1961 [hereinafter referred to as "the Act" for short], arising from the order passed by the Assessing Officer u/s 144 r.ws. 147 of the Act for Assessment Years 2012-13 & 2013-14 respectively.

2. Although the assessee has raised multiple grounds of appeal for both assessment years under consideration, the only ground pressed before us pertains to set-off of losses against business income. The assessment years in question are AYs 2012-13 and AY 2013-14. The relevant CBDT circular regarding the set-off of losses is as follows:-

& 967/Ahd/2025 Manubha Prabhatsangh Vaghela Vs. ITO Asst. Year : 2012-13 & 2013-14 - 2–

“CIRCULAR NO. 11/2019 [F.NO.225/45/2019-ITA.II] SECTION 71, READ WITH SECTION 115BBE, OF THE INCOME-TAX ACT, 1961 - LOSSES - SET OFF OF FROM ONE HEAD AGAINST INCOME FROM AN OTHER - CLARIFICATION REGARDING NON-ALLOWABILITY OF SETOFF OF LOSSES AGAINST THE DEEMED INCOME UNDER SECTION 115BBE OF THE INCOME TAX ACT, 1961 PRIOR TO ASSESSMENT YEAR 2017-18

CIRCULAR NO. 11/2019 [F.NO.225/45/2019-ITA.II], DATED 19-6-2019 With effect from 1-4-2017, sub-section (2) of section 115BBE of the Income-tax Act, 1961 (Act) provides that where total income of an assessee includes any income referred to in section(s) 68/69/69A/69B/69C/69D of the Act, no deduction in respect of any expenditure or allowance or set off of any loss shall be allowed to the assessee under any provisions of the Act in computing the income referred to in section 115BBE(1) of the Act.

2.

In this regard, it has been brought to the notice of the Central Board of Direct Taxes (the Board) that in assessments prior to assessment year 2017-18, while some of the Assessing Officers have allowed set off of losses against the additions made by them under section(s) 68/69/69A/69B/69C/69D, in some cases, set off of losses against the additions made under section 115BBE(1) of the Act have not been allowed. As the amendment inserting the words 'or set off of any loss' is applicable with effect from 1st of April, 2017 and applies from assessment year 2017-18 onwards, conflicting views have been taken by the Assessing Officers in assessments for years prior to assessment year 2017-18. The matter has been referred to the Board so that a consistent approach is adopted by the Assessing Officers while applying provision of section 115BBE in assessments for period prior to the assessment year 2017-18.

3.

The Board has examined the matter. The Circular No. 3/2017 of the Board dated 20th January, 2017 which contains Explanatory notes to the provisions of the Finance Act, 2016, at para 46.2, regarding amendment made in section 115BBE(2) of the Act mentions that currently there is uncertainty on the issue of set-off of losses against income referred to in section 115BBE. It also further mentions that the pre-amended provision of section 115BBE of the Act did not convey the intention that losses shall not be allowed to be setoff against income referred to in section 115BBE of the Act and hence, the amendment was made vide the Finance Act, 2016.

4. 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. 1-4-2017, 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.

& 967/Ahd/2025 Manubha Prabhatsangh Vaghela Vs. ITO Asst. Year : 2012-13 & 2013-14 - 3–

5.

The contents of this Circular may be circulated widely for information of all stakeholders and departmental officers. The pending assessments and litigations on this issue may be handled accordingly.”

3. In view of the aforesaid circular of the CBDT, the Assessing Officer is directed to allow the set-off of losses against business income.

4.

In the result, the both the appeals of the assessee are partly allowed.

The order is pronounced in the open Court on 17.09.2025

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