KOMAF FINANCIAL SERVICES LTD, MUMBAI V. DCIT -III RG 3(2), MUMBAI

ITA 3307/MUM/2009

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 55589 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 4 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-09-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 15-09-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 19-05-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: A K NAYAK
• Assessee Lawyers: F V IRANI
• Keywords: Capital asset; Question of law

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH: MUMBAI BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND SHRI R.S. PADVEKAR, JUDICIAL MEMBER ITA NO.3307/MUM/2009 (ASSESSMENT YEAR: 2005-06) KOMAF FINANCIAL SERVICES LIMITED, 240 NAVSARI BUILDING, DR. D.N. ROAD, FORT, MUMBAI -400 001 ....... APPELLANT VS DCIT -RANGE-3(2), AAYAKAR BHAVAN, MUMBAI -400 020 ..... RESPONDENT PAN: AABPK 8999 F APPELLANT BY: SHRI F.V. IRANI RESPONDENT BY: SHRI A.K. NAYAK DATE OF HEARING: DATE OF PRONOUNCEMENT: 15.09.2011 28.09.2011 O R D E R PER R.S. PADVEKAR, JM: IN THIS APPEAL THE ASSESSEE HAS CHALLENGED THE IMPU GNED ORDER OF THE LD. CIT (A)-III MUMBAI DATED 2.03.2009 FOR T HE A.Y. 2005-06. THE ASSESSEE HAS TAKEN THE FOLLOWING EFFECTIVE GROU NDS:- 1. THE COMMISSIONER OF INCOME TAX (APPEALS) III, MUMBAI (CIT(A)) ERRED IN NOT ALLOWING SET-OFF OF BROUGHT FORWARD CAPITAL LOSS AMOUNTING TO ` 3,75,715 OF A.Y. 2000-01 AGAINST SHORT TERM CAPITAL GAINS IN AY 2005-06 ON T HE GROUND THAT SUCH LOSS IS LONG TERM CAPITAL LOSS AND THEREFORE THE IMPUGNED BROUGHT FORWARD LONG TERM CA PITAL LOSS OF A.Y. 2000-01 CANNOT BE CONSIDERED FOR SET-O FF. ITA 3307 /MUM/2009 KOMAF FINANCIAL SERVICES LIMITED, 2 2. HE FAILED TO APPRECIATE AND OUGHT TO HAVE HELD T HAT: A. PRIOR TO AMENDMENT MADE BY THE FINANCE ACT, 200 2, THERE WAS NO RESTRICTION ON ADJUSTMENT / SET-OFF OF GAINS AND LOSSES ON LONG TERM OR SHORT TERM CAPITAL ASSET S AND THEREFORE CHARACTERIZATION OF PAST LOSSES IS IMMATE RIAL AND ARE ALLOWED TO BE SET OFF BOTH AGAINST LONG TERM CA PITAL GAINS AS WELL AS SHORT TERM CAPITAL GAINS. B. THE AMENDMENT TO SECTION 74 IS PROSPECTIVE, WH ICH INTER ALIA PROVIDES THAT LONG TERM LOSSES CANNOT BE SET OFF AGAINST SHORT TERM GAINS IS APPLICABLE TO THE LOSSE S WHICH HAVE BEEN COMPUTED FOR THE FIRST TIME FOR AY 2003-0 4 AND ONWARDS AND CAN NOT BE APPLICABLE TO LOSSES CARRIED FORWARD FORM EARLIER YEAR. 3. THE APPELLANT PRAYS THAT THE AO BE DIRECTED TO A LLOW SET-OFF OUT OF BROUGHT FORWARD CAPITAL LOSS AMOUNTING TO ` 3,75,715 AGAINST SHORT TERM CAPITAL GAINS IN A.Y. 2005-06 AS CLAIMED BY THE APPELLANT IN ITS RETURN OF INCOME. 2. WE HAVE HEARD THE LD. SR. COUNSEL SHRI F.V. IRAN I AND LD. D.R. SHRI A.K. NAYAK. 3. IN THIS CASE, THE ASSESSEE HAD FILED AN APPLICAT ION FOR CONSTITUTING THE SPECIAL BENCH BUT THE REQUEST OF T HE ASSESSEE WAS NOT ACCEPTED BY THE DIVISIONAL BENCH, HENCE, THIS CASE IS POSTED FOR HEARING. THE LD. COUNSEL WAS FAIR ENOUGH TO SUBMIT THAT THE ISSUE ARISING IN THIS CASE HAS BEEN DECIDED BY THE TRIBUN AL AGAINST THE ASSESSEE IN THE A.Y. 2003-04 IN ITA NO.1141/MUM/200 7 DATED 22.05.2009 AND THE ASSESSEE HAS CHALLENGED SAID ORD ER OF THE TRIBUNAL BEFORE THE HONBLE HIGH COURT OF BOMBAY AN D HONBLE HIGH ITA 3307 /MUM/2009 KOMAF FINANCIAL SERVICES LIMITED, 3 COURT HAS FRAMED THE SUBSTANTIAL QUESTION OF LAW VI DE ORDER DATED 30.11.2010 IN ITA NO.4147 OF 2009. 