M/S. PEETHAMBRA GRANITES (P) LTD.,NEW DELHI vs. DCIT, NEW DELHI

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘F’, NEW DELHI BEFORE SH. R.S. SYAL, VICE PRESIDENT AND SMT. BEENA A. PILLAI, JUDICIAL MEMBER ITA No. 1188/Del/2014 : Asstt. Year : 2008-09

Peethambra Granites (P) Ltd. Vs DCIT D-236B, 2nd Floor Circle-14(1) Sarvodaya Enclave New Delhi New Delhi PAN : AAACP0955A (APPELLANT) (RESPONDENT) Assessee by : Sh. R.K.Talwar, Adv. Revenue by : Sh. Ravi Kant Gupta, Sr. DR Date of Hearing : Date of Pronouncement : 08/08/2018 10/08/2018

ORDER Per Beena A. Pillai, Judical Member Present appeal has been filed by assessee against order dated 26/12/2013 passed by Ld. CIT (A)-XVII, New Delhi for assessment year 2008-09 on the following grounds of appeal: “On the facts and circumstances of the case the learned CIT(A) has erred :-

ITA No.1188/Del/2014 2 (Peethambra Granties (P) Ltd.) 1. In confirming the order of the Assessing Officer passed u/s 154/147/143(3) which is illegal, unjustified and bad in law. 2. In confirming the order of the Assessing Officer who was totally unjustified in adjusting capital gains against business losses where assessee has availed option of not adjusting business losses against capital gains and paying proper taxes on capital gains and carrying business losses.” Brief facts of the case are as under: 1. Assessee filed its return of income on 25/09/08 showing total income of Rs.47,23,747/-. The return was processed under section 143 (1) of the act and the case was selected for scrutiny. Accordingly notice under section 143(2) of the act was issued to assessee. In compliance to the statutory notices, representative of assessee appeared before the Ld.AO and filed replies and documents. 2. Ld.AO observed that assessee is in the business of granite production and trading of granite blocks and marble slabs. During the assessment proceedings assessee produced books of account and bills and vouchers which were examined on test check basis. 3. Assessee in his return of income had declared business loss of Rs.1,39,69,160/-and income under the head income from long term capital gain and short term

ITA No.1188/Del/2014 3 (Peethambra Granties (P) Ltd.) capital gain. Assessee treated income from long term capital gain separately. Ld.AO while passing the assessment order under section 143(3) of the Act adjusted LTCG/STCG income against business loss. Thereafter assessee filed an application for rectification under section 154 which was rejected by Ld.AO by observing that as per section 71(2) of the act which was deducted from business loss. 4. Against the order passed by Ld.AO under section 154 read with 143(3) of the Act, assessee preferred appeal before Ld.CIT(A). Ld.CIT (A) was an agreement with the interpretation of section 71(2) of the act as done by Ld.AO and upheld his action of business loss being set off against income under the head capital gains. Aggrieved by the order of Ld.CIT (A) assessee is in appeal before us now. 5. At the outset Ld.AR submitted that the only issue raised by assessee is in respect of method of computation of income adopted by Ld.AO by adjusting business loss against income from capital gains, when assessee had an option of not adjusting the business loss. 6. Ld.AR submitted that in the present case assessee has offered the long term capital gain for taxation at 10% as per provision to section 112 (1) of the Act. He submitted that under section 71(2) assessee has an

ITA No.1188/Del/2014 4 (Peethambra Granties (P) Ltd.) option due to the expression “may be” used by legislature of not set off the ‘business loss’, against income assessable under the head ‘capital gains’, and to carry forward set off in subsequent assessment years. He placed reliance upon following decisions: • Decision of Hon’ble Bombay High Court in case of CIT vs. Anuj A. Seth HUF reported in (2010) 3 Taxmann.com 91; • Decision of 3rd Member by Hon’ble Bombay Tribunal in case of ITO vs. C.J. Shah (1984) 101 ITD 151; • Decision of Hon’ble Pune Tribunal in case of Coated Fabrics (P.) Ltd., vs. JCIT reported in (2006) 101 ITD 297. 7. On contrary Ld.Sr.DR submitted that set of off losses has to be in accordance with section 70 to 80, which is a part of procedure. By placing reliance upon the order passed by authorities below Ld.Sr.DR submitted that assessee has chosen to carry forward the business loss to avoid MAT provisions. He thus submitted that assessing officer was correct in setting of the business loss against the income earned under the head capital gains. 8. We have perused the submissions advanced by both the sides and the light of the records placed before us. 9. The computation of income along with returns filed under section 139(1) of the Act has been placed at page

ITA No.1188/Del/2014 5 (Peethambra Granties (P) Ltd.) 1 of paper book. On careful perusal of the same, it is observed that business loss has been set off against income from short term capital gain. It is also observed that assessee has paid 10% tax on long-term gain on which STT has not been paid per provisions of section 112 of the Act. 10. In our considered opinion subsection 2 of section 71 is applicable to the facts of the present case as assessee has a positive income under the head capital gains (including long term and short term capital gains). Is on a careful reading of sub section 2 of section 71, it is apparent that there is no restriction imposed on exercising option of setting off of business loss against income under the head capital gains (either long term capital gain or short term capital gain). The facts of the present case assessee has also exercised its right under section 112 of the act and has paid 10% tax on the long term capital gains, and therefore what remains to be adjusted against the business loss is the short term capital gains amounting to Rs.10,58,675/-. The balance unabsorbed business loss amounting to Rs.1,29,10,486/- has been carried forwarded by assessee. We do not find any infirmity in the above computation and carry forward of business loss which is in consonance with the provisions of the act

ITA No.1188/Del/2014 6 (Peethambra Granties (P) Ltd.) We therefore do not agree with computation adopted by Ld.AO. We direct Ld.AO to allow carry forward of unabsorbed business depreciation as per computation of income filed alongwith original return under section 139(1) of the Act. Accordingly, grounds raised by assessee stands allowed. In the result appeal filed by assessee stands allowed. Order Pronounced in the Court on 10/08/2018.

Sd/- Sd/- (R.S.Syal) (Beena A. Pillai) VICE PRESIDENT JUDICIAL MEMBER Dated: 10/08/2018 *Binita* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT

ASSISTANT REGISTRAR

ITA No.1188/Del/2014 7 (Peethambra Granties (P) Ltd.)