Gouranga Cement Pvt. Ltd., Barakar V. DCIT, Cir-3, Bankura, Bankura

ITA 330/KOL/2017

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 6426 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 2 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-05-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 17-02-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SOUMYAJIT DASGUPT
• Assessee Lawyers: D K SEN
• Keywords: Business income
• Section: 143(3); 32

Judgement Text

, D , IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH D KOLKATA BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER AND SHRI S.S.VISWANETHRA RAVI, JUDICIAL MEMBER ITA NO.330/KOL/2017 ASSESSMENT YEAR:2010-11 GOURANGA CEMENT PVT.LTD., PATPUR, P.O.& DIST.BANKURA PIN 722 101 [ PAN NO.AACCG 1513 F ] / V/S . DCIT, CIRCLE-3, BILASH BHAWAN, CANDMARIDANGA, BANKURA, PIN-712 101 /APPELLANT .. /RESPONDENT /BY APPELLANT SHRI D.K. SEN, ADVOCATE /BY RESPONDENT SHRI SOUMYAJIT DASGUPT, ADDL. CIT-DR /DATE OF HEARING 19-03-2018 /DATE OF PRONOUNCEMENT 03-05-2018 /O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER:- THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS), DURGAPUR DATED 28.11.2016. AS SESSMENT WAS FRAMED BY DCIT, CIRCLE- BANKURA U/S 143(3) OF THE INCOME TAX ACT, 1 961 (HEREINAFTER REFERRED TO AS THE ACT) VIDE HIS ORDER DATED 25.03.2013 FOR ASSE SSMENT YEAR 2010-11. THE GROUNDS RAISED BY THE ASSESSEE PER ITS APPEAL ARE AS UNDER: - 1. FOR THAT THE ORDER OF ASSESSMENT PASSED U/S. 143 (3) AND SUSTAINED BY THE LD. CIT(A), DURGAPUR IS ARBITRARY, ILLEGAL AND BAD BOTH IN LAW AND FACT. 2. FOR THAT THE LD. CIT(A), DURGAPUR, IN CONSIDERAT ION OF THE FACTS AND CIRCUMSTANCES OF THE CASE, ERRED IN SUSTAINING ORDER OF THE AO IN MAKING ADJUSTMENT OF UNABSORBED BUSINESS LOSS OF RS.16,64,524/- OF THE EARLIER YEAR AGAINST CAPITAL GAIN. 3. FOR THAT THE LD. AO IN CONSIDERATION OF FACTS AN D CIRCUMSTANCES OF THE CASE IS NOT JUSTIFIED TO ADJUST UNABSORBED BUSINESS LOSS OF THE EARLIER YEAR AGAINST CAPITAL GAIN DURING THE YEAR. 4. FOR THAT THE LD. AO IN CONSIDERATION OF THE FACT S AND CIRCUMSTANCES OF THE CASE, ERRED IN CHARGING INTEREST FOR RS.1,598/- U/S. 234A AND RS.3,71,166/- U/S. 234C OF THE INCOME TAX ACT, 1961. ITA NO.330/KOL/2017 A.Y. 2010 -11 GOURNGA CEMENT PVT. LTD. VS. DCIT, CIR-3 BANKU RA PAGE 2 5. FOR THAT THE APPELLANT RESERVES ITS RIGHT TO ADD TO, TO ALTER AND/OR TO AMEND THE GROUND/S TAKEN AND ADDUCE PAPER/S DOCUMENT/S AT TH E TIME OF HEARING. SHRI D.K. SEN, LD. ADVOCATE APPEARED ON BEHALF OF A SSESSEE AND SHRI SOUMYAJIT DASGUPTA, LD. DEPARTMENTAL REPRESENTATIVE APPEARED ON BEHALF OF REVENUE. 2. IN THIS APPEAL VARIOUS GROUNDS HAVE BEEN RAISED BY ASSESSEE OUT OF WHICH GROUND NO. 1 AND 5 ARE GENERAL IN NATURE AND DO NOT REQUIRE SEPARATE ADJUDICATION. 