SUMARIA APPLIANCES P. LTD, MUMBAI V. ACIT 7(2), MUMBAI

ITA 2712/MUM/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 79120 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 1 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-06-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 11-06-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 20-04-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ADGIRI
• Keywords: Capital asset; Depreciation; Cost of acquisition
• Section: 115JB

Judgement Text

, , , , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES E, MUMBAI .., ! , ' , # BEFORE SHRI I.P.BANSAL, JM AND SHRI RAJENDRA, AM ITA NO.2712/MUM/2012 : ASST.YEAR 2007-08 SUMARIA APPLIANCES PVT. LTD. KINGS CORNER, L.J.ROAD, MAHIM, MUMBAI 400016 PAN:AAFCS 2382D THE ACIT, WARD 7 (2), MUMBAI. ( $% / // / APPELLANT) ' ' ' ' / VS. ( ()$%/ RESPONDENT) $% * + * + * + * + /APPELLANT BY : SHRI ANIL SATHE ()$% * + * + * + * + /RESPONDENT BY : SHRI B.YADGIRI ' * ,-' / / / / DATE OF HEARING : 11.06.2014 ./0 * ,-' / DATE OF PRONOUNCEMENT : 11.06.2014 1 1 1 1 / / / / O R D E R PER I.P.BANSAL (JM) : THIS IS AN APPEAL FILED BY THE ASSESSEE. IT IS D IRECTED AGAINST ORDER PASSED BY LD. CIT(A)-13, MUMBAI DATED 9/12/2011 FOR ASSESSMEN T YEAR 2007-08. GROUNDS OF APPEAL READ AS UNDER: 1.THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING THE COMPUTATION OF SHORT TERM CAPITAL GAINS ON DEPRECIA BLE ASSETS OF RS,1,11,38,056/- AS AGAINST THE SHORT TERM CAPITAL GAIN OF RS.81,60,066 AS COMPUTED BY THE APPELLANT BY: A) IGNORING THE ADDITIONS OF RS.29,77,989 MADE TO T HE BLOCK MADE DURING THE YEAR UNDER CONSIDERATION AND B) NON- APPLICATION OF PROVISIONS OF SEC 50 (1) AND C) NOT APPRECIATING DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. EASTMAN INDUSTRIES LTD. (2008) 174 TAXMAN 344. 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN DISMISSING THE GROUNDS NO.(2) TO (4) RAISED BEFORE HIM, RELATING TO OPTION AVAILABLE TO ASSESSE UNDER SECTION 71(2) ,NOT TO SET OFF LOSSES UNDER ANY HEAD OF INC OME OTHER THAN CAPITAL GAIN AGAINST THE INCOME UNDER THE HEAD CAPITAL GAINS, IN SPITE OF RECORDING THE FACT OF THE SAID OPTION BEING AVAILABLE IN PARA 3.2 OF THE IMPUGNED ORDER. 3. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN DISMISSING THE GROUND NO.