The DCIT,(OSD)-I, Circle-4, Ahmedabad V. Kunvarji Finance Pvt. Ltd., Ahmedabad

ITA 721/AHD/2014

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 8602 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 6 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-09-2017
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 21-06-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 10-03-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: P M MEHTA
• Keywords: Business income; Speculation loss
• Section: 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH BEFORE: SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER THE D CIT (OSD) , CIR.4, AHMEDABAD, NAVJIVAN TRUST BUILDING, OFF. ASHRAM ROAD AHMEDABAD (APPELLANT) VS KUNVARJI FINANCE PVT. LTD. 111, SHYAMAK COMPLEX, AMBAWADI, AHMEDABAD PAN: AAACK8759R (RESPONDENT) REVENUE BY : S H RI MUDIT NAGPAL , SR. D . R. ASSESSEE BY: SHRI P.M. MEHTA DATE OF HEARING : 01 - 08 - 2 017 DATE OF PRONOUNCEMENT : 11 - 09 - 2 017 / ORDER P ER : AMARJIT SINGH, ACCOUNTANT MEMBER : - THIS REVENUE S APPEAL FOR A.Y. 2010 - 11 , AR ISES FROM ORDER OF THE CIT(A) - VIII , AHMEDABAD DATED 02 - 12 - 2013 IN APPEAL NO. CIT(A) - VIII/A C IT(CPC)/44 /12 - 13 , IN PROCEEDINGS UNDER SECTION 154 OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT . I T A NO . 721 / A HD/20 14 A SSESSMENT YEAR 2010 - 11 I.T.A NO. 721/AHD/2014 A.Y. 2010 - 11 PAGE NO D CI T(OSD) VS. KUNVARJI FINANCE PVT. LTD. 2 2. IN THIS CASE, ASSESSEE HAS FILED RETURN OF INCOME DECLARING LOSS OF RS. 76,05,373/ - ON 15 TH OCTOBER, 2010. IN THE RETURN OF INCOME FILED BY THE ASSESSEE THE TOTAL INCOME WAS DERIVED AS UNDER : - PARTICULARS AMOUNT (RS. AMOUNT (RS.) NORMAL BUSIN ESS INCOME ( - ) 88,28,625 SPECULATION BUSINESS INCOME 34,16,420 B/F. SPECULATION BUSINESS LOSS ( - ) 2 1,93, 1 68 12,23,252 GROSS TOTAL INCOME ( - ) 76,05,373 C/F. BUSINESS LOSS ( - ) 76,05,373 THEREAFTER, U/S. 143(1) OF THE ACT, TH E CALCULATION OF THE INCOME WAS DONE IN THE FOLLOWING MANNER. PARTICULARS AMOUNT (RS.) SPECULATION BUSINESS INCOME 1,19,75,416 INTRA HEAD LOSS ADJUSTED 54,12,205 GROSS TOTAL INCOME AFTER INTRA HEAD LOSS ADJUSTMENT 65,63,21 1 B/F. BUSIN ESS LOSS 21,93,168 GROSS TOTAL INCOME 43,70,040 THEREAFTER, THE ASSESSEE HAS FILED APPLICATION U/S. 154 FOR CORR ECTION IN WORKING OF THE INCOME THEN U/S. 154 THE ASSESSING OFFICER HAS PASSED THE ORDER IN THE FOLLOWING MANNER. PARTICULARS AMO UNT (RS.) I.T.A NO. 721/AHD/2014 A.Y. 2010 - 11 PAGE NO D CI T(OSD) VS. KUNVARJI FINANCE PVT. LTD. 3 SPECULATION BUSINESS INCOME 34,16,420 INTRA HEAD LOSS ADJUSTED 