3. FIRST ISSUE RAISED BY ASSESSEE IN GROUND NO.2 AN D 3 ARE INTER-RELATED AND THEREFORE BEING TAKEN UP TOGETHER. THE ISSUE RAISED IS THAT LD. CIT(A) ERRED IN CONFIRMING THE ORDER OF ASSESSING OFFICER BY ADJUST ING THE UNABSORBED BUSINESS LOSS OF 16,64,524/- AGAINST THE CAPITAL INCOME. 4. BRIEFLY STATED FACTS ARE THAT ASSESSEE IN THE PR ESENT CASE IS A PRIVATE LIMITED COMPANY AND ENGAGED IN THE BUSINESS OF CIVIL CONSTR UCTION AND BROKER ACTIVITIES. THE ASSESSEE DURING THE YEAR HAS FLED ITS RETURN OF INC OME INTER ALIA DISCLOSING THE FOLLOWING ITEMS OF INCOME / LOSS:- SL.NO. PARTICULARS AMOUNT (RS) 1. BUSINESS INCOME 13,36,761/- 2. LTCG 86,30,598/ - 3. UNABSORBED BROUGHT FORWARD BUSINESS LOSS 16, 64,524/- THE ASSESSEE IN ITS RETURN OF INCOME SET OFF THE BU SINESS PROFIT AGAINST THE BROUGHT FORWARD OF UNABSORBED BUSINESS LOSS. HOWEVER, AO DI SREGARDED THE WORKING OF ASSESSEE FOR SETTING OFF THE UNABSORBED BROUGHT FOR WARD BUSINESS LOSS. THE AO SET OFF OF THE BROUGHT FORWARD UNABSORBED BUSINESS LOSS AGA INST THE LTCG INCOME DECLARED BY ASSESSEE. 5. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE L D. CIT(A). THE ASSESSEE BEFORE LD. CIT(A) SUBMITTED THAT AS PER THE PROVISI ON OF SECTION 72 OF THE ACT, THE BROUGHT FORWARD BUSINESS LOSS OF 16,64,524/- ONLY CAN BE SET OFF AGAINST THE BUSINES S INCOME. THEREFORE, THE ACTION OF AO I.E. SETTING OF F THE BROUGHT FORWARD BUSINESS LOSS AGAINST THE LTCG INCOME IS CONTRARY TO THE PROVISIO N OF THE ACT. HOWEVER, LD. CIT(A) DISREGARDED THE CONTENTION OF ASSESSEE AND C ONFIRMED THE ORDER OF AO AFTER HAVING RELIANCE ON THE ORDER OF ITAT MUMBAI TRIBUNA L IN THE CASE OF DIGITAL ELECTRONICS LTD. VS. ACIT (2011) 135 TTJ 419 (MUM). ITA NO.330/KOL/2017 A.Y. 2010 -11 GOURNGA CEMENT PVT. LTD. VS. DCIT, CIR-3 BANKU RA PAGE 3 THE ASSESSEE BEING AGGRIEVED BY THIS ORDER OF LD. C IT(A) IS IN APPEAL BEFORE US. 6. BEFORE US LD. AR FOR THE ASSESSEE REITERATED THE SAME ARGUMENTS THAT WERE MADE BEFORE LD. CIT(A) AND RELIED ON THE JUDGMENT O F HON'BLE PUNJAB & HAYANA HIGH COURT IN THE CASE OF CIT VS. RUBBER UDYOG VIKAS P. LTD. (2011) REPORTED IN 335 ITR 558 (P&H). ON THE OTHER HAND, LD DR SUBMITTED THAT CASE LAW RE LIED UPON BY LD. AR IN THE CASE OF RUBBER UDYOG VIKAS P. LTD. (SUPRA) PERTAINS TO THE PENALTY PROCEEDINGS THEREF ORE NO REFERENCE TO THE PRESENT CASE CAN BE MADE. HE VE HEMENTLY RELIED ON THE ORDER OF AUTHORITIES BELOW. 