M.K. CREATIONS, MUMBAI V. ITO WD 14(1)(3), MUMBAI

ITA 3885/MUM/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 1437 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 10 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-04-2017
• Appeal Filed By: Assessee
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 29-05-2014
• Court: TRIBUNAL
• Department Lawyers: SUMAN KUMARDR
• Assessee Lawyers: SHANKARLAL JAIN
• Keywords: Business income
• Section: 143(3); 37(1); 28

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES B, MUMBAI , , , BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER, AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER ITA NO.3885/MUM/2014 ASSESSMENT YEARS: 2010-11 M/S M.K. CREATIONS, C/O- SHANKARLAL JAIN & ASSOCIATES, 12, ENGINEER BUILDING, 265, PRINCESS STREET, MUMBAI-400002 / VS. INCOME TAX OFFICER WARD-14(1)(3), EARNEST HOUSE, NARIMAN POINT, MUMBAI-400021 ( ! /ASSESSEE) ( & / REVENUE) PA NO.:-AAAFM2004J ! / ASSESSEE BY SHRI SHANKARLAL JAIN & / REVENUE BY SHRI SUMAN KUMAR-DR ' &( ) ! * / DATE OF HEARING : 06/04/2017 ) ! * / DATE OF ORDER: 07/04/2017 ITA NO.3885/MUM/2014 M/S M. K. CREATIONS 2 / O R D E R PER JOGINDER SINGH (JUDICIAL MEMBER) THE ASSESSEE IS AGGRIEVED BY THE IMPUGNED ORDER DA TED 10/04/2014 OF THE LD. FIRST APPELLATE AUTHORITY, MU MBAI. THE FIRST GROUND RAISED BY THE ASSESSEE PERTAINS TO CONFIRMING NOT SETTING OFF CARRIED FORWARD BUSINESS LOSS OF RS.27,08,953/- AGAINST PROFIT EARNED BY THE ASSESSE E ON SALE OF DEPRECIABLE ASSET U/S 50 OF THE INCOME TAX ACT, 1961 (HEREINAFTER THE ACT). 2. AT THE OUTSET, THE LD. COUNSEL FOR THE ASSESSEE , SHRI SHANKARLAL JAIN, CLAIMED THAT THE IMPUGNED ISS UE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION O F THE TRIBUNAL IN THE CASE OF DIGITAL ELECTRONICS LTD. VS CIT (135 TTJ (MUMBAI) 419), ACIT VS NIRMAL PLASTICS INDUSTRI ES (ITA NO.6428/MUM/2009), SHRI PADMAWATI SHRINIVASA COTTON GINNING & PROCESSING FACTORY VS DCIT 125 TTJ 411 (VISHKAHA.) IT WAS ALSO CONTENDED THAT THE NATURE O F INCOME IS TO BE DECIDED ON COMMERCIAL PRINCIPLES AND NOT B ASED ON CLASSIFICATION OF INCOME U/S 14 OF THE ACT FOR WHIC H RELIANCE WAS PLACED UPON THE DECISION IN CIT VS COCANADA RADHASWAMY BANK LTD. 57 ITR 306 (SC), CIT VS RAMNAT H GOENKA 259 ITR 26 (MAD.), CIT VS EXCELLENT COMMERCI AL ENTERPRICES AND INVESTMENT LTD. 282 ITR 423 (DEL.), SOUTHERN TRAVELS VS ACIT 232 TAXMAN 689 (DEL.) AND LAVISH APARTMENT PVT. LTD. VS ACIT 210 TAXMAN 9 (DEL.). ON THE OTHER HAND, SHRI SUMAN KUMAR, LD. DR, DEFENDED THE ITA NO.3885/MUM/2014 M/S M. K. CREATIONS 3 ADDITION CONFIRMED BY THE LD. COMMISSIONER OF INCOM E TAX (APPEAL). 2.1. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE FACTS , IN BRIEF, ARE THAT THE ASSESSEE DECLARED INCOME OF RS.13,14,1 10/- IN ITS RETURN, WHICH WAS COMPLETED U/S 143(3) OF THE A CT ON 28/03/2013 AT AN INCOME OF RS.44,90,720/-. THE ASSE SSEE EARNED SHORT TERM CAPITAL GAIN ON SALE OF DEPRECIAB LE ASSET U/S 50 OF THE ACT, WHICH WAS SET OFF AGAINST CARRY FORWARD BUSINESS LOSS OF RS.27,08,953/-. THE LD. ASSESSING OFFICER DISALLOWED THE CLAIM OF THE ASSESSEE ON THE PLEA TH AT THE CASE RELIED UPON BY THE ASSESSEE IN DIGITAL ELECTRO NICS LTD. (SUPRA) HAS NOT BEEN ACCEPTED BY THE DEPARTMENT AND APPEAL HAS BEEN FILED BEFORE THE HON'BLE HIGH COURT . IT IS ALSO NOTED THAT THE LD. COMMISSIONER OF INCOME TAX (APPEAL) ALSO CONFIRMED THE ADDITION ON THE GROUND THAT THE BANGALORE BENCH IN THE CASE OF KAMPLI COOPERATIVE S UGAR FACTORY LTD. VS ACIT 83 ITD 406 (BANG.) AND RAJKOT BENCH OF THE TRIBUNAL IN THE CASE OF MASTER SILK MILLS PV T. LTD. VS DCIT (2001) 77 ITD 530 (RAJKOT) HAS TAKEN CONTRARY DECISION. 2.2. IF THE OBSERVATION MADE IN THE ASSESSMENT ORD ER, LEADING TO ADDITION MADE TO THE TOTAL INCOME, CONCL USION DRAWN IN THE IMPUGNED ORDER, MATERIAL AVAILABLE ON RECORD, ASSERTIONS MADE BY THE LD. RESPECTIVE COUNSEL, IF K EPT IN JUXTAPOSITION AND ANALYZED, IN VIEW OF THE ABOVE, WE ARE ITA NO.3885/MUM/2014 M/S M. K. CREATIONS 4 REPRODUCING HEREUNDER THE RELEVANT PORTION OF THE O RDER FROM THE DECISION OF THE CO-ORDINATE MUMBAI BENCH I N THE CASE OF DIGITAL ELECTRONICS LTD. VS CIT (SUPRA) FOR READY REFERENCE AND ANALYSIS:- 6. IN GROUND NO.2, THE ASSESSEE IS AGGRIEVED THAT THE CIT (A) ERRED IN UPHOLDING THE ORDER OF THE AO AND NOT ALLOWING T HE ASSESSEE THE SET OFF THE BROUGHT FORWARD BUSINESS LOSS OF EARLIE R YEARS OF `` 39,85,596/- AGAINST THE PROFIT REALIZED ON SALE OF BUSINESS ASSETS. 7. AS FAR AS THIS GROUND OF APPEAL IS CONCERNED, TH E RELEVANT MATERIAL FACTS ARE LIKE THIS. IN THE COURSE OF ASSESSMENT PR OCEEDINGS, THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAS SET O FF BROUGHT FORWARD LOSSES AMOUNTING TO RS .39,85,596/- AGAINST SHORT T ERM CAPITAL GAINS ON SALE OF FACTORY BUILDING AND PLANT & MACHINERY. THE ASSESSING OFFICER WAS OF THE VIEW THAT IN TERMS OF THE PROVIS IONS OF SECTION 72, WHICH GOVERNS THE CARRY FORWARD AND SET OFF OF BUSI NESS LOSSES, SO MUCH OF THE CARRY FORWARD LOSSES AS CANNOT BE SET O FF AGAINST ANY PROFITS AND GAINS OF BUSINESS HAS TO BE CARRIED FOR WARD TO THE FOLLOWING YEAR UPTO EIGHT ASSESSMENT YEARS. THE CAR RY FORWARD BUSINESS LOSSES CANNOT BE SET OFF AGAINST ANY OTHER HEAD OF INCOME OTHER THAN PROFITS AND GAINS OF BUSINESS OR PROFESS ION. IT WAS IN THIS BACKDROP OF THESE OBSERVATIONS BY THE ASSESSING OFF ICER, THAT THE ASSESSEE WAS REQUIRED TO SHOW CAUSE AS TO WHY BROUG HT FORWARD BUSINESS LOSSES AMOUNTING TO RS. 39,85,596/- SHOULD NOT BE ALLOWED TO BE SET OFF AGAINST SHORT TERM CAPITAL GAINS ON S ALE OF PLANT AND MACHINERY AND FACTORY BUILDING. THE EXPLANATION OF THE ASSESSEE WAS AS FOLLOWS: 1. DURING THE YEAR, OUR CLIENT HAD SOLD THE FACTOR Y BUILDING ALONG WITH PLANT AND MACHINERY/FURNITURE AND FIXTURE LYING THE REIN FOR A SUM OF RS.1,75,00,000. ON THE ABOVE SALE OUR CLIENT HAD MA DE A PROFIT OF `. 