UDAY S. KOTAK, MUMBAI V. CIT (A)-III, MUMBAI

ITA 880/MUM/2009

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 9452 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 9 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-12-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 27-11-2012
• Assessment Year: 2004-2005
• Appeal Filed On: 10-02-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital asset

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI F BENCH MUMBAI BENCHES, MUMBAI BEFORE SHRIRAJENDRA SINGH, AM & SHRI VIJAY PAL RAO , JM ITA NO. 880/MUM/2009 (ASST YEAR 2004-05) UDAY S KOTAK 36-36A NARIMAN BHAVAN 229 NARIMAN POINT VS THE INCOME TAX OFFICER WARD 3(2)(1), MUMBAI (APPELLANT) (RESPONDENT) PAN NO. AABPK8999F ASSESSEE BY SH FARROKH IRANI REVENUE BY SH MANOJ KUMAR DT.OF HEARING 27 TH NOV 2012 DT OF PRONOUNCEMENT 5 TH DEC 2012 ORDER PER VIJAY PAL RAO, JM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER DATED 14.11.2008 OF THE COMMISSIONER OF INCOME TAX(APPEALS) FOR THE ASS ESSMENT YEAR 2004-05. 2 THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS IN THIS APPEAL: 1. THE CIT(A) ERRED IN NOT ALLOWING SET-OFF OF BROU GHT FORWARD CAPITAL LOSS AMOUNTING TO RS.2,38,270 OF AY 2002-03 AGAINST SHORT TERM CAPITAL GAINS IN A.Y. 2004-05 ON THE GROUND THAT SUCH LOSS IS LONG T ERM CAPITAL LOSS AND THEREFORE THE IMPUGNED BROUGHT FORWARD LONG TERM CAPITA L LOSS OF A.Y. 2002- 03 CANNOT BE CONSIDERED FOR SET-OFF AGAINST SHORT TE RM CAPITAL GAINS OF RS.2,38,270. 2. HE FAILED TO APPRECIATE AND OUGHT TO HAVE HELD TH AT: A. PRIOR TO AMENDMENT MADE BY THE FINANCE ACT, 2002, THERE WAS NO RESTRICTION ON ADJUSTMENT/SET-OFF OF GAINS AND LOSSES ON LONG TERM OR SHORT TERM CAPITAL ASSETS AND THEREFORE CHARACTERIZATIO N OF PAST LOSSES IS IMMATERIAL AND ARE ALLOWED TO BE SET OFF BOTH AGAINS T LONG TERM CAPITAL GAINS AS WELL AS SHORT TERM CAPITAL GAINS. B. THE AMENDMENT TO SECTION 74 IS PROSPECTIVE, WHIC H INTER ALIA PROVIDES THAT LONG TERM LOSSES CANNOT BE SET OFF AG AINST SHORT TERM GAINS IS APPLICABLE TO THE LOSSES WHICH HAVE BEEN C OMPUTED FOR THE ITA NO 880/M/2009 UDAY S KOTAK . 2 FIRST TIME FOR AY 2003-2004 AND ONWARDS AND CAN NOT BE APPLICABLE TO LOSSES CARRIED FORWARD FROM EARLIER YEAR. 3. THE APPELLANT PRAYS THAT THE AO BE DIRECTED TO AL LOW SET-OFF OUT OF BROUGHT FORWARD CAPITAL LOSS AMOUNTING TO RS.2,38,270 AGAINST SHORT TERM CAPITAL GAINS IN A.Y. 2004-05 AS CLAIMED BY THE APPELLANT IN ITS RETURN OF INCOME. 3 THE ONLY ISSUE ARISES FOR OUR CONSIDERATION AND A DJUDICATION IS WHETHER BROUGHT FORWARD CAPITAL LOSS PERTAINING TO ASSESSMENT YEAR 2002-03 CAN BE SETOFF AGAINST THE SHORT TERM CAPITAL GAINS FOR THE ASSESSMENT YEAR 20 04-05 IN VIEW OF THE AMENDED PROVISIONS OF SEC. 74. 4 WE HAVE HEARD THE LD AR OF THE ASSESSEE AS WELL A S THE LD DR AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. AT THE OUTSET, WE NOTE THAT THIS ISSUE IS COVERED BY THE DECISION OF THE SPECIAL BENCH OF THIS TRIBUNAL IN THE CASE OF KOTAK MAHINDRA CAPITAL CO LTD VS ACIT REPORTED IN 18 ITR (TRIB) 213 WHEREIN THE SPECIAL BENCH HAS OBSERVED AND ADJUDICATED THE ISSUE IN PARAS 45 AND 46 AS UNDER: 45. IN OUR OPINION, THE POSITION IN THE PRESENT CASE IS SIMILAR TO THE ONE INVOLVED IN THE CASE OF S.S.C. SHOES LTD. (SUPRA) I NASMUCH AS PROVISIONS OF SEC.74(1) AS AMENDED W.E.F. 1.4.2003, GOING BY THE LANGUAGE USED THEREIN, EXPRESSLY PROVIDE FOR AND DEAL WITH CARRY FORWARD AND SET OFF OF LOSS UNDER THE HEAD CAPITAL GAINS FOR ASSESSMENT YEAR 2003-04 AND SUBSEQUENT YEARS AND THE RIGHT ACCRUED TO THE ASSESSEE BY VIRTUE OF SEC.7 4(1) AS IT STOOD PRIOR TO THE AMENDMENT MADE W.E.F. 1.4.2003 TO SET OFF BROUGHT FO RWARD LONG-TERM CAPITAL LOSS RELATING TO THE PERIOD PRIOR TO AY 2003-04 AGAIN ST SHORT-TERM CAPITAL GAIN OF SUBSEQUENT YEAR/S HAS NOT BEEN TAKEN AWAY BY TH E PROVISIONS OF SEC.74(1) SUBSTITUTED W.E.F. 1.4.2003. 46. IN VIEW OF THE ABOVE DISCUSSION, WE ARE OF THE VIEW THAT THE PROVISIONS OF SEC.74 WHICH DEAL WITH CARRY FORWARD AND SET OFF OF LOSSES UNDER THE HEAD CAPITAL GAINS AS AMENDED BY FINANCE ACT, 2002, WI LL APPLY ONLY TO THE UNABSORBED CAPITAL LOSS FOR THE ASSESSMENT YEAR 2003- 04 AND ONWARDS AND WILL NOT APPLY TO THE UNABSORBED CAPITAL LOSSES RELATING T O THE ASSESSMENT YEARS PRIOR TO THE ASSESSMENT YEAR 2003-04. ACCORDINGLY, WE ANSWER THE QUESTION REFERRED TO THIS SPECIAL BENCH IN FAVOUR OF THE ASSES SEE HOLDING THAT THE ASSESSEE IS ENTITLED TO SET OFF THE LONG-TERM CAPITA L LOSS INCURRED IN AY 2001-02 AGAINST THE SHORT-TERM CAPITAL GAIN MADE BY IT IN A Y 2003-04. GROUND NO.2 OF THE ASSESSEES APPEAL IS ACCORDINGLY ALLOWED. ITA NO 880/M/2009 UDAY S KOTAK . 3 5 FOLLOWING THE DECISION OF THE SPECIAL BENCH (SUPR A), WE DECIDE THIS ISSUE IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. 6 IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE I S ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 5 TH DEC2012 SD/- SD/ ( RAJENDRA SINGH ) ACCOUNTANT MEMBER ( VIJAY PAL RAO ) JUDICIAL MEMBER PLACE: MUMBAI : DATED: 5 TH DEC 2012 RAJ* COPY FORWARDED TO: 1 APPELLANT 2 RESPONDENT 3 CIT 4 CIT(A) 5 DR /TRUE COPY/ BY ORDER DY /AR, ITAT, MUMBAI