34,16,420 GROSS TOTAL INCOME AFTER INTRA HEAD LOSS ADJUSTMENT 0 B/F. BUSINESS LOSS 0 GROSS TOTAL INCOME ( - )19,95,785 C/F. BUSINESS LOSS ( - ) 19,95,785 THEREAFTER, THE ASSESSEE PREFERRED APPEAL BEFORE THE LD. CIT(A) THAT ASSESSEE HAS COMMITTED AN ERROR IN DEDUCTING THE SPECULATION BUSINESS INCOME OF THE CURRENT YEAR TWICE FROM THE NORMAL BUSINESS LOSS OF THE YEAR WHICH HAS RESULTED IN REDUCING THE CARRY FORWARD LOSS . HE ALSO CONTESTED THE CONSEQUENCE OF SETTING OFF INCOME FROM SPECULATION BUSINESS WITH THE CURRENT YEAR S INCOME AND CARRY FORWARD SPECULATION LOSS. HE CLAIMED THAT THE CURRENT YEAR S SPECULATION INCOME SHOULD BE FIRST SET OFF AGAINST BROUGHT FORWARD S PECULATION LOSS AND THEREAFTER THE REMAINING SPECULATION INCOME SHOULD BE ADJUSTED AGAINST THE CURRENT YEAR S BUSINESS LOSS. THE LD. CIT(A) HAS ALLOWED THE APPEAL OF THE ASSESSEE BY OBSERVING AS UNDER: - XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXX NEEDLESS TO SAY THAT, THE PROVISIONS OF THE ACT DO NOT PROHIBIT THE ADJUSTMENT OF CURRENT YEAR'S SPECULATION BUSINESS INC OME WITH THE CURRENT YEAR NORMAL BUSINESS LOSS. THE VIEW IS ALSO SUPPORTED BY THE CIRCULAR MENTIONED BY THE APPELLANT. IN A RECENT DECISION IN THE CASE OF COMMISSIONER OF INCOME - TAX, DELHI - VIII V. ASHOK MITTAL [2013] 31 TAXMANN.COM 240 (DELHI) THE HONOURAB LE HIGH COURT HAS EXPRESSED A SIMILAR OPINION. FOR THE SAKE OF CLARITY THE RELEVANT EXCERPTS FROM THE DECISION ARE REPRODUCED HERE UNDER. - I.T.A NO. 721/AHD/2014 A.Y. 2010 - 11 PAGE NO D CI T(OSD) VS. KUNVARJI FINANCE PVT. LTD. 4 'THE TRIBUNAL HAS APPLIED THE WELL - SETTLED POSITION THAT CIRCULARS ISSUED BY THE; CBDT RELAXING THE RIGOUR OF THE PR OVISIONS OF THE ACT ARE BINDING ON THE'' ASSESSING OFFICER AND OTHERS EXECUTING THE INCOME TAX ACT. THERE WAS NO DISPUTE THAT THE SAID CIRCULAR HAS NOT BEEN WITHDRAWN AND THEREFORE STILL GOVERNED THE TREATMENT TO BE GIVEN TO THE BROUGHT FORWARD SPECULATION LOSSES THOUGH IT WAS ISSUED UNDER THE 1922 ACT. IT WAS ALSO NOT THE CASE OF THE REVENUE THAT THE PROVISIONS OF SECTION 24 OF THE OLD ACT AND SECTION 73 OF THE NEW ACT WERE MATERIALLY DIFFERENT AND THEREFORE THE CIRCULAR HAS NO APPLICATION UNDER THE NEW AC T. IT WAS NOT ALSO THE CASE OF THE REVENUE THAT THE WORKING ADOPTED BY THE ASSESSING OFFICER WAS IN FACT MORE BENEFICIAL TO THE ASSESSEE. THE ORDER OF THE TRIBUNAL WAS IN CONFORMITY WITH THE LEGAL POSITION THAT BENEFICIAL CIRCULARS ISSUED BY THE CBDT ARE B INDING ON THE INCOME - T AX AUTHORITIES. [PARA 8] ' IT HAS BEEN HELD BY THE HONOURABL E HIGH COURT THAT THEY BROUGHT F ORWARD