1,56,41,001. AGAINST THE SAID PROFIT, UNABSORBED DE PRECIATION OF THE PREVIOUS YEAR AMOUNTING TO RS. 47,83,368 WAS SET OF F. 2. FURTHER, AS THIS WAS A PROFIT REALIZED ON SALE O F BUSINESS ASSETS, THE SAID PROFIT BEING BUSINESS INCOME, UNABSORBED BUSIN ESS LOSS WAS SET ITA NO.3885/MUM/2014 M/S M. K. CREATIONS 5 OFF AGAINST THE SAID PROFIT. IT IS SUBMITTED THAT P RIOR TO INSERTION OF SECTION 50, THE SALE OF FACTORY BUILDING/PLANT AND MACHINERY/FURNITURE AND FIXTURE WAS COVERED BY SECTION 41(2) WHEREIN TH E EXCESS OF SALE PROCEEDS OVER THE WRITTEN DOWN VALUE WAS TREATED AS SECTION 41(2) PROFITS AND THE LOSS, IF ANY, WERE TREATED AS BALAN CING CHARGE/TERMINAL ALLOWANCE WHILE COMPUTING INCOME FROM BUSINESS. APP LYING THE SAME YARDSTICK, IT IS SUBMITTED THAT THE PROFITS/LOSS ON SALE OF FACTORY BUILDING/PLANT AND MACHINERY/FURNITURE AND FIXTURE IS TO BE TREATED AS BUSINESS INCOME. IT IS THEREFORE, SUBMITTED THAT TH E GAINS, IF ANY, ARISING ON SALE OF PLANT AND MACHINERY IS TO BE TRE ATED AS FORMING PART OF BUSINESS INCOME. 3. THOUGH THE PROFIT REALIZED ON SALE OF BUSINESS A SSET IS ASSESSABLE ON SECTION 50 AS SHORT TERM CAPITAL GAIN DUE TO SCH EME OF TAXATION AND DUE TO ARTIFICIAL CLASSIFICATION UNDER DIFFEREN T HEADS FOR THE PURPOSE OF COMPUTATION OF INCOME AS PER PROVISIONS OF SECTION 14 OF THE ACT, THE INCOME REALIZED ON THE SALE OF BUSINES S ASSET HAS TO BE TREATED AS FORMING PART OF BUSINESS INCOME. 4. IN THIS REGARDS, WE WISH TO SUBMIT THAT THE SCHE ME OF THE INCOME TAX ACT IS THAT INCOME TAX IS ONE TAX. SECTION 14 O F THE INDIAN INCOME TAX ACT, 1961, CLASSIFIES THE TAXABLE INCOME UNDER DIFFERENT HEAD FOR THE PURPOSE OF COMPUTATION OF THE NET INCOME OF THE ASSESSEE. THOUGH, FOR THE PURPOSE OF COMPUTATION OF THE INCOM E, PROFIT ON SALE OF DEPRECIABLE ASSETS IS SEPARATELY CLASSIFIED, THE SAID PROFIT ON SALE OF ASSETS DOES NOT CEASE TO BE PART OF INCOME FROM BUS INESS IF THE ASSETS ARE PART OF THE BUSINESS ASSETS. WHETHER A P ARTICULAR INCOME IS A PART OF THE INCOME FROM A BUSINESS FALLS TO BE DE CIDED NOT ON THE BASIS OF THE PROVISIONS OF SECTION 14 BUT ON COMMER CIAL PRINCIPLES. RELIANCE IN THIS REGARD IS PLACED ON DECISIONS OF S UPREME COURT IN THE CASE OF CIT V. COCANADA RADHASWAMI BANK LTD.(1965) 57 ITR 306. 