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Income Tax Appellate Tribunal, “D” Bench, Mumbai
O R D E R Per Shamim Yahya (AM) :-
This is an appeal by the Revenue against the order of learned CIT(A) dated 10.8.2018 pertains to A.Y. 2013-14.
The grounds of appeal
read as under :- "Whether on the facts and in the circumstances, the Ld.ClT(A) is justified in allowing the set-off of carried forward business losses against short term capital gain raised by selling of capital assets which were not converted into stock-in-trade and computed as per section 50C of the Act, 1961 in view of provisions of section 72 of the IT Act, 1961?" The appellant prays that the order of the CIT(A) on the above ground be set aside and that of the ITO
9. (3) (1) be restored.
Brief facts of the case are that the Assessing Officer in this case observed that during the course of assessment proceedings assessee was asked to furnish the copy of computation of total income, copy of balance sheet, copy of profit and loss account etc. It is seen from the computation of total income
2 M/s. Destimony India Services Private Limited that the assessee has set off short term capital gains arises out of sale of depreciable assets. That the assessee has not referred any specific provisions of the Act under which this loss has been set off. Thereafter in an order showing complete absence of application of mind the Assessing Officer rejected the assessee’s claim by observing as under :-
The provisions of the Act which deals with the carry forward and set of off losses is available under chapter VI of the Income Tax Act, 1961. Carry forward and set off of business losses has been dealt under the provisions of section 72 of the Act under this chapter. On careful consideration of this provision it is seen that carried forward business losses of earlier year are allowable to be set off against the capital gains of any kind mere are no other provisions under the Income Tax Act which allows such set off. In view of this fact and in absence of any specific provisions under the Act, the carried forward business losses of A.Y-2010-11 set off against short term capital gains on sale of depreciable assets is accordingly denied
Upon assessee’s appeal learned CIT(A) noted following submission of the assessee :-
The appellant filed a written submission which is reproduced in para 3 of this order. The appellant placed reliance on section 72 of Income Tax Act 1961. For proper appreciation of facts, section 72 is reproduced as under:
"72(1) Where from any assessment year, the net result of the computation under the head "Profits and gains of business or profession" is loss to the assessee, not being loss sustained in a speculation business, and such loss cannot be or is not wholly set off against income under any head of income in accordance with the provisions of sec. 71, so much of the loss as has not been so set off or where he has no income under any other head, the whole loss shall, subject to the other provisions of this Chapter, be carried forward to the following assessment year, and - (i) it shall be set off against the profits and gains, if any, of any business or profession carried on by him and assessable for that assessment year;....
4.1.3. After referring section 72 the appellant submitted that as per section 72 of the Act, the losses incurred under the head 'Profits and Gains of Business or Profession' which could not be set off against income from any other head of income, have to be carried forward to the following AY and can be set off "against the profits, if any, of that business carried on by the assessee and assessable for that AY. 4.1.4. The appellant further submitted that section 72 did not mandate that the income that was sought to be adjusted against the brought forward loss
3 M/s. Destimony India Services Private Limited should be the one that is taxable under the head /profits and gains of business' only. There was a distinct difference in the language employed in section 72 in the context of the loss that was to be carried forward (where the loss under the particular head of income is referred to), as against the context of the loss, which it could be set-off against (where the nature of income is referred to).
4.1.5. The appellant claimed that the office premises sold by the appellant during the year was used for its business and since the said capital asset was connected to its business, the gains arising from sale of such assets had rightly been set-off by the appellant against the brought forward business loss.
4.1.6. In support of its claim the appellant placed reliance on judgement of honourable Mumbai ITAT in case of Digital Electronics Ltd. v. Addl. CIT (2010)(Mumbai Tribunal)(l6 taxmann.com 316). The facts of the case considered by the honourable Tribunal were as under:
> The assessee claimed set-off of brought forward business loss and unabsorbed depreciation against short-term capital gains taxable u/s 50 arising out of sale of factory building and plant & machinery.
> It was chimed that though the income was taxable as capital gains, its character remained that of business income in as much as the gains arose on transfer of a business asset on which depreciation was allowed.
4.1.7. After considering the argument of revenue and assessee the learned Tribunal held as under:
> As per section 72, the losses incurred under the head 'Profits and Gains of Business or Profession' which could not be set off against income from any other head of income, have to be carried forward to the following AY and are allowable for being set-off against the profits, if any, of that business or profession carried on by the assessee and assessable for that AY. > There is no requirement of the gains being taxable under the head 'profits and gains of business or profession' and thus, as long as gains are 'of any business or profession carried on by the assessee and assessable to tax for that AY, the same can be set off against loss under the head profits and gains of business or profession carried forward from earlier year.
> The gain arising on sale of the business assets is in the nature of business income, though it is taxed under the head 'Capital Gains'. .
>In view of the above, the Hon'ble Tribunal has held that the brought forward business losses can be set-off against the capital gains taxable u/s 50 of the Act.
4 M/s. Destimony India Services Private Limited 4.1.8. Appellant has also placed reliance on judgement of honourable Mumbai ITAT in case of M/s. Hickson & Dadajee Pvt. Ltd. v. ACIT [ITA No. 5882 of 2012, date of order-28 February 2014] and lTO v. Evershine Pharmaceuticals Distributors Pvt. Ltd. [ITA No. 4922 of 2011, date of order - 22 August 2012] wherein honourable tribunal had also upheld that brought forward business losses can be set off against the capital gains taxable u/s 50 of the Act.
Following the precedents as above learned CIT(A) held that the ground of appeal is allowed and Assessing Officer is directed to grant set off of carry forward loss after verification of records.
6. Against this order the Revenue is in appeal before us. We have heard learned Departmental Representative and perused the record. We agree with the finding of learned CIT(A) that the issue is covered in favour of the assessee by the Tribunal decision cited there. Hence, we uphold the order of learned CIT(A).
In the result, Revenue’s appeal is dismissed.
Pronounced in the open court on 11.3.2021.