SPECULATION LOSS SHOULD FIRST BE ADJUSTED AGAINST THE SPECULATION INCOME FOR THE CURRENT YEAR AND THEREAFTER THE NORMAL BUSINESS LOSS F OR THE CURRENT YEAR SHOULD BE ADJUSTED. IT IS ALSO NOTED THAT THE CIRCULAR HAS NOT YET BEEN OVERRULED BY THE CBDT. FURTHER THE JUDICIAL OPINION EXPRESSED IN VARIOUS JUDGEMENTS MENTIONED BY THE APPELLANT ALSO PRESCRIBES THE ABOVE METHOD OF ADJUSTMENT. ACCOR DINGLY, THE AO IS DIRECTED TO FIRST ADJUST THE BROUGHT FORWARD SPECULATION LOSS WITH THE CURRENT YEAR'S SPECULATION INCOME AND THERE AFTER THE REMAINING SPECULATION INCOME SHOULD BE ADJUSTED WITH CURRENT YEAR'S BUSINESS LOSS. AFTER SETTING OFF IN THIS MANN ER THE CARRY FORWARD BUSINESS LOSS SHOULD BE DETERMINED AND THIS WOULD BE IN ACCORDANCE WITH THE CLAIM OF THE APPELLANT. 3. WE HAVE HEARD BOTH THE SIDES AND PERUSED THE MATERIAL ON RECORD. IN THIS CASE, THE ASSESSEE HAS INCURRED A NORMAL BUSINESS LOSS O F RS. 88 , 28,625/ - AND EARNED SPECULATION BUSINESS INCOME OF RS. 34,16000/ - . THE ASSESSEE HAS SET OFF THE SPECULATION BUSINESS INCOME OF RS. 34 , 16 , 420/ - AGAINST THE BROUGHT FORWARD SPECULATION LOSS TO THE EXTENT OF RS. 21 , 93 , 168/ - . THEREAFTER, THE NORMAL BUSI NESS LOSS TO THE EXTENT OF RS. 12,23,252/ - WAS SET OFF AGAINST THE SPECULATION BUSINESS INCOME. THIS RESULTED IN CARRY FORWARD OF NORMAL BUSINESS LOSS TO THE EXTENT OF R S. 76,05,373/ - . IN TH E ORDER U/S. 154 OF THE ACT, THE ASSESSING OFFICER HAS SET OFF THE NORMAL BUSINESS LOSS OF RS. 88,28,625/ - TO THE EXTENT OF THE SPECULATION BUSINESS INCOME OF RS. 3416420/ - . THEREAFTER, SHOWN THE CARRY FORWARD NORMAL BUSINESS LOSS TO THE EXTENT OF RS. 19,95785/ - . IN THIS I.T.A NO. 721/AHD/2014 A.Y. 2010 - 11 PAGE NO D CI T(OSD) VS. KUNVARJI FINANCE PVT. LTD. 5 CONNECTION , WE HAVE PERUSED THE CIRCULAR NO. 23(XXXIX - 4)D OF 1960 DATED SEPTEMBER 12, 1960 ISSUED BY THE CENTRAL BOARD OF R EVENUE WHICH AFFIRM THAT CURRENT YEAR S SPECULATION INCOME SHOULD BE FIRST BE SET OFF AGAINST THE BROUGHT FORWARD SPECULATION LOSS AND THEREAFTER THE REMAINING SPECULATION INCOME SHOULD BE ADJUSTED AGAINST THE CURRENT YEAR S BUSINESS LOSS. AFTER CONSIDERING THE CIRCULAR OF THE BOARD AND THE DETAILED FINDINGS OF THE LD. CIT(A), WE DO NOT FIND ANY ERROR IN THE DECISION OF THE LD. CIT(A). 4. IN THE RESULT, THE APPEAL OF THE REVENUE IS D ISMISSED. ORDER PR ONOUNCED IN THE OPEN C OURT ON 11 - 09 - 2017 SD/ - SD/ - ( RAJPAL YADAV ) ( AMARJIT SINGH ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD : DATED 11 /09 /2017 / COPY OF ORDER FORWARDED TO: - 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,