Shri Siddharth S. Kothari, Ahmedabad V. The Income Tax Officer, Ward-3(1)(4), Ahmedabad

ITA 2869/AHD/2015

• Counselvise Citation: [2018] 112 COUNSELVISE.COM (IT) 5574 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 1 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-11-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 12-10-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital asset; Business income; Salary income; Capital Gains

Judgement Text

, ,LK ,LK,LK ,LK- -- -,E ,E,E ,E- -- -LH LHLH LH* ** * IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, AHMEDABAD L LL LK KK KOZJH OZJH OZJH OZJH OLHE OLHE OLHE OLHE VGEN VGEN VGEN VGEN] YS[KK LNL; , ] YS[KK LNL; , ] YS[KK LNL; , ] YS[KK LNL; ,OA OAOA OA EK/ EK/EK/ EK/KQFERK KQFERK KQFERK KQFERK JKW; JKW;JKW; JKW;] U; ] U;] U; ] U;KF KFKF KF;D LNL; DS LE{KA ;D LNL; DS LE{KA ;D LNL; DS LE{KA ;D LNL; DS LE{KA BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER AND SMT MADHUMITA ROY, JUDICIAL MEMBER ./ I.T.A. NO. 2869/AHD/2015 ( / ASSESSMENT YEAR : 2012-13) SHRI SIDDHARTH S. KOTHARI, 403-404, FLORENCE, OPP: ASHRAM ROAD POST OFFICE, ASHRAM ROAD, AHMEDABAD-380 009. / VS. ITO, WARD 3(1)(4), AHMEDABAD. ./ ./ PAN/GIR NO. : AELPK 9519 F ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI HARDIK VORA, A.R. / RESPONDENT BY : SHRI VIRENDRA SINGH, SR.D.R. / DATE OF HEARING 23/10/2018 !'# / DATE OF PRONOUNCEMENT 15/11/2018 $% / O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER: THE CAPTIONED APPEAL HAS BEEN FILED AT THE INSTANCE OF THE ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)9, AHMEDABAD [CIT(A) IN SHORT] VIDE APPEAL NO.CIT(A)-9 /597/ITO WD.3(1)(4)/14-15 DATED 14.07.2015 ARISING IN THE MA TTER OF ASSESSMENT ORDER PASSED UNDER S.143(3) OF THE INCOME TAX ACT, 1961(HERE-IN-AFTER REFERRED TO AS 'THE ACT') DATED 04.03.2015 RELEVANT TO ASSESSMENT YEAR (AY) 2012-13. ITA NO.2869/AHD/2015 SHRI SIDDHARTH K. KOTHARI VS ITO A.Y. 2012-13 - 2 - 2. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE AS UNDER:- 1. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE A S WELL AS LAW ON THE SUBJECT, THE LEARNED CIT(A) HAS ERRED IN CONFIR MING THE ORDER OF ASSESSING OFFICER NOT ALLOWING SET OFF OF LOSS O F RS. 11,39,161/- UNDER THE HEAD INCOME FROM OTHER SOURCES AGAINST TH E SALARY INCOME OF RS. 4,00.000/- AND OUT OF BUSINESS INCOME OF RS. 7,39,161/-. 2. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AS WELL AS LAW ON THE SUBJECT, THE LEARNED CIT(A) HAS ERRED IN CONFIR MING THE ORDER OF ASSESSING OFFICER NOT ALLOWING CARRY FORWARD OF LOSS UNDER THE HEAD OF INCOME FROM OTHER SOURCES. 3. IT IS PRAYED THAT ABOVE ADDITION/DISALLOWANCE MA DE BY ASSESSING OFFICER AND CONFIRMED BY COMMISSIONER OF INCOME-TAX (APPEALS) MAY PLEASE BE DELETED. 4. APPELLANT CRAVES LEAVE TO ADD, ALTER OR DELETE A NY GROUND(S) EITHER BEFORE OR IN THE COURSE OF HEARING OF THE AP PEAL. 3. THE SOLITARY ISSUE RAISED BY THE ASSESSEE IS THA T LD. CIT(A) ERRED IN NOT ALLOWING SETTING OFF OF THE LOSS UNDER THE HEAD INCOME FROM OTHER SOURCES AMOUNTING TO RS. 11,39,161/- AGAINST THE IN COME UNDER THE HEAD SALARY AND BUSINESS. 4. THE BRIEFLY STATED FACTS ARE THAT THE ASSESSEE I S AN INDIVIDUAL AND DIRECTOR IN TWO PRIVATE LIMITED COMPANIES. SIMILARL Y, THE ASSESSEE IS ALSO PARTNER TO TWO PARTNERSHIP FIRM. THE ASSESSEE DURIN G THE YEAR HAS EARNED TAXABLE INCOME IN THE FORM OF SALARY FROM THE PRIVA TE LIMITED COMPANIES AND INTEREST ON CAPITAL FROM PARTNERSHIP FIRM. ITA NO.2869/AHD/2015 SHRI SIDDHARTH K. KOTHARI VS ITO A.Y. 2012-13 - 3 - 4.1 BESIDES THE ABOVE, THE ASSESSEE HAS ALSO SHOWN INCOME BY WAY OF INTEREST UNDER THE HEAD FROM OTHER SOURCES AMOUNTIN G TO RS.1,84,999/- ONLY. THE ASSESSEE AGAINST SUCH INTEREST INCOME HAS CLAIMED INTEREST EXPENSES PAID TO VARIOUS PARTIES AMOUNTING TO RS. 1 3,24,160/- ONLY. AS A RESULT, THERE WAS A LOSS OF RS.11,39,161/- UNDER TH E HEAD INCOME FROM OTHER SOURCES. 4.2 THE ASSESSEE HAS SET OFF THE IMPUGNED INTEREST LOSS UNDER THE HEAD INCOME FROM OTHER SOURCES AGAINST THE SALARY INCOME OF RS.4,00,000/- AND INTEREST INCOME FROM PARTNERS FOR RS.7,39,161/- . HOWEVER, THE AO WAS OF THE VIEW THAT THE ASSESSEE I S NOT ENTITLED FOR SET OFF OF THE LOSS CLAIMED UNDER THE HEAD INCOME FROM OTHER SOURCES AGAINST THE SALARY AND BUSINESS INCOME U/S 71 OF THE ACT. A CCORDINGLY, THE ASSESSEE WAS SHOW-CAUSED VIDE LETTER DATED 9.02.201 5 FOR NOT ALLOWING SET OFF OF THE LOSS AS DISCUSSED ABOVE. 4.3 THE ASSESSEE IN COMPLIANCE TO IT SUBMITTED THAT HE IS ENTITLED TO SET OFF OF THE LOSS UNDER THE HEAD INCOME FROM OTHER SO URCES IN PURSUANCE TO THE PROVISION OF SECTION 71 OF THE ACT. HOWEVER, THE AO DISAGREED WITH THE CONTENTION OF TH E ASSESSEE AND DISALLOWED THE CLAIM OF SET OFF OF THE LOSS OF RS.1 1,39,161/-. HENCE, THE ITA NO.2869/AHD/2015 SHRI SIDDHARTH K. KOTHARI VS ITO A.Y. 2012-13 - 4 - LOSS SET OFF BY THE ASSESSEE WAS ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. 5. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL TO LD. C IT(A). THE ASSESSEE BEFORE THE LD. CIT(A) SUBMITTED THAT THE I NTEREST INCOME EARNED FROM THE PARTNERSHIP FIRM SHOULD BE ADJUSTED AGAINS T THE INTEREST LOSS. 5.1 THE ASSESSEE IN ADDITION TO THE ABOVE ALSO SUBM ITTED THAT HE IS ELIGIBLE FOR SET OFF OF THE LOSS U/S 71 OF THE ACT. HOWEVER, THE LD. CIT(A) DISREGARDED THE CONTENTION OF THE ASSESSEE AND CONF IRMED THE ORDER OF AO BY OBSERVING AS UNDER: I HAVE GONE THROUGH THE ASSESSMENT ORDER AND THE S UBMISSIONS MADE BY THE APPELLANT IN THIS REGARD. I FIND THAT THE A. O. HAS GIVEN A VERY DETAILED REASON FOR NOT TO ALLOW SET OFF OF LOSS OF RS. 11,39,161/- UNDER THE HEAD INCOME FROM OTHER SOURCES. IN THIS REGARD THE REASON GIVEN BY THE A.O. IN PARA 3.8, 3.9 AND 3.10 IS WORTH NOTICIN G. THERE IS AMPLE MERIT IN THE ARGUMENTS ADVANCED BY T A.O. THE APPEL LANT'S CONTENTION IN THIS REGARD ARE UNTENABLE. ACCORDINGLY, THE GROUND RAISED BY THE APPELLANT DOES NOT SUBSIST AND THE APPEAL IS DISMIS SED. BEING AGGRIEVED BY THE ORDER OF LD. CIT(A) ASSESSEE IS IN APPEAL BEFORE US. 6. THE LD. AR BEFORE US FILED A PAPER BOOK RUNNING FROM PAGES 1-8 AND REITERATED THE SUBMISSION AS MADE BEFORE THE LO WER AUTHORITIES. ITA NO.2869/AHD/2015 SHRI SIDDHARTH K. KOTHARI VS ITO A.Y. 2012-13 - 5 - 7. ON THE OTHER HAND, LD. DR VEHEMENTLY SUPPORTED T HE ORDER OF AUTHORITIES BELOW. 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. AT THE OUTSET, WE FIND THAT IN THE IDENTICAL FACTS AND CIRCUMSTANCES THE HONBLE ITAT IN THE CASE OF SHRI SUMER BURMAL KOTHARI (BEING FATHER OF THE ASSESSEE) VS. ITO IN I TA NO.2868/AHD/2015 HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. TH E RELEVANT EXTRACT OF THE ORDER IS REPRODUCED BELOW: 3. WE NOTICE FROM CHAPTER VI OF THE ACT THAT THE S AME PRESCRIBES AGGREGATION OF INCOME AND SET OFF OR CARRY FORWARD OF LOSSES. LOSS SET OFF PROVISION IN CASE OF INTER HEAD INCOME COMES U/ S. 70. SECTION 71 APPLIES IN CASE OF INTRA HEAD LOSSES AS UNDER:- '[SET OFF OF LOSS FROM ONE HEAD AGAINST INCOME FROM ANOTHER. 71 (1) WHERE IN RESPECT OF ANY ASSESSMENT YEAR THE NET RESULT OF THE COMPUTATION UNDER ANY HEAD OF INCOME, OTHER THAN 'C APITAL GAINS', IS A LOSS AND THE ASSESSEE HAS NO INCOME UNDER THE HEA D '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 'C APITAL GAINS', IS A LOSS AND THE ASSESEE HAS INCOME ASSESSABLE UNDER THE HEAD 'CAPITAL GAINS', SUCH LOSS 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). [(2A) NOTWITHSTANDING ANYTHING CONTAINED IN SUB-SEC TION (1) OR SUB- SECTION (2), WHERE IN RESPECT OF ANY ASSESSMENT YEA R, THE NET RESULT OF THE COMPUTATION UNDER THE HEAD 'PROFITS AND GAINS O F BUSINESS OR ITA NO.2869/AHD/2015 SHRI SIDDHARTH K. KOTHARI VS ITO A.Y. 2012-13 - 6 - PROFESSION' IS A LOSS AND THE ASSESSEE HAS INCOME A SSESSABLE UNDER THE HEAD 'SALARIES', THE ASSESSEE HAS SHALL NOT BE ENTI TLED TO HAVE SUCH LOSS SET OFF AGAINST SUCH INCOME.] (3)WHERE IN RESP ECT OF ANY ASSESSMENT YEAR, THE NET RESULT OF THE COMPUTATION UNDER THE HEAD 'CAPITAL GAINS' IS A LOSS AND THE ASSESSEE HAS INCO ME ASSESSABLE UNDER ANY OTHER HEAD OF INCOME, THE ASSESSEE SHALL NOT BE ENTITLED TO HAVE SUCH LOSS SET OFF AGAINST INCOME UNDER THE OTHER HE AD.] [(4) WHERE THE NET RESULT OF THE COMPUTATION UNDER THE HEAD 'INCOM E FROM HOUSE PROPERTY' IS A LOSS, IN RESPECT OF THE ASSESSMENT Y EARS COMMENCING ON THE 1ST DAY OF APRIL, 1995 AND THE 1ST DAY OF APRIL , 1996, SUCH LOSS SHALL BE FIRST SET OFF UNDER SUB-SECTIONS (1) AND ( 2) AND THEREAFTER THE LOSS REFERRED TO IN SECTION 71A SHALL BE SET OFF IN THE RELEVANT ASSESSMENT YEAR IN ACCORDANCE WITH THE PROVISIONS O F THAT SECTION.]' 4. A PERUSAL OF SECTION 71 MAKES IT CLEAR THAT IT IS ENABLING PROVISION WHICH ALLOWS SET OFF OF LOSS IN CASE THE NET RESULT OF COMPUTATION UNDER ANY HEAD OF INCOME OTHER CAPITAL GAINS IS A LOSS AND THERE ARE NO CAPITAL GAINS IN THE RESPECTIVELY ASSE SSMENT YEAR. THE SAME HAS BEEN MADE SUBJECT TO OTHER PROVISIONS OF CHAPTE R VI. SUB-SECTION 1 ITSELF CLARIFIES THAT THIS SET OFF OF LOSS CANNOT BE RESORTED TO AGAINST INCOME ASSESSABLE FOR THE VERY ASSESSMENT YEAR UNDE R ANY OTHER HEAD. WE PAUSE HERE FOR A SECOND AND REVERT BACK TO FACTS OF THE CASE. THE ASSESSEE'S LOSS FROM OTHER SOURCES IS NOT IN DISPUT E AND SO IS HIS INCOME FROM THE OTHER HEAD OF SALARY. NEXT COMES SUB-SECTI ON 2 WHICH APPLIES IN CASE THE NET RESULT OF COMPUTATION UNDER ANY HEA D OF INCOME OTHER THAN CAPITAL GAINS IS LOSS AND THE ASSESSEE HAS INC OME ASSESSABLE UNDER THE HEAD CAPITAL GAINS. THIS SUB- SECTION OBVIOUSLY DOES NOT APPLY TO FACTS OF THE INSTANT CASE. THIS IS FOLLOWED SUB-SEC TION 2(A) INSERTED IN THE ACT W.E.F. 01-04-2005 BY THE FINANCE ACT , 2004. THIS SUB-SECTION STARTS WITH A NON-OBSTANTE CLAUSE TO ABOVE STATED SUB-SECT ION 1 AND 2 BARS SET OFF OF LOSS ARISING FROM PROFITS AND GAINS FROM BUS INESS OR PROFESSION AGAINST SALARY INCOME. THE SAME ALSO DOES NOT APPLY IN THE FACTS OF THE CASE. WE COME TO SUB-SECTION 3 PRESCRIBING SET OFF OF LOSS ARISING FROM CAPITAL GAINS. WE DO NOT ENTER INTO A LENGTHY DISCU SSION