Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2022 (4) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2022 (4) TMI 904 - AT - Income TaxRevision u/s 263 by CIT - set off of brought forward business loss from the income assessable under the head 'Capital Gain' - gain of depreciable assets by entering into long term lease agreement - HELD THAT:- As stated earlier, the assessee is engaged in the business of developing & leasing out commercial properties. The activity of leasing such constructed spaces is undeniably its core business activity - these properties constructed by the assessee are its 'business asset' reflected by way of 'Fixed Asset'. Undisputedly, the income derived from leasing these fixed assets on short term basis has all along been taxed as 'Business Income'. Under the scheme of the Act, the income from grant of ‘long term capital leases’ results in deemed transfer of fixed assets, and therefore by way of operation of deeming fiction set out in Section 50 of the Act, the excess/ gain over the WDV of the fixed asset has to be taxed as 'Short Term Capital Gain'. It cannot be denied that the act of entering into 'long term leases’ is the business activity of the assessee and the income, which is assessed by way of capital gain, bears the character of profits or gain derived from such leasing business. Hence, irrespective of under which head such income is taxable (‘short term capital gain’ in the present case), we are of the view that, the loss assessed under the head ‘Profits & Gains of Business or Profession’ in the preceding years and brought forward to the relevant year had been rightly claimed as set off against the profits or gain derived from long term leases assessed under the head 'Short Term Capital Gain'. AO had applied his mind to this particular claim of the assessee in the earlier years and had been accepted and, therefore, when the same claim had been raised in the relevant year as well, the AO had rightly accepted it, in absence of any change of facts or position of law, which permeated through the earlier assessment years. In our view therefore, the AO could not have disturbed the aforesaid settled position. For that, we rely on the decision of Radhasoami Satsang[1991 (11) TMI 2 - SUPREME COURT] AO had correctly allowed the set off of brought forward business loss against the short term capital gain in the relevant year and therefore AO's order cannot be termed as 'erroneous' for paving way to invoke the revisional jurisdiction of Ld. Pr. CIT under of Section 263 of the Act. In the instant case that, although the assessee had explained the above issue in detail to the Ld. Pr. CIT supported with judicial precedents, the Ld. Pr. CIT however did neither himself examine this issue nor recorded his own finding proving that the explanations furnished by the assessee suffered from any infirmity and because of which he found that the view adopted by the AO was unsustainable in law making his order as erroneous within the meaning of Section 263 of the Act. In our opinion, once the Ld. Pr. CIT initiates the proceedings u/s 263 of the Act for specific reasons and these reasons are met by the assessee, then it was incumbent upon the Ld. CIT to himself independently deal with the objections and record his own satisfaction to prove that the AO's order is in fact erroneous and prejudicial to the interests of the Revenue for the reasons out in the SCN. CIT in such a situation cannot merely set aside the assessment order directing AO to pass the order of assessment afresh, effectively giving the AO a second innings without establishing that the assessment order was indeed erroneous as well as prejudicial to the interests of the Revenue. CIT merely setting aside the AO's order without independently dealing with merits of the issue was untenable and therefore the same is set aside. We hold that the AO’s order cannot be held to erroneous as well as prejudicial to the interest of the revenue - since AO’s order is valid in the eyes of law as per the law laid by the Hon’ble Supreme court and various other High courts, we find that the Ld. Pr. CIT erred in interfering/interdicting the order of the AO on this issue. Appeal of assessee allowed.
|