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Facts
The assessee filed an appeal against an order regarding assessment for AY 2016-17. The appeal primarily concerned the disallowance of set-off of carried forward business losses and unabsorbed depreciation amounting to Rs. 21,92,990/-, against an addition made by the AO under section 69A for Rs. 22,00,600/-. The assessee argued that since they had declared 'Nil' income in earlier years, they couldn't claim losses, but now with a completed assessment, set-off should be allowed.
Held
The Tribunal referred to CBDT Circular No. 11/2019, which clarifies that prior to AY 2017-18 (i.e., including AY 2016-17), set-off of losses against additions made under sections like 68/69/69A is permissible. The amendment to section 115BBE, which disallowed such set-offs, was effective from April 1, 2017.
Key Issues
Whether the assessee is entitled to set off carried forward business losses and unabsorbed depreciation against additions made under section 69A, considering the period prior to the amendment of section 115BBE?
Sections Cited
143(3), 69A, 68, 69, 69A, 69B, 69C, 69D, 115BBE
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, ‘SMC‘ BENCH
आदेश / O R D E R PER AMIT SHUKLA (J.M): The aforesaid appeal has been filed by the assessee against order dated 26/12/2023 passed by Addl. / JCIT-9, Delhi for the quantum of assessment passed u/s.143(3) for the A.Y.2016-17. 2. In the grounds, Assessee has raised following grounds of appeal:- GROUND INCOME I:- On the facts and in the circumstances of the case, the Joint Commissioner of Income Tax (Appeals) -
9. Delhi (hereinafter
Shailesh Dhirajlal Shah referred to as "CIT(A)") has erred in confirming the addition of Rs. 37,083/- under the head Income from House property though it was vacant during the part of the year The Appellant therefore prays that the addition of Rs. 37,083/- being baseless, unwanted, illegal and hence be deleted GROUND II On the facts and in the circumstances of the case, the Joint Commissioner of Income Tax (Appeals)-9 Delhi (hereinafter referred to as "CIT(A)") has erred in confirming the disallowance of claim under chapter VIA to the extent of Rs. 1,58,667/- The Appellant therefore prays that the deduction under chapter VIA aggregating to Rs. 1,58,667/- be directed to be allowed GROUND III- On the facts and in the circumstances of the case, the Joint Commissioner of Income Tax (Appeals) - 9 Delhi (hereinafter referred to as "CIT(A)") has erred in not allowing the set off of the carried forward business losses including unabsorbed depreciation to the extent of Rs. 21,92,990/- The Appellant therefore prays that the appropriate set off of the carried forward losses may be granted against the income assessed
The assessee is mainly aggrieved by not allowing the set-off of the carried forward business losses including unabsorbed depreciation of the earlier years to the extent of Rs.21,92,990/- out of addition made by the ld. AO u/s.69A of Rs.22,00,600/- The other grounds have not been argued if this issue is decided.
4. Here in this case, there was a cash deposit of Rs.22,00,600/- in the bank accont which ld. AO has added u/s.69A in the Shailesh Dhirajlal Shah assessment order. Such an addition made by the ld. AO has not been contested and has been accepted. However, the claim of the assessee is that since assessee had declared ‘Nil’ income therefore, it had not claimed carried forward losses and depreciation and now once assessment has been completed at an income of Rs.22,49,400/- therefore, set off of business loss and depreciation from the earlier year is to be allowed. However, the ld. First Appellate Authority had dismissed the appeal on account that assessee did not respond to the various notices. However, he decided the issue on merits and uphe;d the action of the AO.
5. Before us, ld. Counsel submitted that now this issue is covered by the CBDT Circular No.11 of 2009 dated 19/06/2019 where CBDT has clearly held that prior to A.Y.2016-17, the set off of losses against additions made u/s.68/69/69A/69B/69C/69D should be allowed. The relevant Circular 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 19th of June, 2019 Subject: Clarification regarding non-allowability of set-off of losses against the deemed income under section 1158BE of the Income-tax Act, 1961 prior to assessment-year 2017- 18-reg.
With effect from 01.04.2017, sub-section (2) of section 11588E 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/698/69C/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 11588E(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/698/69C/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 1 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 set-off against Income referred to in section Shailesh Dhirajlal Shah 115BBE of the Act and hence, the amendment was made vide the Finance Act, 2016.
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 less against income determined under section 115BBE of the Act till the assessment year 2016-17.
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.
6. Hindi version to follow. Rajarajeswari R Under Secretary (ITA.II), CBDT (F.No. 225/45/2019-ΙΤΑ.ΙΙ) 5. Since, the appeal pertains to A.Y. 2016-17 and CBDT has clarified that denial of set off of any loss is applicable w.e.f. 01/04/2017 i.e. for A.Y.2017-18 onwards, therefore, the CBDT has clarified held that assessee is entitled to set off of loss against income determined u/s.115BBE for the Act which is applicable for the additions made u/s. 68/69/69A/ 69B/ 69C/69D. Thus, we direct the AO to examine the carried forward losses and depreciation and follow the aforesaid CBDT circular and allow the claim of business loss and depreciation to the extent of Rs.21,92,990/- after verification.
In the result, appeal of the assessee is partly allowed.
Order pronounced on 28th June, 2024.