4. THE ISSUE IN CONTROVERSY IS WHETHER THE ASSESSEE IS ENTITLED FOR SET OFF OF THE BROUGHT FORWARD LONG TERM CAPITAL LO SS PERTAINING TO THE A.Y. 2000-01 AGAINST SHORT-TERM-CAPITAL-GAINS IN TH E A.Y. 2005-06. THE IDENTICAL ISSUE HAD COME FOR CONSIDERATION BEFO RE THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE A.Y. 2003-04 AND IT IS HELD AS UNDER. 3.3 AFTER CAREFUL CONSIDERATION OF THE RELEVANT PR OVISIONS AND THE JUDICIAL PRONOUNCEMENTS WE ARE OF THE VIEW THAT THE JUDGMENT IN CASE OF SHAH SADIQ & SONS (SUPRA) WILL NOT BE AP PLICABLE TO THE FACTS OF THE PRESENT CASE. THE SAID JUDGMENT RELAT ED TO VESTED RIGHTS UNDER A STATUTE WHICH HAD BEEN REPEAL. SECT ION 6(C) OF THE GENERAL CLAUSES ACT SAVES THE VESTED RIGHTS UNDER T HE REPEALED STATUTE UNLESS THEY ARE SPECIALLY TAKEN AWAY BY SPE CIFIC PROVISIONS OF THE NEW STATUTE. THE SAME HOWEVER WIL L NOT BE APPLICABLE TO CASES WHEREAS THE STATUTE IS NOT REPE ALED BUT THE PROVISIONS ARE ONLY AMENDED. THIS IS BECAUSE WHEN A STATUTE IS REPEALED THE PROVISIONS ARE NOT CHANGED AND REMAIN AS SUCH AND THEREFORE THE VESTED RIGHTS UNDER THE ORIGINAL PROV ISIONS OF THE REPEALED ACT ARE SAVED CONTINUE TO BE IN FORCE BUT IN CASE THE STATUTE IS NOT REPEALED AND ONLY THE PROVISIONS ARE AMENDED, IT IS THE AMENDED PROVISIONS WHICH WILL APPLY AND THE YEA R OF APPLICABILITY WILL DEPEND UPON THE LANGUAGE USED IN THE AMENDING PROVISIONS. IN THIS CASE THE LANGUAGE OF THE AMENDED PROVISION OF SECTION 74 APPLICABLE FROM ASSESSMENT YEAR 2003-04 PROVIDES THAT LOSS COMPUTED UNDER THE HEAD CAPITAL GAIN IN RESPECT OF ANY ASSESSMENT YEAR WILL BE GOVERNED B Y THE AMENDED PROVISIONS. IT DOES NOT REFER TO ONLY THE LOSS COMPUTED FOR THE A.Y. 2003-04 AND ONWARDS. THEREFORE, THE P LEA OF THE LEARNED AR THAT THE AMENDED PROVISIONS WILL APPLY O NLY TO THE LOSSES COMPUTED FOR THE FIRST TIME IN A.Y. 2003-04 CANNOT BE ITA 3307 /MUM/2009 KOMAF FINANCIAL SERVICES LIMITED, 4 ACCEPTED. ANOTHER REASON FOR REJECTING THE PLEA OF THE ASSESSEE IS THAT AS PER SCHEME OF CARRY FORWARD, LOSSES ARE CAR RIED FORWARD FROM YEAR TO YEAR TO BE SET OFF AGAINST INCOME IF A NY OF THAT YEAR, WHICH MEANS THAT ONCE A LOSS HAS BEEN CARRIED FORWA RD TO A PARTICULAR YEAR, IT BECOMES LOSS OF THAT YEAR BECAU SE ONLY THEN IT CAN BE SET OFF AGAINST INCOME IF ANY OF THAT YEAR, WHICH MEANS THAT ONCE A LOSS HAS BEEN CARRIED FORWARD TO A PART ICULAR YEAR, IT BECOMES LOSS OF THAT YEAR BECAUSE ONLY THEN IT CAN BE SET OFF AGAINST INCOME OF THAT YEAR. THEREFORE ONCE THE LO SS HAS BEEN CARRIED FORWARD TO A PARTICULAR YEAR, IT BECOMES LO SS OF THAT YEAR BECAUSE ONLY THEN IT CAN BE SET OFF AGAINST INCOME OF THAT YEAR. THEREFORE ONCE THE LOSS HAS BEEN CARRIED FORWARD TO A PARTICULAR YEAR, ITS SET OFF AND FURTHER CARRY FORWARD WOULD B E GOVERNED BY THE PROVISIONS APPLICABLE FOR THAT YEAR. 3.4 THE POSITION IS SIMILAR TO CASE OF RELIANCE JUT E AND INDUSTRIES LTD. (SUPRA). IN THAT CASE UNDER THE UN AMENDED PROVISIONS OF SECTION 24(2) OF THE ACT OF 1922, THE BUSINESS LOSS COULD BE CARRIED FORWARD FROM YEAR TO YEAR TILL IT WAS FULLY ABSORBED. BUT THE PROVISIONS OF SECTION 24(2) WERE AMENDED FROM ASSESSMENT YEAR 1957-58 AND AS PER THE AMENDED PROV ISIONS, LOSS COULD BE CARRIED FORWARD AND SET OFF ONLY UP T O 8 YEARS. IT WAS HELD BY THE SUPREME COURT THAT WHEN ASSESSMENT FOR THE YEAR 1960-61 WAS BEING MADE AND SECTION 24(2) WAS I NVOKED IT WAS SECTION 24(2) IN FORCE IN THAT YEAR WHICH WAS A PPLICABLE AND THEREFORE THE UNABSORBED LOSS OF ASSESSMENT YEAR 19 50-51, COULD BE CARRIED FORWARD ONLY UPTO 8 YEARS AND THUS COULD NOT BE SET OFF AGAINST INCOME FOR ASSESSMENT YEAR 1960-61. SIMILA RLY, WHILE DEALING WITH ASSESSMENT FOR A.Y. 2003-04, IT IS THE SECTION 74 IN FORCE IN THAT YEAR WHICH WILL BE APPLICABLE. AS PE R THE AMENDED PROVISIONS OF SECTION 74 APPLICABLE FROM ASSESSMENT YEAR 2003- 04 LONG TERM CAPITAL LOSS FOR ANY ASSESSMENT YEAR COULD BE CARRIED FORWARD AND SET OFF ONLY AGAINST LONG TERM CAPITAL GAIN IN ITA 3307 /MUM/2009 KOMAF FINANCIAL SERVICES LIMITED, 5 THE SUBSEQUENT YEAR. THEREFORE WHILE DEALING WITH CARRY FORWARD AND SET OFF OF LOSSES IN A.Y. 2003-04, LOSS COMPUTE D FOR ANY ASSESSMENT YEAR WILL BE GOVERNED BY THE AMENDED PRO VISIONS APPLICABLE FROM A.Y. 2003-04. WE ARE THUS OF THE C ONSIDERED OPINION THAT LONG TERM CAPITAL LOSS OF 2000-01 COUL D BE SET OFF ONLY AGAINST LONG TERM CAPITAL GAIN IN ASSESSMENT YEAR 2 003-04 IN WHICH THE AMENDED PROVISIONS WERE APPLICABLE. WE A CCORDINGLY SEE NO INFIRMITY IN THE ORDER OF CIT (A) HOLDING TH AT THE CARRIED FORWARD LONG TERM LOSS OF ASSESSMENT YEAR 2000-01 C OULD NOT BE SET OFF AGAINST THE SHORT TERM CAPITAL GAIN FOR ASS ESSMENT YEAR 2003-04. ACCORDINGLY, THE ORDER OF CIT (A) IS UPHE LD. 5. AS THERE IS NO CHANGE IN THE FACTS THIS YEAR, HE NCE, NO REASON TO DIFFER FROM THE VIEW TAKEN BY THE TRIBUNAL IN ASSES SEES OWN CASE FOR THE A.Y. 2003-04. WE, ACCORDINGLY, FOLLOWING THE O RDER OF THE TRIBUNAL IN ASSESSEES OWN CASE, CONFIRM THE ORDER OF THE LD . CIT (A). ACCORDINGLY, GROUNDS IN THIS APPEAL ARE DISMISSED. 6. IN THE RESULT, ASSESSEES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 2 8TH SEPTEMBER 2011. SD/- SD/- ( P.M. JAGTAP ) ACCOUNTANT MEMBER ( R.S. PADVEKAR ) JUDICIAL MEMBER MUMBAI, DATED : 28TH SEPTEMBER 2011 COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A) -III, MUMBAI. 4) THE CIT-III, MUMBAI. 5) THE D.R. G BENCH, MUMBAI. BY ORDER / / TRUE COPY / / ASSTT. REGISTRAR I.T.A.T., MUMBAI ITA 3307 /MUM/2009 KOMAF FINANCIAL SERVICES LIMITED, 6 *CHAVAN SR.N. EPISODE OF AN ORDER DATE INITIALS CONCERNED 1 DRAFT DICTATED ON 15.09.2011 SR.PS 2 DRAFT PLACED BEFORE AUTHOR 19.09.2011 SR.PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5 APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/PS 6 KEPT FOR PRONOUNCEMENT ON SR.PS/PS 7 FILE SENT TO THE BENCH CLERK SR.PS/PS 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER