ITO 9(3)(1), MUMBAI V. DESTIMONEY INDIA SERVICES P.LTD, MUMBAI

ITA 6165/MUM/2018

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 0485 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 4 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-03-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2013-2014
• Appeal Filed On: 29-10-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Sale consideration of property below Jantri Value; Capital asset; Business income; Depreciation; Unabsorbed depreciation; Set aside; Capital Gains
• Section: 50C; 72; 22

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI SHRI SHAMIM YAHYA (AM) & SHRI RAMLAL NEGI (JM) I.T.A. NO. 6165/MUM/2018 (ASSESSMENT YEAR 2013-14) ITO-9(3)(1) 419, 4 TH FLOOR AAYAKAR BHAVAN M.K. ROAD MUMBAI-400 020. VS. M/S. DESTIMONY INDIA SERVICES PRIVATE LIMITED 6 TH FLOOR, A-WING TECH WEB CENTRE NEW LINK ROAD JOGESHWARI WEST MUMBAI-400 102. PAN : AACCD1326K (APPELLANT) (RESPONDENT) ASSESSEE BY NONE DEPARTMENT BY SHRI BHARAT ANDHLE DATE OF HEARING 10.03.2021 DATE OF PRONOUNCEMENT 11.03.2021 O R D E R PER SHAMIM YAHYA (AM) :- THIS IS AN APPEAL BY THE REVENUE AGAINST THE ORDER OF LEARNED CIT(A) DATED 10.8.2018 PERTAINS TO A.Y. 2013-14. 2. THE GROUNDS OF APPEAL READ AS UNDER :- 'WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES, THE LD.C LT(A) IS JUSTIFIED IN ALLOWING THE SET-OFF OF CARRIED FORWARD BUSINESS LOS SES AGAINST SHORT TERM CAPITAL GAIN RAISED BY SELLING OF CAPITAL ASSETS WHI CH WERE NOT CONVERTED INTO STOCK-IN-TRADE AND COMPUTED AS PER SECTION 50C OF THE ACT, 1961 IN VIEW OF PROVISIONS OF SECTION 72 OF THE IT ACT, 1961?' THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(A) ON THE ABOVE GROUND BE SET ASIDE AND THAT OF THE ITO 9 (3) (1) BE RESTORED. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSING O FFICER IN THIS CASE OBSERVED THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS AS SESSEE WAS ASKED TO FURNISH THE COPY OF COMPUTATION OF TOTAL INCOME, CO PY OF BALANCE SHEET, COPY OF PROFIT AND LOSS ACCOUNT ETC. IT IS SEEN FROM THE CO MPUTATION OF TOTAL INCOME M/S. DESTIMONY INDIA SERVICES PRIVATE LIMITED 2 THAT THE ASSESSEE HAS SET OFF SHORT TERM CAPITAL GA INS ARISES OUT OF SALE OF DEPRECIABLE ASSETS. THAT THE ASSESSEE HAS NOT REFER RED ANY SPECIFIC PROVISIONS OF THE ACT UNDER WHICH THIS LOSS HAS BEEN SET OFF. THEREAFTER IN AN ORDER SHOWING COMPLETE ABSENCE OF APPLICATION OF MIND THE ASSESSING OFFICER REJECTED THE ASSESSEES CLAIM BY OBSERVING AS UNDER :- THE PROVISIONS OF THE ACT WHICH DEALS WITH THE CARR Y FORWARD AND SET OF OFF LOSSES IS AVAILABLE UNDER CHAPTER VI OF THE INCOME T AX ACT, 1961. CARRY FORWARD AND SET OFF OF BUSINESS LOSSES HAS BEEN DEALT UNDER T HE PROVISIONS OF SECTION 72 OF THE ACT UNDER THIS CHAPTER. ON CAREFUL CONSIDERATIO N OF THIS PROVISION IT IS SEEN THAT CARRIED FORWARD BUSINESS LOSSES OF EARLIER YEAR ARE ALLOWABLE TO BE SET OFF AGAINST THE CAPITAL GAINS OF ANY KIND MERE ARE NO OTHER PROVISIONS UNDER THE INCOME TAX ACT WHICH ALLOWS SUCH SET OFF. IN V I EW OF THIS FACT AND IN ABSENCE OF ANY SPECIFIC PROVISIONS UNDER THE ACT, THE CARRIED F ORWARD BUSINESS LOSSES OF A.Y-2010-11 SET OFF AGAINST SHORT TERM CAPITAL GAINS O N SALE OF DEPRECIABLE ASSETS IS ACCORDINGLY DENIED. 