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Facts
The assessee incurred a commodity loss of Rs. 46,16,027/- from MCX and NCDEX. The Assessing Officer (AO) made an addition of this amount as unexplained income/expenditure, disagreeing with the assessee's explanation regarding the source of funds for repayment. The assessee appealed, contending that the set-off of the business loss should be allowed, even if treated as unexplained expenditure, in light of CBDT Circular No. 11/2019.
Held
The Tribunal condoned the delay in filing the appeal. Relying on CBDT Circular No. 11/2019, which clarifies that for assessment years prior to 2017-18, an assessee is entitled to claim set-off of loss against income determined under section 115BBE, the Tribunal directed the AO to allow the set-off of the business loss against the income determined by him.
Key Issues
Whether a business loss incurred in commodity transactions can be set off against income deemed under Section 115BBE of the Income Tax Act for assessment years prior to 2017-18.
Sections Cited
115BBE, 68, 69, 69A, 69B, 69C, 69D
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “SMC” BENCH, MUMBAI
Before: SHRI NARENDRA KUMAR BILLAIYA, HON’BLE & SHRI RAHUL CHAUDHARY, HON’BLE
PER NARENDRA KUMAR BILLAIYA, AM: This appeal by the assessee is preferred against the order dt. 17/08/2023 by NFAC, Delhi pertaining to Assessment Year 2011-12. 2. The solitary grievance of the assessee is that the assessee should be allowed the set off of the business loss amounting to Rs.46,16,027/-.
This appeal is time barred by limitation for a period of 64 days. We have carefully considered the reasons for delay in filing the appeal. We are convinced that the assessee was prevented by reasonable and sufficient cause for not filing the appeal on time. Therefore, the delay is condoned.
Briefly stated facts of the case are that, the Assessing Officer (AO), was in possession of the information that the assessee had entered into commodity transaction in which the assessee had Assessment Year: 2011-12 Darshan Surendra Tanna 2
commodity loss of Rs. 46,16,027/- from MCX and NCDEX. The assessee was asked to explain the source of repayment of the commodity loss. In his reply, the assessee stated that he had outstandings from friends and relatives in earlier years which has been returned and even used for the payment of commodity loss. The reply of the assessee did not find any favour with the AO who made the addition of Rs.46,16,027/- as unexplained income though, it has to read as unexplained expenditure.
Be that as it may, the claim of the assessee is that even if it is added back as unexplained expenditure, the set off of the same should be allowed in the light of the CBDT Circular No. 11/2019, dt. 19/06/2019 and the same reads as under:- Circular No. 11/2019 Government of India Ministry of Finance Department of Revenue Central Board of Direct Taxes
North-Block, New Delhi, dated the 19” of June, 2019
Subject: Clarification regarding non-allowability of set-off of losses against the deemed income under section 115BBE of the Income-tax Act, 1961 prior to assessment-year 2017-18-reg.
With effect from 01.04.2017, 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.
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 1158BE(1) of the Act have not been allowed. As the amendment inserting the words ’or set off of any loss’ is applicable with effect Tom 1^ of April, 2017 and applies from assessment year 2017-18 onwards, conflicting views have been taken by the Assessing Officers in Assessment Year: 2011-12 Darshan Surendra Tanna 3
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 20" 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 set-off 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. 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. 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.
Hindi version to follow.
Rajarajeswari R.) Under Secretary (ITA.II), CBDT
(F.No. 225/45/2019-ITA.II)”
Since the loss has not been rejected by the AO, in the light of the aforementioned binding Circular, the AO is directed to allow the set off of the loss to the income determine by him.
In the result, appeal of the assessee is allowed. Order pronounced in the Court on 3rd July, 2024 at Mumbai. (RAHUL CHAUDHARY) ACCOUNTANT MEMBER Kolkata, Dated 03/07/2024 *SC SrPs *SC SrPs *SC SrPs *SC SrPs Assessment Year: 2011-12 Darshan Surendra Tanna 4
आदेश की "ितिलिप अ"ेिषत/Copy of the Order forwarded to : अपीलाथ" / The Appellant
""थ" / The Respondent 2. संबंिधत आयकर आयु" / Concerned Pr. CIT 3. आयकर आयु" अपील
( ) / The CIT(A)- िवभागीय "ितिनिध ,आयकर अपीलीय अिधकरण, मुंबई /DR,ITAT, Mumbai, 5. गाड" फाई/ Guard file. 6. आदेशानुसार/ BY ORDER,