DHIREN PRAVINCHANDRA DALAL, MUMBAI V. DCIT CIR 14(2), MUMBAI

ITA 450/MUM/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 3489 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-06-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 08-05-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 20-01-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Earning of tax free income
• Section: 10AA; 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH D, MUMBAI BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND DR. S.T.M. PAVALAN, JUDICIAL MEMBER ITA NO. 450 /MUM/2012 ASSESSMENT YEAR: 2008-09 DHIREN P. DALAL PLOT NO. 33ABCD, GOVERNMENT INDUSTRIAL ESTATE, CHARKOP, KANDIVALI (W) MUMBAI 400 067 PAN: AABPD 5224 C VS. DCIT CIR 14(2) 3 RD FLOOR EARNEST HOUSE, NARIMAN POINT MUMBAI 400020 (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI DEEPAK TRALSHAWALA RESPONDENT BY : SHRI RAJARSHI DWIVEDY DATE OF HEARING : 08.05.2013 DATE OF PRONOUNCEMENT : 12.06.2013 O R D E R PER DR. S.T.M. PAVALAN, JM: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER OF THE LD.CIT(A) -25, MUMBAI DATED 21.10.2011 FOR THE ASSE SSMENT YEAR 2008-09. 2. THE ONLY ISSUE ARISING OUT OF THE GROUNDS OF APP EAL RELATES TO THE ADDITION OF RS.37,14,399/- MADE BY THE AO U/S 14A OF THE INCOME TAX ACT, THEREBY DISALLOWING THE SET OFF OF BUSINESS LOSS AS CLAIMED BY THE ASSE SSEE AND THE SAME CONFIRMED BY THE LD.CIT(A). 3. BRIEFLY STATED, THE ASSESSEE, AN INDIVIDUAL ENGA GED IN THE PROPRIETARY BUSINESS OF ROYAL HOME TEXTILES THROUGH SEZ UNIT AT SURAT HA D CLAIMED A SET OFF OF THE LOSES OF RS.37,14,399/- INCURRED IN RESPECT OF THE UNITS EXEMPTED U/S 10AA AGAINST THE INCOME FROM HOUSE PROPERTY, SHORT TERM CAPITAL GAIN AND INCOME FORM OTHER SOURCES. IN THE ASSESSMENT FRAMED U/S 143(3), THE AO DISALLO WED THE CLAIM OF THE ASSESSEE AS THE PROFITS AND GAINS OF THE PROPRIETARY BUSINES S ARE EXEMPTED U/S 10AA AND ON ITA NO. 450 /MUM/2012 DHIREN P. DALAL ASSESSMENT YEAR: 2008-09 2 THE SAME ANALOGY, LOSS FROM THE SAID UNITES REQUIRE D TO BE IGNORED BY NOTING THAT THE LOSS IS NOTHING BUT EXCESS OF EXPENDITURE OTHER INCOME, WHICH HAS NEXUS WITH THE EXEMPTED INCOME, THEREBY DISALLOWED THE SAME U/S 1 4A(I) AND MADE THE IMPUGNED ADDITION. ON APPEAL, THE LD.CIT(A) CONFIRMED THE AC TION OF THE AO ALMOST ON THE SIMILAR REASONS GIVEN BY THE AO. AGGRIEVED BY THE I MPUGNED ORDER, THE ASSESSEE IS IN APPEAL BEFORE US. 4. HAVING HEARD THE RIVAL SUBMISSIONS AND PERUSED T HE MATERIAL ON RECORD, IT IS PERTINENT TO MENTION THAT THE SOLITARY LEGAL ISSUE TO BE DECIDED BY US IS WHETHER THE LOSS SUFFERED IN RESPECT OF THE UNIT ELIGIBLE FOR D EDUCTION U/S 10AA IS ALLOWABLE TO BE SET OFF AND CARRIED FORWARD AGAINST THE INCOME UNDE R OTHER HEADS. IT IS RELEVANT TO NOTE THAT PLETHORA OF JUDICIAL DECISIONS SUPPORT TH E PROPOSITION THAT SECTION 10AA OF INCOME TAX ACT, THOUGH LISTED UNDER CHAPTER III OF THE ACT WHICH DEALS WITH INCOME WHICH DO NOT FORM PART OF TOTAL INCOME, IS A PROVI SION WHICH PROVIDES FOR DEDUCTION AND NOT EXEMPTION. GENERALLY, TWO KINDS OF SET OF F OF LOSSES NAMELY SET OFF WITHIN THE SAME HEAD OF INCOME OR INTER HEAD SET OFF (SECT ION 70) AND SET-OFF AGAINST OTHER HEADS OF INCOME OR INTRA HEAD SET-OFF (SECTION 71) ARE PROVIDED UNDER THE ACT. ACCORDING TO SECTION 71, IF THERE IS A NET RESULT O F LOSS IN RESPECT OF ANY HEAD OF INCOME DURING ANY ASSESSMENT YEAR, THE LOSS CAN BE SET OFF AGAINST THE INCOME OF ANY OTHER HEAD OF INCOME EXCEPT THE LOSS FROM SPECU LATION BUSINESS, LOSS UNDER THE HEAD CAPITAL GAIN, LOSSES FROM THE BUSINESS OF OWIN G AND MAINTAINING OF RACE LOSSES, LOSS FROM BUSINESS/PROFESSION CANNOT BE SET OFF AGA INST INCOME UNDER THE HEAD SALARIES, LOSS FROM EXEMPT INCOME AND ALSO NO LOSS CAN BE SET OFF AGAINST GAINS FROM WITHIN LOTTERIES, CROSSWORDS, PUZZLES, CARD GAMES O R OTHER GAMBLING UNDER SECTION 58(4) OF THE ACT. SECTION 10AA (6) STATES LOSS REF ERRED TO IN SUBSECTION (1) OF SECTION 72 OR SUB-SECTION (1) OR SUBSECTION (3) OF SECTION 74, IN SO FAR SUCH LOSS RELATES TO THE BUSINESS OF THE UNDERTAKING, BEING THE UNIT SHA LL BE ALLOWED TO BE CARRIED FORWARD OR SET OFF. THIS PROVISION RESTRICTS CARRY FORWARD AND SET OFF OF LOSS UNDER SECTIONS 72 & 74 BUT DOES NOT PROVIDE ANYTHING REGA RDING INTER-HEAD SET OFF U/S 70 AND INTRA HEAD SET OFF U/S 71 OF THE ACT. ADMITTEDL Y, THERE IS A LOSS OF RS.37,14,399/- IN THE UNIT ELIGIBLE FOR DEDUCTION U/S 10AA. AFTER SETTING OFF OF THE BUSINESS LOSS AGAINST THE BUSINESS INCOME IF THERE IS STILL A LOS S AND SUCH LOSS HAS TO BE SET-OFF ITA NO. 450 /MUM/2012 DHIREN P. DALAL ASSESSMENT YEAR: 2008-09 3 AGAINST INCOME FROM OTHER SOURCES IN THE SAME YEAR AS PER THE PROVISIONS OF SECTION 71 OF THE ACT. IN VIEW OF THE SAID LEGAL POSITION A S DISCUSSED, THE LOWER AUTHORITIES ARE NOT JUSTIFIED IN DISALLOWING THE CLAIM OF SET O FF OF LOSS INCURRED IN RESPECT OF AN ELIGIBLE UNIT U/S 10AA AGAINST THE INCOME UNDER THE OTHER HEADS. ALSO, SECTION 10AA BEING A PROVISION PROVIDES FOR DEDUCTION AND NOT FO R EXEMPTION, THE AUTHORITIES BELOW ARE NOT JUSTIFIED IN MAKING THE ADDITION BY I NVOKING SECTION 14A OF THE ACT. THEREFORE, WHILE WE DELETE THE IMPUGNED ADDITION OF RS.37,14,399/- MADE BY INVOKING SECTION 14A OF THE ACT, DIRECT THE AO TO A LLOW THE SET OFF OF BUSINESS LOSS U/S 71 OF THE ACT AS CLAIMED BY THE ASSESSEE. WE OR DER AND DIRECT ACCORDINGLY. 5. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON THIS 12 TH DAY OF JUNE, 2013. SD/- SD/- (P.M. JAGTAP) (DR. S.T.M. PAVALAN) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 12.06.2013. *SRIVASTAVA COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR D BENCH //TRUE COPY// BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.