Sh. Ajay Kumar Singhania, Ludhiana V. DCIT, CPC, Banglore

ITA 1650/CHANDI/2017

• Counselvise Citation: [2018] 122 COUNSELVISE.COM (IT) 3948 (ITAT-CHANDIGARH)
• Duration Of Justice: 9 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-10-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2016-2017
• Appeal Filed On: 05-12-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital asset; Set aside; Capital Gains
• Section: 72

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, A CHANDIGARH BEFORE SHRI SANJAY GARG, JUDICIAL MEMBE AND MS. ANNAPURNA GUPTA, ACCOUNTANTMEMBER ITA NO. 1650/CHD/2017 ASSESSMENT YEAR : 2016-17 SH. AJAY KUMAR SINGHANIA, VS. THE DCIT, CPC, 577/8-A,VISHWAKARMA ST., BANGLORE GILL ROAD, LUDHIANA PAN NO. AFIPS5558N (APPELLANT) (RESPONDENT) APPELLANT BY : SH. NAVNEET SEHGAL, CA RESPONDENT BY : SMT.CHANDERKANTA, SR.DR DATE OF HEARING : 28.09.2018 DATE OF PRONOUNCEMENT : 04.10.2018 ORDER PER SANJAY GARG, JUDICIAL MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSE SSEE AGAINST THE ORDER DATED 31.12.2016 OF THE COMMISSIONER OF I NCOME TAX(A)-2, LUDHIANA [HEREINAFTER REFERRED TO AS CIT(A)]. 2. THE SOLE ISSUE INVOLVED IN THIS APPEAL IS AS TO WHETHER UNDER THE PROVISIONS OF SECTION 71 OF THE INCOME-TAX ACT, 1961 (IN SHORT 'THE ACT') THERE IS AN OPTION TO THE ASSESSEE TO S ET OFF THE BUSINESS LOSSES AGAINST THE CAPITAL GAINS OR IS IT MANDATORY TO DO SO. 3. THE BRIEF FACTS OF THE CASE ARE THAT DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD BUSINESS LOSS OF RS. 3,04,56,921/-, ITA NO. 1650/CHD/2017- AJAY KUMAR SINGHIANA, LUDHIANA 2 WHEREAS, THE ASSESSEE HAD EARNED SHORT TERM CAPITAL GAINS OF RS. 8,80,902/-. THE ASSESSEE IN THE RETURN OF INCOME DI D NOT SET OFF THE BUSINESS LOSS AGAINST THE SHORT TERM CAPITAL GAIN. HOWEVER, AFTER ADJUSTING THE CAPITAL GAINS OF THE YEAR AGAINST THE BROUGHT FORWARD SHORT TERM CAPITAL LOSS OF RS. 4,86,524/- AND CLAIM ING DEDUCTION U/S 80 AT RS. 3,94,378/- RETURNED THE TAXABLE INCOME A T NIL WITH CARRY FORWARD BUSINESS LOSS OF RS. 2,91,52,776/-. HOWEVER , THE LOWER AUTHORITIES HAVE ADJUSTED THE CURRENT YEAR CAPITAL GAINS AGAINST THE CURRENT YEAR BUSINESS LOSS AND ACCORDINGLY COMPUTED THE INCOME OF THE ASSESSEE. 4. BEFORE US, LD. COUNSEL FOR THE ASSESSEE HAS RELI ED UPON THE PROVISIONS OF SECTION 71 OF THE ACT AS AMENDED FROM TIME TO TIME. HE HAS FURTHER SUBMITTED THAT TO ARRIVE AT THE CORRECT CONCLUSION, PROVISIONS OF SECTION AS INTRODUCED VIDE 1961 ACT A ND FURTHER SUBSTITUTED BY FINANCE ACT 1961 W.E.F. 1.4.1962 AND FURTHER SUBSTITUTED BY FINANCE ACT 1967 W.E.F. 1.4.1968 (A S ABOVE) AND FURTHER SUBSTITUTED BY FINANCE ACT 1987 ARE ALSO RE LEVANT. 1961 - AS ORIGINALLY ENACTED THIS SECTION READ AS U NDER:- SET OFF OF LOSS FROM ONE HEAD AGAINST INCOME FROM A NOTHER - 71. WHERE IN RESPECT OF ANY ASSESSMENT YEAR THE NET RE SULT OF THE COMPUTATION UNDER ANY HEAD OF INCOME, OTHER THAN 'C APITAL GAINS', IS A LOSS AND THE ASSESSEE HAS NO INCOME UN DER THE HEAD 'CAPITAL GAINS', HE SHALL, SUBJECT TO THE PROVISION S OF THIS CHAPTER, BE ENTITLED TO HAVE THE AMOUNT OF SUCH LOS S SET OFF AGAINST HIS INCOME ASSESSABLE FOR THE ASSESSMENT YE AR UNDER ANY OTHER HEAD. PROVIDED THAT WHERE THE TOTAL INCOME INCLUDES ANY I NCOME ASSESSABLE UNDER THE HEAD CAPITAL GAIN, THE LOSS COMPUTED UNDER ANY OTHER HEAD OF INCOME, IF THE ASSESSEE SO DESIRES, SHALL NOT BE SET OFF AGAINST THE INCOME UNDER THE HEAD C APITAL GAINS ITA NO. 1650/CHD/2017- AJAY KUMAR SINGHIANA, LUDHIANA 3 BUT SHALL SET OFF AGAINST HIS INCOME ASSESSABLE UND ER ANY OTHER HEAD OF INCOME. 1962 BY THE FINANCE (NO.2) ACT,1962 (20 OF 1962) THE FOLLOWING SECTION WAS SUBSTITUTED FOR THE EARLIER S ECTION WITH EFFECT FROM 1 APRIL,1962. 71. SET OFF OF LOSS FROM ONE HEAD AGAINST INCOME FR OM ANOTHER (1 ) WHERE IN RESPECT OF ANY ASSESSMENT YEAR THE NET RESULT OF THE COMPUTATION UNDER ANY HEAD OF INCOME, OTHER THAN 'CAPITAL GAINS', IS A LOSS AND THE ASSESSEE HAS NO INCOME UNDER THE HEAD 'CAPITAL GAINS', HE SHALL, SUBJECT TO THE PROVISIONS OF THIS CHAPTER, BE ENTITLED TO HAVE THE AMOUNT OF SUC H LOSS SET OFF AGAINST HIS INCOME, IF ANY, ASSESSABLE FOR THE ASS ESSMENT YEAR UNDER ANY OTHER HEAD. (2) WHERE IN RESPECT OF ANY ASSESSMENT YEAR, THE NE T RESULT OF THE COMPUTATION UNDER ANY HEAD OF INCOME, OTHER THAN 'C APITAL GAINS', IS A LOSS AND THE ASSESSEE HAS INCOME ASSES SABLE UNDER THE HEAD 'CAPITAL GAINS', SUCH LOSS MAY, SUBJECT TO THE PROVISIONS OF THIS CHAPTER, BE SET OFF AGAINST HIS INCOME, IF ANY, OF THE ASSESSEE ASSESSABLE FOR THAT ASSESSMENT YEAR UNDER ANY OTHER HEAD INCLUDING INCOME FROM CAPITAL GAINS REL ATING TO THE SHORT-TERM CAPITAL ASSETS AS WELL AS OTHER CAPITAL ASSETS OR IF THE ASSESSEE SO DESIRES, SHALL BE SET-OFF ONLY AGAINST HIS INCOME, IF ANY, ASSESSABLE UNDER ANY HEAD OF INCOME OTHER THA N CAPITAL GAINS. THE EFFECT OF THIS WAS TO NUMBER THE EARLIER SECTIO N AS SUB- SECTION(1), WITH VERBAL CHANGES, DELETE THE ORIGINA L PROVISO AND INSERT SUB-SECTION(2) 1967 SUB-SECTION (2) WAS SUBSTITUTED BY THE FOLLOWING SU B- SECTIONS (2) AND (3) BY THE FINANCE (NO. 2) ACT 1967 WITH EFFECT FROM I APRIL 1968 : (2) WHERE IN RESPECT OF ANY ASSESSMENT YEAR, THE NE T RESULT OF THE COMPUTATION UNDER ANY HEAD OF INCOME, OTHER THAN 'C APITAL GAINS', IS A LOSS AND THE ASSESSEE HAS INCOME ASSES SABLE UNDER THE HEAD 'CAPITAL GAINS', SUCH LOSS MAY, SUBJECT TO THE PROVISIONS OF THIS CHAPTER, BE SET OFF - (I) AGAINST HIS INCOME, IF ANY, OF THE ASSESSEE ASS ESSABLE FOR THAT ASSESSMENT YEAR UNDER ANY OTHER HEAD INCLU DING INCOME ASSESSABLE UNDER THE HEAD CAPITAL GAINS ITA NO. 1650/CHD/2017- AJAY KUMAR SINGHIANA, LUDHIANA 4 (WHETHER RELATING TO THE SHORT-TERM CAPITAL ASSETS OR ANY OTHER CAPITAL ASSETS),OR (II) IF THE ASSESSEE SO DESIRES, ONLY AGAINST HIS I NCOME, IF ANY, UNDER THE HEAD CAPITAL GAINS IN SO FAR AS SU CH INCOME RELATES TO SHORT-TERM CAPITAL ASSETS, AND I NCOME UNDER ANY OTHER HEAD. SUBSTITUTED BY FINANCE ACT, 1987 W.E.F. 1.4.1988 SET OFF OF LOSS FROM ONE HEAD AGAINST INCOME FROM A NOTHER WHERE IN RESPECT OF ANY ASSESSMENT YEAR, THE NET R ESULT OF THE COMPUTATION UNDER ANY HEAD OF INCOME, IS A LOSS, TH E ASSESSEE SHALL SUBJECT TO THE PROVISIONS OF THIS CHAPTER, BE ENTITLED TO HAVE THE AMOUNT OF SUCH LOSS SET OFF AGAINST HIS IN COME, IF ANY, ASSESSABLE FOR THE ASSESSMENT YEAR UNDER ANY OTHER HEAD. CARRY FORWARD AND SET OFF BUSINESS LOSSES. 72. (1) WHERE FOR ANY ASSESSMENT YEAR, THE NET RESULT O F THE COMPUTATION UNDER THE HEAD 'PROFITS AND GAINS OF BU SINESS OR PROFESSION' IS A LOSS TO THE ASSESSEE, NOT BEING A LOSS SUSTAINED IN A SPECULATION BUSINESS, AND SUCH LOSS CANNOT BE OR IS NOT WHOLLY SET OFF AGAINST INCOME UNDER ANY HEAD OF INC OME IN ACCORDANCE WITH THE PROVISIONS OF SECTION 71, SO MU CH OF THE LOSS AS HAS NOT BEEN SO SET OFF OR, . THE RELEVANT PROVISIONS OF SECTION 71 OF THE ACT AS SUBSTITUTED BY FINANCE ACT 1991 W.E.F. 1.4.1992 ARE REPRODUCED AS UNDER:- SUBSTITUTED BY THE FINANCE ACT (NO.2), 1991 W.E.F.1 .4.1992 SET OFF OF LOSS FROM ONE HEAD AGAINST INCOME FROM A NOTHER- 71. (1) WHERE IN RESPECT OF ANY ASSESSMENT YEAR THE NET RESULT OF THE COMPUTATION UNDER ANY HEAD OF INCOME, OTHER THAN 'CAPITAL GAINS', IS A LOSS AND THE ASSESSEE HAS NO INCOME UNDER THE HEAD 'CAPITAL GAINS', HE SHALL, SUBJECT T O THE PROVISIONS OF THIS CHAPTER, BE ENTITLED TO HAVE THE AMOUNT OF SUCH LOSS SET OFF AGAINST HIS INCOME, IF ANY, ASSES SABLE FOR THAT ASSESSMENT YEAR UNDER ANY OTHER HEAD. (2) WHERE IN RESPECT OF ANY ASSESSMENT YEAR, THE NE T RESULT OF THE COMPUTATION UNDER ANY HEAD OF INCOME, OTHER THA N 'CAPITAL GAINS', IS A LOSS AND THE ASSESSEE HAS INC OME ASSESSABLE UNDER THE HEAD 'CAPITAL GAINS', SUCH LOS S MAY, SUBJECT TO THE PROVISIONS OF THIS CHAPTER, BE SET O FF AGAINST HIS ITA NO. 1650/CHD/2017- AJAY KUMAR SINGHIANA, LUDHIANA 5 INCOME, IF ANY, ASSESSABLE FOR THAT ASSESSMENT YEAR UNDER ANY HEAD OF INCOME INCLUDING THE HEAD 'CAPITAL GAINS' ( WHETHER RELATING TO SHORT-TERM CAPITAL ASSETS OR ANY OTHER CAPITAL ASSETS). (3) WHERE IN RESPECT OF ANY ASSESSMENT YEAR, THE N ET RESULT OF THE COMPUTATION UNDER THE HEAD 'CAPITAL GAINS' IS A LOSS AND THE ASSESSEE HAS INCOME ASSESSABLE UNDER ANY OTHER HEAD OF INCOME, THE ASSESSEE SHALL NOT BE ENTITLED TO HAVE SUCH LOSS SET OFF AGAINST INCOME UNDER THE OTHER HEAD. 5. THE PROVISIONS OF SECTION 72 ARE ALSO RELEVANT, WHICH FOR THE SAKE OF CONVENIENCE ARE ALSO REPRODUCED BELOW:- CARRY FORWARD AND SET OFF OF BUSINESS LOSSES. 72. (1) WHERE FOR ANY ASSESSMENT YEAR, THE NET RESULT O F THE COMPUTATION UNDER THE HEAD 'PROFITS AND GAINS OF BU SINESS OR PROFESSION' IS A LOSS TO THE ASSESSEE, NOT BEING A LOSS SUSTAINED IN A SPECULATION BUSINESS, AND SUCH LOSS CANNOT BE OR IS NOT WHOLLY SET OFF AGAINST INCOME UNDER ANY HEAD OF INC OME IN ACCORDANCE WITH THE PROVISIONS OF SECTION 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 TH E OTHER PROVISIONS OF THIS CHAPTER, BE CARRIED FORWARD TO T HE FOLLOWING ASSESSMENT YEAR, AND (I) IT SHALL BE SET OFF AGAINST THE PROFITS AND G AINS, IF ANY, OF ANY BUSINESS OR PROFESSION CARRIED ON BY HIM AND ASSESSABLE FOR THAT ASSESSMENT YEAR ; (II) IF THE LOSS CANNOT BE WHOLLY SO SET OFF, THE AMOUNT OF LOSS NOT SO SET OFF SHALL BE CARRIED FORWARD TO THE FOLL OWING ASSESSMENT YEAR AND SO ON : .... 6. A PERUSAL OF THE ABOVE LEGISLATIVE HISTORY REVEA LS THAT THE ASSESSEE HAS ALWAYS BEEN GIVEN AN OPTION TO SET OFF HIS LOSSES AGAINST THE INCOME FROM CAPITAL GAINS. HOWEVER, AS PER THE PROVISIONS OF SUB SECTION (3) OF SECTION 71, THE ASSESSEE IS NOT ALLO WED TO SET OFF CAPITAL LOSS AGAINST INCOME UNDER ANY OTHER HEAD. THE ABOVE VIEW IS FORTIFIED ITA NO. 1650/CHD/2017- AJAY KUMAR SINGHIANA, LUDHIANA 6 BY THE DECISION OF THE PUNE BENCH OF THE TRIBUNAL I N COATED FABRICS (P) LTD. VS JCIT [2006] 285 ITR (AT) 148 (PUNE). 7. IN VIEW OF THIS, WE DO NOT FIND ANY JUSTIFICATIO N ON THE PART OF THE LOWER AUTHORITIES IN MAKING THE IMPUGNED ADJUST MENTS AND, THEREFORE, THE SAME ARE SET ASIDE. THE ASSESSING OF FICER IS DIRECTED TO ACCEPT THE RETURNED INCOME /COMPUTATION OF THE ASSE SSEE, AS SUCH. IN THE RESULT, THE APPEAL OF THE ASSESSEE STANDS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 04.10.2018 SD/- SD/- (ANNAPURNA GUPTA) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 04.10.2018 RKK COPY TO: THE APPELLANT THE RESPONDENT THE CIT THE CIT(A) THE DR ITA NO. 1650/CHD/2017- AJAY KUMAR SINGHIANA, LUDHIANA 7