4. UPON ASSESSEES APPEAL LEARNED CIT(A) NOTED FOLL OWING SUBMISSION OF THE ASSESSEE :- THE APPELLANT FILED A WRITTEN SUBMISSION WHICH IS REP RODUCED IN PARA 3 OF THIS ORDER. THE APPELLANT PLACED RELIANCE ON SEC TION 72 OF INCOME TAX ACT 1961. FOR PROPER APPRECIATION OF FACTS, SECTION 72 IS REPRODUCED AS UNDER: '72(1) WHERE FROM ANY ASSESSMENT YEAR, THE NET RESULT OF THE COMPUTATION UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PR OFESSION' IS LOSS TO THE ASSESSEE, NOT BEING LOSS SUSTAINED IN A SPECULATION BU SINESS, AND SUCH LOSS CANNOT BE OR IS NOT WHOLLY SET OFF AGAINST INCOME UNDER ANY HEAD OF INCOME IN ACCORDANCE WITH THE PROVISIONS OF SEC. 71, SO MUCH O F THE LOSS AS HAS NOT BEEN SO SET OFF OR WHERE HE HAS NO INCOME UNDER ANY OTHER HEAD, THE WHOLE LOSS SHALL, SUBJECT TO THE OTHER PROVISIONS OF THIS CH APTER, BE CARRIED FORWARD TO THE FOLLOWING ASSESSMENT YEAR, AND - (I) IT SHALL BE SET OFF AGAINST THE PROFITS AND GAINS, I F ANY, OF ANY BUSINESS OR PROFESSION CARRIED ON BY HIM AND ASSESSABLE FOR THAT ASSESSMENT YEAR;.... 4.1.3. AFTER REFERRING SECTION 72 THE APPELLANT SUB MITTED THAT AS PER SECTION 72 OF THE ACT, THE LOSSES INCURRED UNDER THE HEAD 'PR OFITS AND GAINS OF BUSINESS OR PROFESSION' WHICH COULD NOT BE SET OFF AG AINST INCOME FROM ANY OTHER HEAD OF INCOME, HAVE TO BE CARRIED FORWARD TO TH E FOLLOWING AY AND CAN BE SET OFF 'AGAINST THE PROFITS, IF ANY, OF THAT BUSINE SS CARRIED ON BY THE ASSESSEE AND ASSESSABLE FOR THAT AY. 4.1.4. THE APPELLANT FURTHER SUBMITTED THAT SECTION 72 DID NOT MANDATE THAT THE INCOME THAT WAS SOUGHT TO BE ADJUSTED AGAINST THE BROU GHT FORWARD LOSS M/S. DESTIMONY INDIA SERVICES PRIVATE LIMITED 3 SHOULD BE THE ONE THAT IS TAXABLE UNDER THE HEAD /PROF ITS AND GAINS OF BUSINESS' ONLY. THERE WAS A DISTINCT DIFFERENCE IN TH E LANGUAGE EMPLOYED IN SECTION 72 IN THE CONTEXT OF THE LOSS THAT WAS TO BE C ARRIED FORWARD (WHERE THE LOSS UNDER THE PARTICULAR HEAD OF INCOME IS REFERRED TO), AS AGAINST THE CONTEXT OF THE LOSS, WHICH IT COULD BE SET-OFF AGAINS T (WHERE THE NATURE OF INCOME IS REFERRED TO). 4.1.5. THE APPELLANT CLAIMED THAT THE OFFICE PREMISES S OLD BY THE APPELLANT DURING THE YEAR WAS USED FOR ITS BUSINESS AND SINCE THE SAID CAPITAL ASSET WAS CONNECTED TO ITS BUSINESS, THE GAINS ARISING FROM SALE OF SUCH ASSETS HAD RIGHTLY BEEN SET-OFF BY THE APPELLANT AGAINST THE BROUGH T FORWARD BUSINESS LOSS. 4.1.6. IN SUPPORT OF ITS CLAIM THE APPELLANT PLACED RE LIANCE ON JUDGEMENT OF HONOURABLE MUMBAI ITAT IN CASE OF DIGITAL ELECTRONIC S LTD. V. ADDL. CIT (2010)(MUMBAI TRIBUNAL)(L6 TAXMANN.COM 316). THE FAC TS OF THE CASE CONSIDERED BY THE HONOURABLE TRIBUNAL WERE AS UNDER : > THE ASSESSEE CLAIMED SET-OFF OF BROUGHT FORWARD BU SINESS LOSS AND UNABSORBED DEPRECIATION AGAINST SHORT-TERM CAPITAL GA INS TAXABLE U/S 50 ARISING OUT OF SALE OF FACTORY BUILDING AND PLANT & M ACHINERY. > IT WAS CHIMED THAT THOUGH THE INCOME WAS TAXABLE AS CA PITAL GAINS, ITS CHARACTER REMAINED THAT OF BUSINESS INCOME IN AS MUC H AS THE GAINS AROSE ON TRANSFER OF A BUSINESS ASSET ON WHICH DEPRECIATION WAS ALLOWED. 4.1.7. AFTER CONSIDERING THE ARGUMENT OF REVENUE AND ASSESSEE THE LEARNED TRIBUNAL HELD AS UNDER: > AS PER SECTION 72, THE LOSSES INCURRED UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PROFESSION' WHICH COULD NOT BE SET OFF AG AINST INCOME FROM ANY OTHER HEAD OF INCOME, HAVE TO BE CARRIED FORWARD TO TH E FOLLOWING AY AND ARE ALLOWABLE FOR BEING SET-OFF AGAINST THE PROFITS, IF A NY, OF THAT BUSINESS OR PROFESSION CARRIED ON BY THE ASSESSEE AND ASSESSABL E FOR THAT AY. > THERE IS NO REQUIREMENT OF THE GAINS BEING TAXABLE UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PROFESSION' AND THUS, AS L ONG AS GAINS ARE 'OF ANY BUSINESS OR PROFESSION CARRIED ON BY THE ASSESSEE AN D ASSESSABLE TO TAX FOR THAT AY, THE SAME CAN BE SET OFF AGAINST LOSS UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION CARRIED FORWARD FRO M EARLIER YEAR. > THE GAIN ARISING ON SALE OF THE BUSINESS ASSETS IS IN THE NATURE OF BUSINESS INCOME, THOUGH IT IS TAXED UNDER THE HEAD 'CAPITAL GAIN S'. . >IN VIEW OF THE ABOVE, THE HON'BLE TRIBUNAL HAS HELD THAT THE BROUGHT FORWARD BUSINESS LOSSES CAN BE SET-OFF AGAINST THE CAPITAL GAI NS TAXABLE U/S 50 OF THE ACT. M/S. DESTIMONY INDIA SERVICES PRIVATE LIMITED 4 4.1.8. APPELLANT HAS ALSO PLACED RELIANCE ON JUDGEME NT OF HONOURABLE MUMBAI ITAT IN CASE OF M/S. HICKSON & DADAJEE PVT. LTD. V. ACIT [ITA NO. 5882 OF 2012, DATE OF ORDER-28 FEBRUARY 2014] AND L TO V. EVERSHINE PHARMACEUTICALS DISTRIBUTORS PVT. LTD. [ITA NO. 492 2 OF 2011, DATE OF ORDER - 22 AUGUST 2012] WHEREIN HONOURABLE TRIBUNAL HAD ALSO UPHELD THAT BROUGHT FORWARD BUSINESS LOSSES CAN BE SET OFF AGAINST THE CA PITAL GAINS TAXABLE U/S 50 OF THE ACT. 5. FOLLOWING THE PRECEDENTS AS ABOVE LEARNED CIT(A) HELD THAT THE GROUND OF APPEAL IS ALLOWED AND ASSESSING OFFICER IS DIRECTED TO GRANT SET OFF OF CARRY FORWARD LOSS AFTER VERIFICATION OF RECORDS. 6. AGAINST THIS ORDER THE REVENUE IS IN APPEAL BEFO RE US. WE HAVE HEARD LEARNED DEPARTMENTAL REPRESENTATIVE AND PERUSED TH E RECORD. WE AGREE WITH THE FINDING OF LEARNED CIT(A) THAT THE ISSUE IS COV ERED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL DECISION CITED THERE. HENCE, WE UPH OLD THE ORDER OF LEARNED CIT(A). 7. IN THE RESULT, REVENUES APPEAL IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON 11.3.2021. SD/- SD/- (RAMLAL NEGI) (SHAMIM YA HYA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI; DATED : 11/03/2021 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// ( ASSISTANT REGISTRAR) PS ITAT, MUMBAI