5. IT IS ALSO SUBMITTED THAT THE HEADS OF INCOME DE SCRIBED IN SECTION 14 OF THE INDIAN INCOME TAX ACT, 1961 AND FURTHER E LABORATED FOR THE PURPOSES OF COMPUTATION IN VARIOUS SECTIONS ARE INT ENDED MERELY TO INDICATE THE CLASSES OF INCOME. THE HEADS DO NOT EX HAUSTIVELY DELIMIT SOURCES FROM WHICH ARISES. BUSINESS INCOME IS BROKE N UP UNDER DIFFERENT HEADS ONLY FOR THE PURPOSE OF COMPUTATION OF THE TOTAL INCOME. BY THAT BREAKING UP THE INCOME DOES NOT CEA SE TO BE THE INCOME OF THE BUSINESS, THE DIFFERENT HEADS OF INCO ME BEING ONLY THE CLASSIFICATION PRESCRIBED BY THE INCOME TAX ACT FOR COMPUTATION. RELIANCE IN THIS REGARD IS PLACED ON DECISIONS OF S UPREME COURT IN CASE OF CIT V. CHUGANDAS AND CO.(1965) 055 ITR 0017 . 6. RELYING ON THE ABOVE DECISIONS, ITAT, MUMBAI IN THE CASE OF J.K. CHEMICALS LTD. V ACIT,33 BCAJ (APRIL 2001) PAGE 36, ON AN IDENTICAL FACTS AND CIRCUMSTANCES, HAS HELD THAT THE PROFIT R EALIZED ON SALE OF BUSINESS ASSET THOUGH ASSESSABLE UNDER THE HEAD SH ORT TERM CAPITAL GAIN, IS BUSINESS INCOME AND HENCE, THE BROUGHT FO RWARD BUSINESS ITA NO.3885/MUM/2014 M/S M. K. CREATIONS 6 LOSSES SHOULD BE SET OFF AS PER THE PROVISION OF SE CTION 72 OF THE INCOME TAX ACT. 7. IN VIEW OF THE ABOVE, THE ASSESSEE, RELYING ON T HE ABOVE DECISIONS OF SUPREME COURT AND THE MUMBAI TRIBUNAL, HAS CORRE CTLY TREATED THE INCOME ARISING ON SALE OF BUSINESS ASSES AS BUSINES S INCOME AND HAS CORRECTLY SET OFF BROUGHT FORWARD THE BUSINESS LOSS OF RS. 39,85,596/- AGAINST THE PROFIT REALISED ON SALE OF BUSINESS ASSETS VIZ FACTORY BUILDING/PLANT AND MACHINERY/FURNITURE AND FIXTURE. 8. THE ASSESSING OFFICER, HOWEVER, WAS NOT IMPRESSE D BY ANY OF THESE SUBMISSIONS. HE WAS OF THE VIEW THAT THE PROV ISIONS OF SECTION 72 ARE VERY CLEAR THAT BROUGHT FORWARD BUSI NESS LOSSES CAN ONLY BE SET OFF AGAINST PROFITS AND GAINS OF BUSINE SS OR PROFESSION AND, THEREFORE, BROUGHT FORWARD BUSINESS LOSSES OF RS. 39,85,596/- CANNOT BE ALLOWED TO SET OFF AGAINST SHORT TERM CAP ITAL GAINS. HE, THUS, DECLINED TO SET OFF THE CLAIM OF THE ASSESSEE . AGGRIEVED BY THE STAND OF THE AO, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT (A) BUT WITHOUT ANY SUCCESS. THE CIT (A) UP HELD THE STAND OF THE ASSESSING OFFICER AND OBSERVED THAT THERE IS NO AMBIGUITY IN SECTION 72 AND IT CANNOT BE SAID THAT THE SALE OF C APITAL ASSET WILL RESULT INTO CAPITAL GAINS AND THE INCOME EARNED SHA LL BE TREATED UNDER THE HEAD CAPITAL GAINS AND NOT INCOME FROM B USINESS. AS REGARDS THE ASSESSEES SUBMISSIONS PLACING RELIANCE ON THE PROVISIONS OF ERSTWHILE SECTION 41(2), THE CIT (A) OBSERVED THAT THIS PLEA IS MEANINGLESS AND THE PROVISIONS OF SECT ION 50 ARE APPLICABLE TO ASSESSEES CASE. REFERENCE WAS ALSO M ADE ON THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE C ASE OF CIT V. MILLIND TRADING CO. P.LTD., 76 TAXMAN 389, HOLDING THAT THERE IS NO PROVISION WHICH GIVE OPTION TO THE ASSESSEE TO S HOW THE PROFIT AS INCOME FROM ONE SOURCE AND CARRY FORWARD A LOSS FROM OTHER SOURCE OF INCOME TO THE NEXT YEAR. THE CIT (A) ALSO REFERRED TO THE JUDGEMENT OF THE HONBLE SUPREME COURT IN THE CASE OF CIT V. URMILA RAMESH, 96 TAXMAN 533 (SC), HOLDING THAT PRO VISIONS OF SECTION 41(2) AS ALSO SECTION 50 CANNOT APPLY TO TH E SAME AMOUNT. IT WAS IN THIS BACKDROP THAT THE CIT (A) CONCLUDED THAT THE INCOME WHICH IS TO BE ASSESSED UNDER THE HEAD CAPITAL GAI NS CANNOT BE SET OFF AGAINST BUSINESS LOSSES ONLY BECAUSE IT HAS BEEN GENERATED FROM THE SALE OF BUSINESS ASSETS. THE ACTION OF THE ASSESSING ITA NO.3885/MUM/2014 M/S M. K. CREATIONS 7 OFFICER WAS THUS UPHELD AND IN FACT FORTIFIED BY TH E CIT(A). THE ASSESSEE IS AGGRIEVED AND IS IN APPEAL BEFORE US. 9. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. SECTION 72 OF THE INCOME TAX ACT, INTER ALIA, PROVIDES THAT WHERE FOR ANY ASSESSMENT YEAR, 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 SPECULATION BUSINESS, AND SUCH LOSS CANNOT BE OR IS NOT WHOLLY SET OFF AGAINST INCOME UNDER ANY HEAD OF INCOME IN ACCORDANCE WITH THE PROVISIONS OF SECTION 71, SO MUCH OF THE L OSS AS HAS NOT BEEN SO SET OFF OR, WHERE HE HAS NO INCOME UNDER AN Y OTHER HEAD, THE WHOLE LOSS SHALL, SUBJECT TO THE OTHER PROVISIO NS OF THIS CHAPTER, BE CARRIED FORWARD TO THE FOLLOWING ASSESS MENT YEAR AND, - (I) IT SHALL BE SET BE OFF AGAINST THE PROFITS AN D GAINS, IF ANY, OF ANY BUSINESS OR PROFESSION CARRIED ON BY HIM AND AS SESSABLE FOR THAT ASSESSMENT YEAR .. . IT IS THUS CLEAR THAT SECTION 72 OF THE ACT PROVIDES THAT WHERE FOR ANY ASSESSMENT YEAR , THE NET RESULT OF THE COMPUTATION UNDER THE HEAD PROFITS AND GAIN S OF BUSINESS 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 INCOME IN ACCORDANCE WITH THE PROVISIONS OF SECTION 71, SO MUCH OF THE L OSS AS HAS NOT BEEN SO SET OFF IS TO BE CARRIED FORWARD TO THE FOL LOWING ASSESSMENT YEAR AND IS ALLOWABLE FOR BEING SET OFF AGAINST TH E PROFITS, IF ANY, OF THAT BUSINESS OR PROFESSION CARRIED ON BY HIM AN D ASSESSABLE FOR THAT ASSESSMENT YEAR. IT IS THUS FOR SETTING OFF T HE INCOME THAT WHILE THE LOSS TO BE CARRIED FORWARD HAS TO BE UNDE R THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION, THE GAINS AGAINST WHICH SUCH LOSS CAN BE SET OFF, HAS TO BE PROFITS O F ANY BUSINESS OR PROFESSION CARRIED ON BY HIM AND ASSESSABLE IN T HAT ASSESSMENT YEAR. IN OTHER WORDS, THERE IS NO REQUIREMENTS OF T HE GAINS BEING TAXABLE UNDER THE HEAD PROFITS AND GAINS OF BUSINE SS OR PROFESSION AND THUS, AS LONG AS GAINS ARE OF ANY BUSINESS OR PROFESSION CARRIED ON BY THE ASSESSEE AND ASSESSABL E TO TAX FOR THAT ASSESSMENT YEAR, THE SAME CAN BE SET OFF AGAI NST LOSS UNDER ITA NO.3885/MUM/2014 M/S M. K. CREATIONS 8 THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSIO N CARRIED FORWARD FROM EARLIER YEARS. IN THE CASE OF CIT V. C OCANADA RADHASWAMI BANK LTD(SUPRA), THEIR LORDSHIPS OF THE HONBLE SUPREME COURT TOOK NOTE OF THIS DISTINCTION AND THE IMPLICATIONS OF THESE PROVISION REGARDING CARRY FOREWARD AND SET OF F OF BUSINESS LOSS. IT WAS NOTED BY THE HONBLE SUPREME COURT THA T WHILE ONE SET OF PROVISIONS, I.E. THE NATURE OF LOSS INCURRED BY THE ASSESSEE, CLASSIFIES THE SAME ON THE BASIS OF INCOME BEING TA XABLE UNDER A PARTICULAR HEAD FOR THE PURPOSE OF COMPUTATION OF T HE NET INCOME, THE OTHER SET OF PROVISIONS IS CONCERNED, ONLY WITH THE NATURE OF GAINS BEING FROM BUSINESS AND NOT WITH THE HEAD OF TAX. THEIR LORDSHIPS HELD THAT AS LONG AS THE PROFITS AND GAIN S ARE IN THE NATURE OF BUSINESS PROFITS AND GAINS, AND EVEN IF T HESE PROFITS ARE LIABLE TO BE TAXED UNDER A HEAD OTHER THAN INCOME F ROM BUSINESS AND PROFESSION, THE LOSS CARRIED FORWARD CAN BE SET OFF AGAINST SUCH PROFITS OF THE ASSESSEE. IN THIS VIEW OF THE M ATTER, THE OBJECTION RAISED BY THE AUTHORITIES BELOW, IN OUR H UMBLE UNDERSTANDING, ARE DEVOID OF ANY LEGAL SUBSTANCE. C OMING TO THE JUDICIAL PRECEDENTS CITED BY THE CIT (A), WE FIND T HAT IN THE CASE OF MILLIND TRADING CO. P.LTD, 211 ITR 690 (SUPRA), THE IR LORDSHIPS WERE CONCERNED WITH THE QUESTION WHETHER OR NOT THE ASSESSEE HAD OPTION OF NOT SETTING OFF THE LOSSES INCURRED AGAIN ST THE INCOME FROM DIFFERENCE SOURCES UNDER THE HEAD BUSINESS IN COME. THE ISSUE WAS THUS CONFINED TO THE QUESTION AS TO HOW T HE TOTAL INCOME FOR A PARTICULAR ASSESSMENT YEAR IS TO BE COMPUTED. THIS DECISION HAS NO BEARING ON THE ISSUE IN APPEAL BEFORE US. SO FAR AS THE HONBLE SUPREME COURT JUDGEMENT IN THE CASE OF CIT V. URMILA RAMESH (SUPRA) IS CONCERNED, IT WILL HAVE NO BEARIN G ON THE ISSUE BEFORE US, BECAUSE IT REFERS TO SIMULTANEOUS APPLIC ATION OF SECTION 41(2) AND SECTION 50 ON THE SAME AMOUNT. IN CONTRAS T TO THAT POSITION, THE SHORT REFERENCE TO SECTION 41(2) IN T HE PRESENT CASE IS TO SHOW THE NATURE OF INCOME IN CONTRADISTINCTION W ITH THE HEAD UNDER WHICH IT IS TO BE ASSESSED. REVENUE THUS DOES NOT DERIVE ANY ADVANTAGE FROM THIS DECISION. IN VIEW OF THESE DISC USSIONS AND AS ALSO BEARING IN MIND THE ENTIRETY OF THE CASE, WE A RE OF THE CONSIDERED VIEW THAT THE INCOME EARNED IN THE YEAR BEFORE US, ITA NO.3885/MUM/2014 M/S M. K. CREATIONS 9 ALTHOUGH NOT TAXABLE AS PROFITS AND GAINS FROM BUS INESS AND PROFESSION WAS AN INCOME IN THE NATURE OF INCOME O F BUSINESS NEVERTHELESS. THE ASSESSEE WAS, THEREFORE, INDEED J USTIFIED IN CLAIMING THE SET OFF OF BUSINESS LOSSES AGAINST THE INCOME OF CAPITAL GAINS. WE UPHOLD THE GRIEVANCE OF THE ASSESSEE AND DIRECT THE AO TO GRANT THE SET OFF. THE ASSESSEE GET RELIEF ACCOR DINGLY. 10. GROUND NO.2 IS THUS ALLOWED. 2.3. WE FIND THAT IN THE AFORESAID ORDER, THE TRIB UNAL REACHED TO A PARTICULAR CONCLUSION BY PLACING RELIA NCE UPON THE DECISION FROM HON'BLE APEX COURT IN THE CASE OF CIT VS COCANADA RADHASWAMY BANK LTD. (1965) 57 ITR 306 (SC ), HON'BLE GUJARAT HIGH COURT IN CIT VS MILIND TRADING CO. PVT. LTD. (1994) 118 CTR (GUJ.) 154 AND THE DECISION IN CIT VS URMILA RAMESH (1998) 146 CTR (SC) 81 WAS DISTINGUIS HED. THE BENCH CONCLUDED THAT THE ASSESSEE IS ENTITLED T O SET OFF OF BROUGHT FORWARD BUSINESS LOSSES AGAINST THE CAPI TAL GAINS, THUS, THE OBSERVATION OF THE LD. COMMISSIONER OF IN COME TAX (APPEAL) THAT CONTRARY DECISION, MENTIONED IN T HE ORDER, WERE NOT CONSIDERED IS OF NO HELP TO THE REVENUE BE CAUSE, THE COORDINATE BENCH DULY CONSIDERED THE DECISIONS FROM HON'BLE GUJARAT HIGH COURT AS WELL AS HON'BLE APEX COURT. EVEN OTHERWISE, THE RATIO LAID DOWN IN THE ORDER OF THE TRIBUNAL IN THE CASE OF NIRMAL PLASTIC INDUSTRIES A ND SHRI PADMAVATI SHRINIVASA COTTON GINNING AND PROCESSING FACTORY (SUPRA) FURTHER SUPPORTS THE CASE OF THE AS SESSEE. RESPECTFULLY FOLLOWING THE AFORESAID DECISIONS, WE REVERSE THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEAL ) AND ALLOW THE APPEAL OF THE ASSESSEE ON THE ISSUE IN HA ND. ITA NO.3885/MUM/2014 M/S M. K. CREATIONS 10 3. THE NEXT GROUND RAISED BY THE ASSESSEE PERTAINS TO CONFIRMING THE DISALLOWANCE OF RS.1,91,280/-, CL AIMED AS BUSINESS LOSS/BAD DEBT. THE CRUX OF THE ARGUMENT IS IDENTICAL TO THE GROUND RAISED. THE LD. DR DEFENDED THE ADDITION. 3.1. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE FACTS , IN BRIEF, ARE THAT THE ASSESSEE HAD WRITTEN OF BAD DEBT AMOUN TING TO RS.90,35,880/- (INCLUDING THE BAD DEBT WRITTEN OFF AMOUNTING TO RS.87,78,922/- IN RESPECT OF M/S TATI SA, PARIS, FRANCE). THE ASSESSEE WAS ASKED TO FURNISH T HE COMPLETE DETAILS ALONG WITH SUPPORTING CORRESPONDEN CE ETC IN SUPPORT OF ITS CLAIM. THE ASSESSEE FILED THE DET AILS SHOWING THAT THE BAD DEBT WRITTEN OFF DURING THE FI NANCIAL YEAR 2009-10 RELEVANT TO ASSESSMENT YEAR 2010-11. T HE ASSESSEE WAS ASKED WITH RESPECT TO BAD DEBT WRITTEN OFF AMOUNTING TO RS.1,91,280/- IN RESPECT OF CERTAIN PA RTIES AS HAS BEEN DETAILED IN THE ASSESSMENT ORDER. THE ASSE SSEE VIDE LETTER DATED 21/03/2013 REPLIED AS UNDER:- WITH REFERENCE TO ASSESSEES CLAIM FOR WRITE OFF OF BAD DEBT AND DETAILS OF WRITTEN OFF OF RS.1,91,279/-, WE HAVE HO NOUR TO SUBMIT THAT ADVANCE GIVEN BY THE ASSESSEE DURING THE COURS E OF BUSINESS FOR BUSINESS TRANSACTIONS WHICH ADVANCE COULD NOT B E ADJUSTED AS THE PARTY DID NOT SUPPLY THE MATERIAL OR RAISED COU NTER CLAIM AGAINST THE ASSESSEE. THE NECESSARY DETAILS OF THE SAME IS ENCLOSED HEREWITH. THE SAID AMOUNT OF RS.1,91,279/ - WILL BE ALLOWABLE AS REDUCTION EITHER AS BUSINESS LOSS UNDE R PROVISION OF SECTION 28 READ WITH 37(1) OR AS BAD DEBT UNDER PRO VISION OF SECTION 36. ITA NO.3885/MUM/2014 M/S M. K. CREATIONS 11 3.2. IF THE OBSERVATION MADE IN THE ASSESSMENT ORD ER, LEADING TO ADDITION MADE TO THE TOTAL INCOME, CONCL USION DRAWN IN THE IMPUGNED ORDER, MATERIAL AVAILABLE ON RECORD, ASSERTIONS MADE BY THE LD. RESPECTIVE COUNSEL, IF K EPT IN JUXTAPOSITION AND ANALYZED, WE FIND THAT THE CASE O F THE ASSESSEE IS SQUARELY COVERED FROM THE DECISION OF T HE TRIBUNAL IN THE CASE OF ACIT VS M/S BANK OF BARODA FOR A.Y. 2005-06 (ITA NO.2927/MUM/2011 ETC.) ORDER DATED 25/07/2014. THE FOLLOWING CASES ALSO SUPPORTS THE C ASE OF THE ASSESSEE. I) SOUTH INDIAN BANK V/S CIT, 262 ITR 579 (KAR.); II) DCIT V/S CATHOLIC SYRIAN BANK LTD., 267 ITR 52, ITAT COCHIN SPECIAL BENCH; III) STATE BANK OF BIKANER & JAIPUR V/S DCIT, [2001 [ 74 ITD 203 (JAIPUR BENCH); IV) BANK OF BARODA V/S JCIT, ITAT B BENCH, MUMBAI , FOR A.Y. 199697, 199798 AND 200001; V) TRF LTD. V/S CIT, 323 ITR 397 (SC) AND VIJAYA BA NK V/S CIT (SC) 323 ITR 167. 2.3. EVEN OTHERWISE, IN VIEW OF THE AMENDMENT IN T HE TAXATION LAWS WITH EFFECT FROM 01 ST APRIL, 1989, THE REQUIREMENT OF DEMONSTRATING THAT THE DEBTS HAS BEC OME BAD HAS BEEN DISPENSED WITH AND ONLY REQUIREMENT RE MAINS THAT IT SHOULD BE WRITTEN OFF IN BOOKS OF ACCOUNT S OF THE ASSESSEE, WHICH HAS BEEN FURTHER CLARIFIED BY CBDT CIRCULAR NO.551 DATED 23/01/1990. OUR VIEW FIND SUPPORT FROM THE ITA NO.3885/MUM/2014 M/S M. K. CREATIONS 12 RATIO LAID DOWN IN CIT VS BRILLIANT TUTORIALS PVT. LTD. 292 ITR 399 (MAD.), CIT VS MORGAN SECURITIES AND CREDITS PV T. LTD. (210 CTR 336)(DEL.), DCIT VS OMAN INTERNATIONAL BAN K SAOG. (313 ITR 128)(BOM.), CIT VS STAR CHEMICALS (B OM.) PVT. LTD. 220 CTR 319 (BOM.), CIT VS GLOBAL CAPITAL LTD. 201 TAXATION 210 (DEL.), CIT VS M/S EXCEL FASHION PVT. LTD. (201 TAXATION 216)(DEL), CIT VS AUTO METERS LTD. 292 ITR 345 (DEL.). SO FAR AS, THE RELIANCE UPON THE DECISION I N KASHMIR TRADING COMPANY VS DCIT AND AHAMADABAD ELECTRICITY COMPANY LTD. (SUPRA), THE DECISION FROM HONBLE RAJ ASTHAN HIGH COURT AND GUJARAT HIGH COURT ARE CONCERNED, TH E HONBLE APEX COURT, LATER ON, IN T.R.F. LTD. VS CI T 323 ITR 397 (SC), CONSIDERING THE PROVISION OF SECTION 36(1 )(VII), PRIOR TO APRIL, 1, 1989 AND POST AMENDMENT HELD THAT IT I S NOT NECESSARY FOR THE ASSESSEE TO ESTABLISH THAT THE DE BT, IN FACT, HAS BECOME IRRECOVERABLE. MERE WRITTEN OFF IN ITS A CCOUNTS IS ENOUGH, THUS, FOLLOWING THE AFORESAID DECISION FROM HONBLE APEX COURT, WE ALLOW THE GROUND OF THE ASSESSEE. FINALLY, THE APPEAL OF THE ASSESSEE IS ALLOWED. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT IN THE PRESENCE OF LD. REPRESENTATIVES FROM BOTH SIDES AT THE CONCLUSION OF THE HEARING ON 06/04/2017. SD/- SD/- ( RAMIT KOCHAR ) (JOGINDER SINGH) ' # / ACCOUNTANT MEMBER $ # / JUDICIAL MEMBER MUMBAI; + DATED : 07/04/2017 ITA NO.3885/MUM/2014 M/S M. K. CREATIONS 13 F{X~{T? P.S / ,& !%$&'()(*& / COPY OF THE ORDER FORWARDED TO : 1. -./0 / THE APPELLANT 2. 12/0 / THE RESPONDENT. 3. 3 3 ' 4! ( -. ) / THE CIT, MUMBAI. 4. 3 3 ' 4! / CIT(A)- , MUMBAI 5. 5&61! , 3 -.*- 7 , ' / DR, ITAT, MUMBAI 6. 89 / GUARD FILE. ! / BY ORDER, 25.!1! //TRUE COPY// / (DY./ASSTT. REGISTRAR) , ' / ITAT, MUMBAI,