(2) TO (4) IN REGARD TO POTION UNDER SECTION 71( 2). WITHOUT CONSIDERING THE EXTENSIVE SUBMISSIONS DTD.19 TH DECEMBER 2011, MADE BY THE ASSESSEE IN THE COURSE OF HEARING. ITA NO.2712/MUM/2012 : ASST.YEAR 2007-08 2 4. THE LEARNED COMMISSIONER OF INCOME TAX ERRED IN CONFIRMING ADDITION OF RS.96,37,320/- TOWARDS VAT COMPONENT IN CLOSING STO CK, NOT APPRECIATING THAT THAT SECTION 145A, USES THE WORDS PURCHASE AND SALE OF G OODS AND INVENTORY AND WHEN APPLIED IN ITS TRUE SPIRIT IS TAX NEUTRAL. 2. AT THE TIME OF HEARING LD. AR DID NOT PRESS GROU ND NO.4, HENCE, THE SAME IS DISMISSED AS NOT PRESSED. 3. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF DEALI NG AND TRADING OF CONSUMER APPLIANCES. IN THE BLOCK OF ASSETS UNDER THE HEAD BUILDINGS THE ASSESSEE OWNED TWO PREMISES, ONE OF WHICH WAS SOLD DURING THE YEAR . THE POSITION OF THE BLOCK OF ASSETS IS DESCRIBED IN PARA 2.5 OF THE ORDER OF LD. CIT(A) AND BEING RELEVANT FOR DISPOSAL OF THE APPEAL IS DESCRIBED AS UNDER: SR. NO. ASSETS RATE % (P.A) WDV 01.04.2006 ADDITIONS DURING THE YEAR DELETIONS DURING THE YEAR NET BLOCK OF ASSET DEPR ECIATI ON ALLOW ABLE WDV 31/3 /200 7 1. SHOP PREMISES M9 10 21,933,828.00 2,977,989.21 0 24,911,817.21 2. OFFICE PREMISES 10 1,428,116.39 34,500,000.0 0 (33,071,883.61 ) (BLOCK OF ASSET) 23,361,944.39 2,977,989.21 34,500,000.0 0 (8,160,066.40) 3.1 IT CAN BE SEEN FROM THE ABOVE DETAILS THAT OFFI CE PREMISES STATED AT SL. NO.2 OF WHICH WDV AS ON 1/4/2006 WAS A SUM OF RS.14,28,116. 39 WAS SOLD FOR A SUM OF RS.3.45 CRORES ON 20/4/2006. IT MAY FURTHER BE MEN TIONED THAT THE SALE PRICE OF OFFICE PREMISES EXCEEDED OPENING WDV OF THE WHOLE B LOCK WHICH WAS ONLY A SUM OF RS.2,33,61,944.39. AN ADDITION OF RS.29,77,789.21 WAS MADE TO THE SHOP PREMISES M-9, WHICH REMAINED UNSOLD OUT OF THE BLOCK OF ASSE TS. IT MAY ALSO BE MENTIONED HERE THAT THE ADDITION OF RS.29,77,989.21 WAS MADE BY THE ASSESSEE WITH REGARD TO UNSOLD PROPERTY ONLY AFTER THE DATE OF SALE I.E. AF TER 20/4/2006. AS PER PROVISIONS OF SECTION 50 OF THE INCOME TAX ACT, 1961(THE ACT) WHE N A CAPITAL ASSET WHICH FORMS PART OF BLOCK OF ASSET IN RESPECT OF WHICH DEPRECIA TION HAS BEEN ALLOWED, THE GAIN ARISING OUT OF SALE IS ASSESSABLE AS SHORT TERM CAP ITAL GAIN IN THE MANNER PRESCRIBED THREREIN. AS PER THE CASE OF ASSESSEE, THE NATURE OF SUM INCURRED BY THE ASSESSEE ON ITA NO.2712/MUM/2012 : ASST.YEAR 2007-08 3 ADDITION IN RESPECT OF UNSOLD ASSET I.E. AMOUNTING TO RS.29,77,989.21 WAS ALSO REQUIRED TO BE REDUCED FROM THE SALE PRICE AS PER C LAUSE (III) OF SUB-SECTION(1) TO SECTION 50. ON THE BASIS OF SUCH INTERPRETATION TH E ASSESSEE COMPUTED SHORT TERM CAPITAL GAINS AS FOLLOWS: SALE PRICE OF THE PROPERTY RS.3,45,00,000 I) OPENING WDV OF THE BLOCK OF ASSET RS. 2,33,61,9 44.39 II) ADDITION OF THE SHOP PREMISES M-9 RS. 29,77, 989.21 (-) RS.2,63,39,933. 60 BALANCE RS.81,60,066.40 ============= 3.2 AS PER COMPUTATION OF INCOME THE ASSESSEE HAD S HOWN LOSS FROM ITS BUSINESS ACTIVITIES AT A SUM OF RS.1,28,272,696/-. HOWEVER, ASSESSEE WITHOUT SETTING OFF THE SHORT TERM CAPITAL GAIN SUCH LOSS SHOWN AT THE NE T GAIN AT RS.81,60,066/-. 3.3 THE ASSESSEE BEING CORPORATE ASSESSEE IS ALSO A SSESSABLE ON THE BASIS OF MINIMUM ALTERNATIVE TAX(MAT). THE CALCULATION OF INCOME UNDER MAT WAS ALSO DONE IN THE COMPUTATION FILED BY THE ASSESSEE AND W AS COMPUTED AT RS.2,78,08,632/-. THE TAX PAYABLE UNDER THE NORMAL PROVISION WAS RS.27,19,751/- AND UNDER MAT PROVISION WAS RS.31,20,129/-. THE TAX BEING MORE UNDER THE MAT WAS SHOWN TO BE PAYABLE. 3.4 IN THE ASSESSMENT ORDER ALSO THE INCOME OF THE ASSESSEE UNDER NORMAL PROVISIONS HAS BEEN COMPUTED AT RS.79,02,680/- AS AGAINST INCOME COMPUTED IN MAT OF RS.2,78,08,632/-. THEREFORE, IT IS CLEAR TH AT THE ASSESSEE IN THE PRESENT CASE IS ASSESSABLE AT THE INCOME DETERMINED UNDER SECTIO N 115JB IRRESPECTIVE OF THE FACT THAT WHETHER VIEW TAKEN BY THE ASSESSEE OR AO IS C ORRECT. 3.5 THE A.O WHILE COMPUTING THE CAPITAL GAIN OF THE ASSESSEE FIRSTLY DID NOT REDUCE THE AMOUNT OF RS.29,77,989/- FROM THE CAPITAL GAIN ASSESSABLE AS SHORT TERM CAPITAL GAIN. SECONDLY, HE HAS DENIED THE CLAIM OF THE ASS ESSEE THAT ITS BUSINESS LOSS SHOULD BE CARRIED FORWARD TO NEXT YEAR AND CAPITAL GAIN SHOULD BE ASSESSED ON STAND ALONE BASIS FOR THIS YEAR. ACCORDING TO A.O CAPI TAL GAIN SHOWN BY THE ASSESSEE HAVE TO BE SET OFF AGAINST BUSINESS LOSS OF THE ASSESSEE AND, THEREFORE, ASSESSEE WILL BE ENTITLED TO ITA NO.2712/MUM/2012 : ASST.YEAR 2007-08 4 CARRY FORWARD THE RESULTANT BUSINESS LOSS AFTER SET TING OFF OF CAPITAL GAIN. THE COMPUTATION OF THE AO IN THE ASSESSMENT ORDER IS AS UNDER: INCOME FROM BUSINESS /PROFESSION NET LOSS AS PER RETURN (1,28,72,696) ADD.U/S. 145A 96,37,320 (32,35,376) SHORT TERM CAPITAL GAINS AS PER PARA 3 OF THE ORDER 1,11,38,056 GROSS TOTAL INCOME 79,02,680 ROUNDED OFF 79,02,680 MAT CALCULATION U/S. 115JB NET PROFIT BEFORE TAX AS PER P&L AND AFTER DISALLOWABLE & ALLOWABLE U/S.115JB 2,78,08,632 3.6 LD. CIT(A) HAS UPHELD THE ACTION OF AO. THE AS SESSEE BEING AGGRIEVED, IN THE FIRST GROUND HAS CONTENDED THAT ADDITION OF RS.29, 77,989/- CANNOT BE IGNORED WHILE COMPUTING SHORT TERM CAPITAL GAIN. IN GROUND NO.2 & 3, IT IS THE CASE OF THE ASSESSEE THAT CAPITAL GAIN SHOULD HAVE BEEN ASSESSED SEPARAT ELY AND ENTIRE BUSINESS LOSS SHOULD HAVE BEEN CARRIED FORWARD TO THE NEXT YEAR. 4. AFTER NARRATING THE FACTS IT WAS SUBMITTED BY LD . AR THAT AS PER PROVISIONS OF SECTION 50(1), WHILE COMPUTING CAPITAL GAIN THE ASS ESSEE IS ENTITLED TO GET DEDUCTION OF AGGREGATE OF FOLLOWING AMOUNTS: (I) EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY IN CONNECTION WITH SUCH TRANSFER OR TRANSFERS. (II) THE WDV OF THE BLOCK OF ASSETS AS AT THE BEGIN NING OF THE PREVIOUS YEAR. (III) THE ACTUAL COST OF ANY ASSET FALLING WITHIN T HE BLOCK OF ASSETS ACQUIRED DURING THE PREVIOUS YEAR. HE SUBMITTED THAT ADDITION OF RS.29,77,989/- WAS AC TUAL COST OF ASSET FALLING WITHIN THE BLOCK OF ASSET DURING THE PREVIOUS YEAR, THEREF ORE, THE SAME WAS ALLOWABLE. 4.1 ON SECOND ASPECT OF THE MATTER THAT ASSESSEE IS ENTITLED TO CARRY FORWARD THE BUSINESS LOSS AND WAS ALSO ENTITLED TO GET ASSESSE D CAPITAL GAIN SEPARATELY WITHOUT ITA NO.2712/MUM/2012 : ASST.YEAR 2007-08 5 SETTING OFF THE SAME AGAINST BUSINESS LOSS, LD. A R RELIED UPON THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. BR ITISH INSULATION CALENDARS LTD., 202 ITR 254, WHEREIN IT HAS BEEN HELD THAT ASSESSE E HAS NO OPTION TO CARRY FORWARD BUSINESS LOSS WHETHER THERE IS INCOME FROM OTHER S OURCES AND, THEREFORE, BUSINESS LOSS HAD TO BE SET OFF AGAINST DIVIDEND INCOME OF T HE SAME YEAR. HE SUBMITTED THAT THOUGH DECISION HAS BEEN RENDERED ON SECTION 71(1) BUT HE SUBMITTED THAT FOLLOWING OBSERVATIONS OF THEIR LORDSHIPS FROM THE SAID DECIS ION WILL BE RELEVANT TO CONSTRUE THAT ASSESSEE HAS SUCH OPTION AS PER SUB-SECTION ( 2) OF SECTION 71. IT WOULD APPEAR FROM THE ABOVE THAT SECTION 70 TAL KS OF SET OFF OF LOSS FROM ONE SOURCE AGAINST THE INCOME FROM ANOTHER SOURCE UNDER THE SA ME HEAD OF INCOME. THERE IS NO DIFFICULTY IN UNDERSTANDING THE PROVISIONS OF THIS SECTION. SECTION 71 TALKS OF SET OFF OF LOSS FROM ONE HEAD AGAINST INCOME FROM ANOTHER HEA D. AS NOTED ABOVE, IT IS THE ASSESSEE'S CONTENTION THAT IT HAS AN OPTION NOT TO SET OFF BUSINESS LOSS AGAINST INCOME UNDER OTHER HEAD. ON THE CONTRARY, THE REVENUE'S C ONTENTION IS THAT THERE IS NO OPTION OF ANY SORT AS CONTENDED ON BEHALF OF THE ASSESSEE , IN THE MATTER OF SET OFF OF LOSS UNDER ONE HEAD AGAINST INCOME UNDER OTHER HEAD OF T HE SAME YEAR. IT IS ONLY IN THE CASE OF SETTING OFF OF LOSS AGAINST THE INCOME UNDE R THE HEAD 'CAPITAL GAINS' THAT AN OPTION IS GIVEN TO THE ASSESSEE IN VIEW OF THE EXP RESSION IF THE ASSESSEE SO DESIRED USED IN SUB-SECTION (2) OF SECTION 71 OF THE ACT. ON A CAREFUL READING OF SECTION 71 OF THE ACT, IT IS VERY MUCH APPARENT THAT THE ASSESSEE HA S NO OPTION OF EXERCISING SETTING OFF OF BUSINESS LOSS AGAINST INCOME UNDER ANY OTHER HEAD O THER THAN THE INCOME UNDER THE HEAD ' CAPITAL GAINS ' . IN OUR OPINION, THE TRIBUN AL HAS WRONGLY CONSTRUED THE EXPRESSION 'BE ENTITLED TO' USED IN SECTION 71 TO M EAN THAT THE ASSESSEE HAD AN OPTION IN THE MATTER OF SET OFF OF BUSINESS LOSS AGAINST THE INCOME UNDER ANY OTHER HEAD. IN OUR CONSIDERED VIEW, THAT EXPRESSION SIMPLY ENABLE S THE ASSESSEE TO SET OFF BUSINESS LOSS AGAINST INCOME UNDER ANY OTHER HEAD AND, BUT FOR THAT EXPRESSION, THE ASSESSEE WOULD NOT BE ENTITLED TO SET OFF LOSS UNDER ANOTHE R HEAD IN THE SAME YEAR. 5. ON THE OTHER HAND, LD. DR SUBMITTED THAT NONE OF THE CLAIM OF THE ASSESSEE IS IN ACCORDANCE WITH LAW. THEREFORE, HE SUBMITTED TH AT ORDER PASSED BY LD. CIT(A) ON BOTH THE ISSUES SHOULD BE UPHELD. 6. WE HAVE HEARD BOTH THE PARTIES AND THEIR CONTENT IONS HAVE CAREFULLY BEEN CONSIDERED. ADVERTING TO THE ISSUE RAISED IN GROUN D NO.1, IT WILL BE RELEVANT TO REPRODUCE SECTION 50 OF INCOME TAX ACT, 1961. SPECIAL PROVISION FOR COMPUTATION OF CAPITAL GAINS IN CASE OF DEPRECIABLE ASSETS: NOTWITHSTANDING ANYTHING CONTAINED IN CLAUSE (42A) OF SECTION 2, WHERE THE CAPITAL ASSET IS AN ASSET FORMING PART OF A BLOCK OF ASSETS IN RESPECT OF WHICH DEPRECIATION HAS BEEN ALLOWED UNDER THIS ACT OR UNDER THE INDIAN INC OME-TAX ACT, 1922 (11 OF 1922), THE PROVISIONS OF SECTIONS 48 AND 49 SHALL BE SUBJECT T O THE FOLLOWING MODIFICATIONS: ITA NO.2712/MUM/2012 : ASST.YEAR 2007-08 6 (1) WHERE THE FULL VALUE OF THE CONSIDERATION RECEI VED OR ACCRUING AS A RESULT OF THE TRANSFER OF THE ASSET TOGETHER WITH THE FULL VA LUE OF SUCH CONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF THE TRANSFER OF ANY OTHER CAPITAL ASSET FALLING WITHIN THE BLOCK OF THE ASSETS DURING THE PREVIOUS YEAR, EXCEEDS THE AGGREGATE OF THE FOLLOWING AMOUNTS, NAMELY: (I) EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY IN CONNECTION WITH SUCH TRANSFER OR TRANSFERS ; (II) THE WRITTEN DOWN VALUE OF THE BLOCK OF ASSETS AT THE BEGINNING OF THE PREVIOUS YEAR ; AND (III) THE ACTUAL COST OF ANY ASSET FALLING WITHIN T HE BLOCK OF ASSETS ACQUIRED DURING THE PREVIOUS YEAR, SUCH EXCESS SHALL BE DEEMED TO BE THE CAPITAL GAINS ARISING FROM THE TRANSFER OF SHORT-TERM CAPITAL ASSETS ; (2) WHERE ANY BLOCK OF ASSETS CEASES TO EXIST AS SU CH, FOR THE REASON THAT ALL THE ASSETS IN THAT BLOCK ARE TRANSFERRED DURING THE PRE VIOUS YEAR, THE COST OF ACQUISITION OF THE BLOCK OF ASSETS SHALL BE THE WRI TTEN DOWN VALUE OF THE BLOCK OF ASSETS AT THE BEGINNING OF THE PREVIOUS YEAR, AS IN CREASED BY THE ACTUAL COST OF ANY ASSET FALLING WITHIN THAT BLOCK OF ASSETS, ACQU IRED BY THE ASSESSEE DURING THE PREVIOUS YEAR AND THE INCOME RECEIVED OR ACCRUI NG AS A RESULT OF SUCH TRANSFER OR TRANSFERS SHALL BE DEEMED TO BE THE CAP ITAL GAINS ARISING FROM THE TRANSFER OF SHORT-TERM CAPITAL ASSETS. 6.1 FROM PERUSAL OF AFOREMENTIONED PROVISION, IT WI LL BE CLEAR THAT SECTION 50(2) WILL NOT BE APPLICABLE TO THE FACTS OF THE PRESENT CASE AS BLOCK OF ASSETS HAS NOT CEASED TO EXIST FOR THE REASONS THAT ALL THE ASSET S IN THE BLOCKS ARE NOT TRANSFERRED DURING THE PREVIOUS YEAR. ACCORDING TO SECTION 50( 1), WHERE FULL VALUE OF THE CONSIDERATION RECEIVED OR ACCRUING AS A RESULT OF TRANSFER OF ASSET TOGETHER WITH THE AFOREMENTIONED VALUE OF SUCH CONSIDERATION RECEIVED OR ACCRUED AS A RESULT OF THE TRANSFER OF ANY OTHER CAPITAL ASSET FALLING WITHIN THE BLOCK OF ASSETS DURING THE PREVIOUS YEAR, EXCEED AGGREGATE OF THE FOLLOWING NA MELY: - EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY IN CO NNECTION WITH SUCH TRANSFER OR TRANSFERS. - THE WRITTEN DOWN VALUE OF THE BLOCK OF ASSETS AT THE BEGINNING OF THE PREVIOUS YEAR; -THE ACTUAL COST OF ANY ASSET FALLING WITHIN THE BL OCK OF ASSETS ACQUIRED DURING THE PREVIOUS YEAR. IN SUCH A CASE, SUCH EXCESS IS TO BE DEEMED TO BE T HE CAPITAL GAINS ARISING FROM THE TRANSFER OF SHORT TERM CAPITAL ASSET. ITA NO.2712/MUM/2012 : ASST.YEAR 2007-08 7 6.2 HERE IN THE PRESENT CASE, IT HAS TO BE EXAMIN ED THAT WHETHER THE SUM OF RS.29,77,989.21 FALLS UNDER ANY OF THE AFOREMENTION ED THREE ITEMS. IT HAS ALREADY BEEN DESCRIBED THAT THE ADDITION SHOWN BY THE ASSES SEE IS IN RESPECT OF UNSOLD PROPERTY FALLING IN THE BLOCK OF ASSETS. THEREFORE , THE SAME CANNOT BE AN EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY IN ACCORDANCE WITH THE TRANSFER OF THE ASSET. THE SAME ALSO CANNOT SAID TO BE THE ACTUAL COST OF ANY ASSET FALLING WITHIN BLOCK OF ASSET ACQUIRED DURING THE PREVIOUS YEAR AS IT IS RELATED TO AN ASSET WHICH HAS NOT BEEN ACQUIRED DURING THE PREVIOUS YEAR AND IS A BROUGHT FORWARD ASSET.. THEREFORE, ASSESSEE IS NOT ENTITLED TO GET DEDUCTION OF RS.29, 77,989.21 WHILE COMPUTING SHORT TERM CAPITAL GAIN AS PER PROVISIONS OF SECTION 50. IN THIS VIEW OF THE SITUATION, WE FIND NO FORCE IN THE CLAIM OF THE ASSESSEE AS HAS BEEN MADE IN GROUND NO.1. THEREFORE, GROUND NO.1 IS DISMISSED. 7. ADVERTING TO GROUND NO.2 & 3, IT WILL BE RELEVAN T TO REPRODUCE THE RELEVANT PORTION OF SECTION 71 SUB-SECTION (1) & (2). 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 COMPUTATI ON UNDER ANY HEAD OF INCOME, OTHER THAN CAPITAL GAINS, IS A LOSS AND THE ASSESSEE HA S NO INCOME UNDER THE HEAD CAPITAL GAINS, HE SHALL, SUBJECT TO THE PROVISIONS OF THIS CHAPTER, BE ENTITLED TO HAVE THE AMOUNT OF SUCH LOSS SET OFF AGAINST HIS INCOME, IF ANY, ASSESSABLE 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 THAN CAPITAL GAINS, IS A LOSS AND THE ASSESSEE HAS INCOME ASSESSABLE UNDER THE HEAD CAPITAL GAINS, SUCH LOS S MAY, SUBJECT TO THE PROVISIONS OF THIS CHAPTER, BE SET OFF AGAINST HIS INCOME, IF ANY , ASSESSABLE FOR THAT ASSESSMENT YEAR UNDER ANY HEAD OF INCOME INCLUDING THE HEAD CAPITA L GAINS (WHETHER RELATING TO SHORT- TERM CAPITAL ASSETS OR ANY OTHER CAPITAL ASSETS). 7.1 FROM THE PERUSAL OF THE AFOREMENTIONED PROVISIO N IT IS CLEAR THAT SECTION 71(1) WILL NOT BE APPLICABLE TO THE CASE OF THE ASSESSEE AS IN THE PRESENT CASE ASSESSEE HAS INCOME UNDER THE HEAD CAPITAL GAIN. SECTION 71 (2) WILL BE APPLICABLE AS IN THE PRESENT CASE THE ASSESSEE HAS COMPUTED LOSS UNDER T HE HEAD INCOME FROM BUSINESS OR PROFESSION. IT IS THE CONTENTION OF LD. AR THA T WORD USED IN SECTION 71(2) MAY GIVES AN OPTION TO THE ASSESSEE SO AS TO WHETHER ADJUST THE SAID LOSS AGAINST CAPITAL GAIN OR NOT. THUS, ACCORDING TO ASSESSEE IT IS ENT ITLED TO CARRY FORWARD BUSINESS LOSS SEPARATELY AND TO GET ASSESSED CAPITAL GAIN IN THE YEAR UNDER CONSIDERATION. ITA NO.2712/MUM/2012 : ASST.YEAR 2007-08 8 7.2 IN OUR CONSIDERED OPINION THERE IS NO FORCE IN THE CLAIM MADE BY THE ASSESSEE. FIRSTLY, SUB-SECTION (2) OF SECTION 71 DOES NOT GIV E ANY OPTION TO THE ASSESSEE TO CARRY FORWARD BUSINESS LOSS SEPARATELY DESPITE THERE BEIN G INCOME UNDER THE HEAD CAPITAL GAIN. SECTION 71(2) CONTEMPLATES A SITUATION WHERE IN RESPECT OF ANY ASSESSMENT YEAR, THE NET RESULT OF COMPUTATION UNDER ANY HEAD OF INCOME , OTHER THAN CAPITAL GAIN IS A LOSS AND ASSESSEE HAS INCOME ASSESSABLE UNDER THE HEAD CAPITAL GAINS, IN SUCH SITUATION, SUCH LOSS MAY, SUBJECT TO PROVIS ION OF CHAPTER VI (SECTION 66 TO 80), BE SET OFF, FOR AND FROM ASSESSMENT YEAR 1992- 93, AGAINST ASSESSEES INCOME, IF ANY, ASSESSABLE FOR THAT ASSESSMENT YEAR UNDER ANY HEAD OF INCOME INCLUDING THE HEAD CAPITAL GAINS (WHETHER RELATING TO SHORT TER M CAPITAL GAIN ASSET OR ANY OTHER CAPITAL ASSET). THUS, PROVISIONS OF SECTION 71(2) CANNOT BE CONSTRUED TO GIVE OPTION TO THE ASSESSEE TO CARRY FORWARD BUSINESS LOSS SEPA RATELY WITHOUT SET OFF OF INCOME ARISING OUT OF SHORT TERM CAPITAL GAIN. ONLY ON TH E BASIS OF WORD MAY AS APPEARING IN SECTION 71(2), SUCH BENEFIT CANNOT BE GRANTED T O THE ASSESSEE AS HAS BEEN SOUGHT BY IT. THE LANGUAGE OF THE PROVISION IS CLEAR. N O OPTION HAS BEEN GIVEN TO THE ASSESSEE TO CARRY FORWARD LOSS UNDER ANY OTHER HEAD TO SUBSEQUENT YEAR WITHOUT SETTING OFF OF THE SAME AGAINST SHORT TERM CAPITAL GAIN. 7.3 RELIANCE BY THE ASSESSEE ON THE DECISION OF HON BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. BRITISH INSULATION CALENDARS LTD. ( SUPRA) IS ALSO MISPLACED AS THE SAID DECISION HAS NOT BEEN RENDERED FOR THE PROPOSITION WHICH HAS BEEN RAISED BY THE ASSESSEE IN THE PRESENT APPEAL. THE ISSUE IN THAT CASE WAS WHETHER OR NOT DIVIDEND INCOME OF THE ASSESSEE COULD BE SET OFF AGAINST BUS INESS LOSS OF THE SAME YEAR. DIVIDEND INCOME WAS TAXABLE AT THE CONFESSIONAL RAT E. THEREFORE, ACCORDING TO ASSESSEE TAX WAS TO BE CHARGED ON DIVIDEND INCOME A ND BUSINESS LOSS WAS TO BE CARRIED FORWARD TO BE SET OFF AGAINST INCOME OF SU BSEQUENT YEARS. THE TRIBUNAL HELD THAT ASSESSEE HAD SUCH OPTION. IT WAS HELD BY THE IR LORDSHIPS THAT TRIBUNAL WAS NOT JUSTIFIED IN HOLDING THAT ASSESSEE HAS SUCH OPT ION AND IT WAS HELD THAT BUSINESS LOSS WAS RIGHTLY SET OFF AGAINST DIVIDEND INCOME BY THE ITO. SIMILAR IS THE POSITION IN THE PRESENT CASE AND IT HAS TO BE HELD THAT ASSESS EE HAS NO OPTION TO CARRY FORWARD BUSINESS LOSS TO SUBSEQUENT YEARS WITHOUT SET OFF O F THE SAME TO CAPITAL GAIN ARISING DURING THE YEAR. THE LANGUAGE OF SECTION IS VERY C LEAR AND NO SUCH OPTION HAS BEEN GIVEN TO THE ASSESSEE. ITA NO.2712/MUM/2012 : ASST.YEAR 2007-08 9 7.4 IN VIEW OF ABOVE DISCUSSION, WE DISMISS GROUND NO.2 & 3 OF THE ASSESSEE. 8. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS D ISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 11TH JUNE, 2014. 1 * ./0 2'3 11/06/2014 / * 9 SD/- SD/- (RAJENDRA) (I.P.BANSAL) ' ' ' ' / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI; 2' DATED : 11 TH JUNE, 2014. 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