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IN THE INSTANT CASE THE ASSESSEE HAS SHOWN BUSINESS INCOME OF 13,36,761/- AND LTCG INCOME OF 86,30,498/- ONLY. BESIDES THE ABOVE ASSESSEE HAS SH OWN UNABSORBED BROUGHT FORWARD BUSINESS LOSS OF 16,64,542/- WHICH WAS SET OFF AGAINST THE BUSINESS INCOME TO THE EXTENT OF 13,36,761/- BY THE ASSESSEE. THE ASSESSEE HAS OFFERED THE TAX ON LTCG AT SPECIAL RATE @ OF RS. 20 % FOR RS. 17,26,100.00 (20% OF RS. 86,30,498.00 ONLY) WHICH TRANSPIRES THAT THE AS SESSEE HAS NOT SET OFF THE REMAINING BROUGHT FORWARD BUSINESS LOSS OF RS. 3,27,763.00 (1 6,64,542.00 13,36,761.00) AGAINST THE LTCG. THUS THE BALANCE AMOUNT OF UNABSO RBED BROUGHT FORWARD BUSINESS LOSS OF 3,27,763/- WAS CARRIED FORWARD TO THE SUBSEQUENT YE AR BY THE ASSESSEE. HOWEVER, THE AO SET OFF THE ENTIRE BUSINESS BROUGHT FORWARD LOSS AGAINST THE LTCG INCOME DECLARED BY ASSESSEE. THUS, AO LEVIED TAX ON THE BUSINESS OF 13,36,761/- AS WELL AS CHARGED LTCG TAX @ 20% ON THE REMAINING AMO UNT OF LTCG INCOME I.E. RS. 69,65,974.00 (RS. 86,30,498.00 16,64,542.00). THE VIEW TAKEN BY THE AO WAS UPHELD BY THE LD. CIT(A). NOW THE ISSUE BEFORE US A RISES FOR OUR CONSIDERATION SO AS TO WHETHER THE IMPUGNED LOSS OF 16,64,824/- I.E. UNABSORBED BROUGHT FORWARD LOSS SHOULD BE SET OFF AGAINST THE BUSINESS INCOME OF 13,36,761/- AND BALANCE OF 3,27,763/- AGAINST THE LTCG INCOME. AT THIS JUNCTUR E, WE FIND IMPORTANT TO REPRODUCE THE PROVISION OF SEC 72 OF THE ACT, WHICH READS AS UNDER:- CARRY FORWARD AND SET OFF OF BUSINESS LOSSES. 38 72. 39 [(1) WHERE FOR ANY ASSESSMENT YEAR, THE NET RESULT OF THE COMPUTATION UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSI ON IS A LOSS TO THE ASSESSEE, NOT BEING A LOSS SUSTAINED IN A SPECULATION BUSINESS, A ND SUCH LOSS CANNOT BE OR IS NOT ITA NO.330/KOL/2017 A.Y. 2010 -11 GOURNGA CEMENT PVT. LTD. VS. DCIT, CIR-3 BANKU RA PAGE 4 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 , 40 [* * *] WHERE HE HAS NO INCOME UNDER ANY OTHER HEAD, THE WH OLE LOSS SHALL, SUBJECT TO THE OTHER PROVISIONS OF THIS CHAPTER, BE CARRIED FORWAR D TO THE FOLLOWING ASSESSMENT YEAR, AND (I) IT SHALL BE SET OFF AGAINST THE PROFITS AND GAINS, IF ANY, OF ANY BUSINESS OR PROFESSION CARRIED ON BY HIM AND ASSESSABLE FOR THA T ASSESSMENT YEAR ; 41 [* * *] (II) IF THE LOSS CANNOT BE WHOLLY SO S ET OFF, THE AMOUNT OF LOSS NOT SO SET OFF SHALL BE CARRIED FORWARD TO THE FOLLOWING ASSESSMENT YEAR AN D SO ON :] 42 [ PROVIDED THAT WHERE THE WHOLE OR ANY PART OF SUCH LOSS IS S USTAINED IN ANY SUCH BUSINESS AS IS REFERRED TO IN SECTION 33B WHICH IS DISCONTINUED IN THE CIRCUMSTANCES SPECIFIED IN THAT SECTION, AND, THEREAFTER, AT ANY TIME BEFORE THE EXPIRY OF THE PERIOD OF THREE YEARS REFERRED TO IN THAT SECTION, SUCH BUSIN ESS IS RE-ESTABLISHED, RECONSTRUCTED OR REVIVED BY THE ASSESSEE, SO MUCH OF THE LOSS AS IS ATTRIBUTABLE TO SUCH BUSINESS SHALL BE CARRIED FORWARD TO THE ASSESSMENT YEAR RELEVANT TO THE PREVIOUS YEAR IN WHICH THE BUSINESS IS SO RE-ESTABLISHED, RECONSTRUCTED OR REV IVED, AND (A) IT SHALL BE SET OFF AGAINST THE PR OFITS AND GAINS, IF ANY, OF THAT BUSINESS OR ANY OTHER BUSINESS CARRIED ON BY HIM AND ASSESSABLE FOR THAT ASSESSMENT YEAR ; AND (B) IF THE LOSS CANNOT BE WHOLLY SO SE T OFF, THE AMOUNT OF LOSS NOT SO SET OFF SHALL, IN CASE THE BUSINESS SO RE-ESTABLISHED, RECONSTRUCTED OR REVIVED CONTINUES TO BE CARRIED ON BY THE ASSESSEE, BE CARRIED FORWARD TO T HE FOLLOWING ASSESSMENT YEAR AND SO ON FOR SEVEN ASSESSMENT YEARS IMMEDIATELY SUCCEE DING.] (2) WHERE ANY ALLOWANCE OR PART THEREOF IS, UNDER S UB-SECTION (2) OF SECTION 32 OR SUB-SECTION (4) OF SECTION 35 , TO BE CARRIED FORWARD, EFFECT SHALL FIRST BE GIVE N TO THE PROVISIONS OF THIS SECTION. (3) NO LOSS 42 [(OTHER THAN THE LOSS REFERRED TO IN THE PROVISO TO SUB-SECTION (1) OF THIS SECTION)] SHALL BE CARRIED FORWARD UNDER THIS SECTI ON FOR MORE THAN EIGHT ASSESSMENT YEARS IMMEDIATELY SUCCEEDING THE ASSESSMENT YEAR FO R WHICH THE LOSS WAS FIRST COMPUTED. A PLAIN LOOK AT THE ABOVE STATUTORY PROVISION MAKES IT CLEAR THAT THE UNABSORBED BROUGHT FORWARD BUSINESS LOSS NEEDS TO BE SET OFF A GAINST THE BUSINESS INCOME DECLARED BY ASSESSEE FOR THE YEAR UNDER CONSIDERATION. THERE IS NO DISPUTE THAT ASSESSEE HAS SHOWN BUSINESS INCOME OF 13,36,761/- FOR THE YEAR UNDER CONSIDERATION. THERE FORE, IN OUR CONSIDERED VIEW, ASSESSEE IS VERY MUCH ENTITLED TO CLAIM THE SET OFF OF THE BROUGHT FORWARD UNABSORBED BUSINESS LOSS AGAINST THE INCOME DECLARED UNDER THE HEAD BUSINESS. THE AMOUNT WHICH HAS NOT BEEN SET OFF AGAINST THE B USINESS INCOME OF THE ASSESSEE CAN BE SET OFF AGAINST THE LTCG INCOME OF THE ASSESSEE IN VIEW OF THE ORDER OF HONBLE ITA NO.330/KOL/2017 A.Y. 2010 -11 GOURNGA CEMENT PVT. LTD. VS. DCIT, CIR-3 BANKU RA PAGE 5 MUMBAI TRIBUNAL IN THE CASE OF DIGITAL ELECTRONICS LTD.(SUPRA) WHEREIN IT WAS HELD AS UNDER : SECTION 72 PROVIDES THAT WHERE FOR ANY ASSESSMENT Y EAR, THE NET RESULT OF 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 SPECU LATION BUSINESS, AND SUCH LOSS CANNOT BE OR IS NOT WHOLLY SET OFF AGAINST INCOME U NDER ANY HEAD OF INCOME IN ACCORDANCE WITH THE PROVISIONS OF SECTION 71, SO MU CH OF THE LOSS AS HAS NOT BEEN SO SET OFF IS TO BE CARRIED FORWARD TO THE FOLLOWING A SSESSMENT YEAR AND IS ALLOWABLE FOR BEING SET OFF 'AGAINST THE PROFITS, IF ANY, OF THAT BUSINESS OR PROFESSION CARRIED ON BY HIM AND ASSESSABLE FOR THAT ASSESSMENT YEAR'. THUS, FOR SETTING OFF THE INCOME, WHILE THE LOSS TO BE CARRIED FORWARD HAS TO BE UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PROFESSION', THE GAINS AGAINST WHICH SUCH LOSS C AN BE SET OFF, HAS TO BE PROFITS OF 'ANY BUSINESS OR PROFESSION CARRIED ON BY HIM AND A SSESSABLE IN THAT ASSESSMENT YEAR'. IN OTHER WORDS, THERE IS NO REQUIREMENT OF THE GAIN S BEING TAXABLE UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PROFESSION' AND, THUS, AS LONG AS GAINS ARE 'OF ANY, BUSINESS OR PROFESSION CARRIED ON BY THE ASSESSEE A ND ASSESSABLE TO TAX FOR THAT ASSESSMENT YEAR', THE SAME CAN BE SET OFF AGAINST L OSS UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION CARRIED FORWARD FROM EARL IER YEARS. IN THE CASE OF CIT V. COCANADA RADHASWAMI BANK LTD. [1965]57 ITR 306 (SC ) , THE SUPREME COURT HELD THAT AS LONG AS THE PROFITS AND GAINS ARE IN THE NATURE OF BUSINESS PROFITS AND GAINS, AND EVEN IF THESE PROFITS ARE LI ABLE TO BE TAXED UNDER A HEAD OTHER THAN INCOME FROM BUSINESS AND PROFESSION, THE LOSS CARRIED FORWARD CAN BE SET OFF AGAINST SUCH PROFITS OF THE ASSESSEE. IN THAT VIEW OF THE MATTER, THE OBJECTION RAISED BY THE AUTHORITIES BELOW ARE DEVOID OF ANY LEGAL SUBST ANCE. THEREFORE, THE INCOME EARNED IN THE RELEVANT YEAR, ALTHOUGH NOT TAXABLE AS 'PROFITS AND GAINS FROM BUSINESS OR PROFESSION' WAS AN INCOM E IN THE NATURE OF INCOME OF BUSIESS NEVERTHELESS. THE ASSESSEE WAS, THEREFORE, INDEED JUSTIFIED IN CLAIMING SET OFF OF BUSINESS LOSSES AGAINST THE INCOME OF CAPITAL GA INS. IT IS UNDISPUTED FACT THAT THE ASSESSEE HAS THE EAR NED THE LONG TERM CAPITAL INCOME BY WAY OF TRANSFER OF THE BUSINESS ASSETS SUCH AS FACT ORY BUILDING, PLANT & MACHINERY, ELECTRIC INSTALLATION UNDER THE HEAD SLUM SALE. THU S THE NATURE OF LTCG IS IN THE NATURE OF BUSINESS PROFIT & GAINS WHICH IS LIABLE TO BE TA XED UNDER THE HEAD CAPITAL GAIN BY VIRTUE OF THE PROVISIONS OF LAW. BUT THE NATURE OF LTCG IS BUSINESS ONLY AS DISCUSSED ABOVE IN THE CASE OF DIGITAL ELECTRONICS LTD.(SUPRA) . 7.1 IN VIEW OF ABOVE, WE DIRECT THE AO TO SET OFF T HE BUSINESS LOSS OF RS.13,36,761.00 AGAINST THE BUSINESS INCOME AND THE REMAINING LOSS OF RS. 3,27,763.00 SHOULD BE SET OFF AGAINST THE LTCG AS D ISCUSSED ABOVE. THIS GROUND OF ASSESSEES APPEAL IS PARTLY ALLOWED. ITA NO.330/KOL/2017 A.Y. 2010 -11 GOURNGA CEMENT PVT. LTD. VS. DCIT, CIR-3 BANKU RA PAGE 6 8. NEXT ISSUE RAISED BY ASSESSEE IN GROUND NO.4 REL ATES TO THE LEVY OF INTEREST U/S 234A/234C OF THE ACT. THE AO IS DIRECTED TO GRANT C ONSEQUENTIAL RELIEF TO THE ASSESSEE. 9. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLOWED IN TERMS OF ABOVE. ORDER PRONOUNCED IN OPEN COURT ON 03/05/2018 SD/- SD/- ( % ') ( ') (S.S.VISWANETHRA RAVI) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER *DKP, SR.P.S ) - 03/05/2018 / KOLKATA / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT-GOURANGA CEMENT PVT.LTD., PATPUR, P.O.&D IST. BANKURA, PIN-722 101 2. /RESPONDENT-DCIT, CIRCLE-3, BILASH BHAWAN, CHANDMAR IDANGA, BANKURA, PIN 712101 3. , - / CONCERNED CIT 4. - - / CIT (A) 5. . %%, , , / DR, ITAT, KOLKATA 6. 2 / GUARD FILE. BY ORDER/ , /TRUE COPY/ SR. PRIVATE SEC RETARY HEAD OF OFFICE/DDO ,,