RANGRAJ ELECTRO PRODUCTS PVT LTD,MUMBAI V. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-14(1)(2), MUMBAI

ITA 5369/MUM/2024

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Rangraj Electro Products Pvt. Ltd. appealed against the order of the National Faceless Appeal Centre (NFAC), which denied the set off of brought forward business losses against deemed short-term capital gains for the Assessment Year 2022-23. The Centralized Processing Centre (CPC) initially rejected this set off, leading to the appeal. The First Appellate Authority upheld the CPC's decision, citing Section 72 of the Income Tax Act, which restricts the set off of business losses to profits from business and profession. However, the Tribunal, referencing judicial precedents, overturned this decision, allowing the set off against capital gains.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 473095 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-01-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2022-2023
• Other Referred Cases: PCIT vs. Alcon Developers, Digital Electronics Ltd. vs. Addl. Commissioner of Income Tax
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R.R. MAKWANA
• Assessee Lawyers: V. G. GINDE
• Keywords: Capital asset; Capital Gains
• Section: 154; 72

Judgement Text

" Page | 1 ITA No. 5369/Mum/2024 AY 2022-23 Rangraj Electro Products Pvt. Ltd. Vs. DCIT, Mumbai IN THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY, V.P. AND SHRI GIRISH AGRAWAL, A.M. ITA Nos.5369/Mum/2024 Vs. A.Y.2022-23 Rangraj Electro Products Pvt. Ltd., C/o Sumaria & Sumaria, Chartered Accountants, 807, Ecstasy Business Park, J.S.D. Road, Mulund (West)-400080 DCIT, Circle-14(1)(2), Mumbai. (Appellant) (Respondent) PAN AACCR 3277P Assessee by Shri V.G. Ginde, Advocate And Shri Shri Kumar Kale, Advocate Revenue by Shri R.R. Makwana, Addl. CIT Date of hearing 16.01.2025 Date of pronouncement .01.2025 O R D E R PER SAKTIJIT DEY, V.P.: 1. This is an appeal by the assessee against order dated 20.08.2024 passed by National Faceless Appeal Centre (NFAC), Delhi for the Assessment Year (AY) 2022-23. 2. The short issue arising for consideration in the present appeal is, whether brought forward business loss can be set off against deemed short Page | 2 ITA No. 5369/Mum/2024 AY 2022-23 Rangraj Electro Products Pvt. Ltd. Vs. DCIT, Mumbai term capital gain taxable under Section (u/s.) 50 of the Income Tax Act, 1961 (in short the ‘Act’). 3. Briefly, the facts are, in the year under consideration, the assessee had transferred certain capital asset forming part of a block of depreciable assets and derived capital gain. The assessee had also brought forward business loss. In the return of income filed for the impugned assessment year, assessee had set off the brought forward business loss against the short-term capital gain derived in terms of Section 50 of the Act. While processing the return of income, the Centralized Processing Centre (CPC) did not allow set off of brought forward business loss against the deemed short term capital gain. Thereafter, assessee filed an application u/s. 154 seeking rectification, which was rejected by the CPC. 4. Challenging such rejection, the assessee preferred an appeal before the First Appellate Authority. While deciding the appeal, the First Appellate Authority, referring to Section 72 of the Act, held that brought forward business loss can be set off only against the profit and loss of business and profession assessable for that assessment year and it cannot be set off in any other manner. Accordingly, he dismissed assessee’s appeal. 5. We have heard the parties and perused the materials on record. Having gone through the judicial precedents cited before us by learned counsel for the assessee in course of hearing, it is observed that the Hon’ble Page | 3 ITA No. 5369/Mum/2024 AY 2022-23 Rangraj Electro Products Pvt. Ltd. Vs. DCIT, Mumbai Jurisdictional High Court has decided identical issue in favour of the assessee in case of PCIT vs. Alcon Developers, [2021] 128 taxmann.com 371 (Bombay). The observations of the Hon’ble Court while deciding the issue are as under: “28. Thus, it is quite clear that the view taken by the ITAT in its impugned order dated 15-9-2016, is entirely consistent with the view taken by the coordinate bench of the ITAT in Digital Electronics Ltd. (supra). As was noted by this Court in Hickson & Dadajee (P.) Ltd. (supra), the Revenue, has accepted the decision of the ITAT in Digital Electronics Ltd. (supra). Based thereon, this Court has accepted the position that it is not the requirement of section 72 of the said Act that such gain or profit must be taxable only under the head of \"profits and gains of business or profession\". The carry forward business losses would therefore be set off against the short-term capital gains on the sale of building, plant, and machinery. This is yet another reason not to accept the submissions of Ms. Linhares and to answer the substantial questions of law against the Revenue and in favour of the assessee.” 6. Notably, the Special Leave Petition (SLP) filed by the Revenue against the aforesaid decision of the Hon’ble Jurisdictional High Court has been dismissed by the Hon’ble Supreme Court, of course, due to low tax effect. Identical issue has been decided in favour of the assessee by the Coordinate Bench in case of Digital Electronics Ltd. vs. Addl. Commissioner of Income Tax [2011] 16 taxmann.com 316 (Mumbai), and the decision has been upheld by the Hon’ble Jurisdictional High Court. Thus, respectfully following the ratio laid down in the judicial precedents noted above, we direct the Assessing Officer to allow assessee’s claim of set off Page | 4 ITA No. 5369/Mum/2024 AY 2022-23 Rangraj Electro Products Pvt. Ltd. Vs. DCIT, Mumbai of carried forward business loss against the deemed short term capital gain computed u/s. 50 of the Act. 7. In the result, appeal is allowed. Order pronounced in the open court on 28/01/2025. Sd/- Sd/- (GIRISH AGRAWAL) (SAKTIJIT DEY) (ACCOUNTANT MEMBER) (VICE PRESIDENT) Mumbai, Dated:28.01.2025 Aks/- Copy of the Order forwarded to : The Appellant, The Respondent, The CIT, The DR ITAT & Guard File BY ORDER, True Copy// Sr. Private Secretary/ Asst. Registrar Income Tax Appellate Tribunal, Mumbai "