TMI Blog1993 (1) TMI 43X X X X Extracts X X X X X X X X Extracts X X X X ..... an branch was Rs. 39,87,929. The Income-tax Officer computed the loss from business at Rs. 7,14,759. The assessee had also earned considerable income by way of dividend (Rs. 21,79,245). The dividend income was taxable at a concessional rate and, therefore, the assessee claimed before the Income-tax Officer that its business loss should be carried forward to be set off against business profits in the subsequent year(s) and its dividend income for the year under consideration should be taxed at the concessional rate. The Income-tax Officer rejected the assessee's claim as, in his opinion, section 71(1) of the Income-tax Act, 1961 ( for short, " the Act " ), required that the loss suffered under one head of income must be set off against the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ipulated the same in the sections, as for example, in sections 3(2) and 48 of the Act. Further, the Appellate Assistant Commissioner was of the view that the words " entitled to " appearing in section 71(1) of the Act bestowed upon the assessee only a concession in the matter of set-off of income for the purpose of reducing the tax, larger tax burden that would have arisen, if it was merely provided that the loss under one head should be set off against the income under the same head and in the absence of any such income under the same head, this loss would have no meaning, for purpose of determining the tax liability (sic). In this view of the matter, he upheld the action of the Income-tax Officer. Being aggrieved by the order of the App ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e phraseology used in section 72(1), viz., and such loss cannot be or is not wholly set off assumes importance. In our opinion, the Appellate Assistant Commissioner has committed an error in not putting the word 'wholly' against both 'cannot be' and 'is not'. It is applicable to both. We agree with Shri Dastur that the phrase can reasonably refer to only one situation where the loss cannot be set off either because there are no profits or is not set off because the assessee has not exercised his right to the set off. Having regard to the above discussion, we accept the assessee's submissions and hold that it was open to the assessee not to claim set-off of its business loss against its dividend income which is charged at a lower rate of tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se sections appear in Chapter VI which deals with "Aggregation of income and set off or carry forward of losses ". " Section 70. - (1) Save as otherwise provided in this Act, where the net result for any assessment year in respect of any source falling under any head of income other than "Capital gains" is a loss, the assessee shall be entitled to have the amount of such loss set off against his income from any other source under the same head. (2) (i) Where the result of the computation made for any assessment year under sections 48 to 55 in respect of any short-term capital asset is a loss, the assessee shall be entitled to have the amount of such loss setoff against the income, if any, as arrived at under a similar computation made f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other than 'Capital gains'. "Section 72. - (1) Where for any assessment year, the net result of the computation under the head 'Profits and gains of business or profession' is a loss to the assessee, not being a loss sustained in a speculation business, and such loss cannot be or is not wholly set off against income under any head of income in accordance with the provisions of section 71, so much of the loss as has not been so set off or, where the assessee has income only under the head 'Capital gains' relating to capital assets other than short-term capital assets and has exercised the option under subsection (2) of that section or where he has no income under any other head, the whole loss shall, subject to the other provisions of this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other than the income under the head " Capital gains " . In our opinion, the Tribunal has wrongly construed the expression "be entitled to" used in section 71 to mean that the assessee had an option in the matter of set off of business loss against the income under any other head. In our considered view, that expression simply enables the assessee to set off business loss against income under any other head and, but for that expression, the assessee would not be entitled to set off loss under another head in the same year. For all these reasons, we are of the view that the Tribunal was not justified in accepting the assessee's contention regarding the carry forward of business loss. In this view of the matter, we answer the question referre ..... X X X X Extracts X X X X X X X X Extracts X X X X
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