AND OBSERVE THAT THE LOSS IN QUESTION IS UNDER THE OTHER SOURCE S. SIMILAR IS THE SITUATION IN SUB-SECTION 4 APPLICABLE IN CASE OF INCOME FROM HOUSE PROPERTY. WE ARE OF THE OPINION THAT SUB-SECTIONS 2 TO 4 HEREINABOVE DO NOT ACT AN EXCEPTION TO SECTION 71(1) EXCEPT TO THE EXTENT INDICATED THEREIN. WE PROCEED FURTHER IN THIS CHAPTER AND FIN D THAT SECTION ITA NO.2869/AHD/2015 SHRI SIDDHARTH K. KOTHARI VS ITO A.Y. 2012-13 - 7 - 74A ONLY DEALS WITH LOSSES FROM CERTAIN SPECIFIED SOUR CES FALLING UNDER THE HEAD INCOME FROM OTHER SOURCES. THE ONLY SPECIF IED SOURCE THEREIN IS HORSE RACING WHICH OBVIOUSLY DOES NOT APPLY IN T HE INSTANT CASE. 5. THE REVENUE STRONGLY SUPPORTS BOTH THE LOWER AU THORITIES' VIEWS A LOSS ARISING FROM THE HEAD OTHER SOURCES IS NOT T O BE SET OFF AGAINST SALARY INCOME. WE HAVE THOROUGHLY ANALYZED RELEVANT PROVISIONS OF SECTION 71 HEREINABOVE. WE FIND THAT ALL NEGATIVE COVENANTS I N SECTION 71 SUB-SECTIONS 2 TO 4(SUPRA) NOWHERE COVER FACTS OF THE INSTANT CASE. WE REITERATE THAT SUCH CLAUSES BARRING APPLICATION OF BENEFICIAL PROVISION HAVE TO BE LITERALLY INTERPRETED AND SCOP E THEREOF CANNOT BE WIDENED. WE ACCORDINGLY CONCLUDE THAT THE ASSESSEE' S CASE SEEKING SET OFF OF HIS LOSS ARISING FROM OTHER SOURCES OF RS. 7 ,81, 608/- DESERVES TO BE SET OFF AGAINST HIS SALARY INCOME OF RS. 8 LACS (SUPRA) AS PER SECTION 71(1) OF THE ACT. WE ORDER ACCORDINGLY. THE IMPUGNED DIS ALLOWANCE OF SET OFF OF LOSS IS DELETED. 8.1 THE FACTS OF THE CASE ON HAND ARE IDENTICAL TO THE ORDER AS DISCUSSED ABOVE, THEREFORE RESPECTFULLY FOLLOWING THE SAME WE REVERSE THE ORDER OF AUTHORITIES BELOW AND DIRECT THE AO TO DELETE THE A DDITION MADE BY HIM. HENCE, THE GROUND OF ASSESSEE IS ALLOWED. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED . THIS ORDER PRONOUNCED IN OPEN COURT ON 15/11/2018 SD/- SD/- E/KQFERK JKW; E/KQFERK JKW; E/KQFERK JKW; E/KQFERK JKW; OLHE VGEN OLHE VGEN OLHE VGEN OLHE VGEN U;KF;D LNL; U;KF;D LNL; U;KF;D LNL; U;KF;D LNL; YKS[KK LN YKS[KK LN YKS[KK LN YKS[KK LNL; L; L; L; (MADHUMITA ROY) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; DATED 15/11/2018 PRITI YADAV, SR.PS ITA NO.2869/AHD/2015 SHRI SIDDHARTH K. KOTHARI VS ITO A.Y. 2012-13 - 8 - !'# $#! / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. & '( ) / CONCERNED CIT 4. ) () / THE CIT(A)-9, AHMEDABAD. 5. ,-. //'( , '(# , 12$&$ / DR, ITAT, AHMEDABAD. 6. .34 5 / GUARD FILE. % & / BY ORDER, , / //TRUE COPY// '/& () ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD