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Income Tax Appellate Tribunal, DELHI BENCH ‘F’, NEW DELHI
Before: Sh. Amit ShuklaDr. B. R. R. Kumar
Per Dr. B. R. R. Kumar, Accountant Member:
The present appeal by the revenue and the Cross Objection by the assessee are directed against the order of the ld. CIT(A)- 14, New Delhi dated 14.06.2017.
2. Following grounds have been raised by the revenue:
1. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in law and on facts in allowing set-off of business loss against the commodity trading income assessed u/s 68 of the Act of Rs.3,14,20,610/-.
2 CO No. 226/Del/2017 Purshotam Ispat 2. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in law and on facts in allowing set-off business loss against commodity trading income of Rs. 3,14,20,610/- assessed u/s 68 by holding that amendment in section 115BBE is prospective in nature without appreciating that the above amendment is clarificatory in nature as evident from the amendment.
3. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in law and on the facts in allowing set-off business loss against commodity trading income of Rs. 3,14,20,610/- without appreciating the fact that the Hon'ble Courts have held in plethora of judgments that income assessed u/s 68 does not fall under the normal heads of income and thus no adjustments can be allowed from such incomes.
4. That the Ld. CIT(A) has failed to appreciate that the Hon'ble Kerala High Court in the case of M/s Kerala Sponge Iron Ltd Vs CIT (ITA No. 195/2014 dated 19.08.2015), Hon'ble Gujarat High Court in the case of Fakir Mohmed Hasan Vs CIT(2001) [247 ITR 290], Hon'ble ITAT Chandigarh in case of ITO Vs Dulari Digital Photo Services Pvt. Ltd. ( and Hon'ble ITAT Chennai in the case of the Deputy Commissioner of Income Tax, Corporate Circle Vs M/s Shree Karthik Papers Ltd (ITA No. 325/Mds/2015 A.V. 2006-07 dated 06.04.2016) has held that income assessed u/s 68 does not fall under normal head of income and thus no adjustment can be allowed from such incomes.”
3. In CO No.226/Del/2017, the assessee has raised the following grounds: “1. That the ld. CIT(Appeals) has grossly erred in not allowing ground of the appellant that a commodity profit of Rs.3,14,20,610/- could not be taxed under section 68 of the Act.
2. That the ld. CIT(Appeals) has grossly erred in confirming the action of the Assessing Officer in treating the commodity profit of Rs.3,14,20,610/- as taxable under section 68 of the Act by holding it to be unexplained.”
3 CO No. 226/Del/2017 Purshotam Ispat 4. The revenue came into appeal against the order of the ld. CIT (A) allowing the benefit of provisions Section 115BBE of the Income Tax Act, 1961 to the income assessed u/s 68 for the assessment year 2013-14.
We have gone through the provisions of the Finance Bill 2016 and the memorandum thereof with regard to the provisions of Section 115BBE and the income determined u/s 69 to 69D which have come into force w.e.f. 01.04.2017. We have also gone through the clarification issued by the CBDT which allows the set off income assessed u/s 68 with reference to applicability of provisions of Section 115BBE. For the sake of ready reference and clarity, the Circular of the CBDT is reproduced below:
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 11SBBE 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
4 CO No. 226/Del/2017 Purshotam Ispat 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 p t 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.
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 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 loss against income determined under section 115BBE of the Act till the assessment year 2016-17.