TMI Blog2010 (10) TMI 722X X X X Extracts X X X X X X X X Extracts X X X X ..... ction raised by the authorities below, in our humble understanding, are devoid of any legal substance. Coming to the judicial precedents cited by the CIT(A), we find that in the case of CIT vs. Milling Trading Co. (P) Ltd. (1993 -TMI - 19720 - GUJARAT High Court), their Lordships were concerned with the question whether or not the assessee had option of not setting off the losses incurred against the income from different sources under the head "Business income". The issue was thus confined to the question as to how the total income for a particular assessment year is to be computed. - ITA No. 1658/Mum/2009; - - - Dated:- 20-10-2010 - Pramod Kumar, Asha Vijayaraghavan, JJ. Milind S. Kothari for the Appellant Jitendra Yadav for the Respondent ORDER Pramod Kumar, Accountant Member:- 1. By way of this appeal, the assessee has called into question correctness of CIT(A)'s order dt. 18th Dec., 2008, in the matter of assessment under s. 143(3) for asst. yr. 2005-06. 2. In ground No. 1, the assessee is aggrieved that the CIT(A) erred in remitting back the disallowance of Rs. 5,00,000 under s. 14A r/w r. 8D of the IT Rules, 1962. 3. As far as this iss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd to the following year upto eight assessment years. The carry forward business losses cannot be set off against any other head of income other than profits and gains of business or profession. It was in this backdrop of these observations by the AO, that the assessee was required to show cause as to why brought forward business losses amounting to Rs. 39,85,596 should not be allowed to be set off against short-term capital gains on sale of plant and machinery and factory building. The explanation of the assessee was as follows:- "1. During the year, our client had sold the factory building along with plant and machinery/furniture and fixture lying therein for a sum of Rs. 1,75,00,000. On the above sale our client had made a profit of Rs. 1,56,41,001. Against the said profit, unabsorbed depreciation of the previous year amounting to Rs. 47,83,368 was set off. 2. Further, as this was a profit realized on sale of business assets, the said profit being business income, unabsorbed business loss was set off against the said profit. It is submitted that prior to insertion of s. 50, the sale of factory building/plant and machinery/furniture and fixture was covered by s. 41(2) whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SC). 6. Relying on the above decisions, Tribunal, Mumbai in the case of J.K. Chemicals Ltd. vs. Asstt. CIT 33 BCAJ (April, 2001) p. 36, on an identical facts and circumstances, has held that the profit realized on sale of business asset though assessable under the head 'Short-term capital gain', is business income and hence, the brought forward business losses should be set off as per the provision of s. 72 of the IT Act. 7. In view of the above, the assessee, relying on the above decisions of Supreme Court and the Mumbai Tribunal, has correctly treated the income arising on sale of business assets as business income and has correctly set off brought forward the business loss of Rs. 39,85,596 against the profit realised on sale of business assets viz. "factory building/plant and machinery/furniture and fixture." 8. The AO, however, was not impressed by any of these submissions. He was of the view that the provisions of s. 72 are very clear that brought forward business losses can only be set off against profits and gains of business or profession and, therefore, brought forward business losses of Rs. 39,85,596 cannot be allowed to be set off against short-term capital g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y business or profession carried on by him and assessable for that assessment year...........". It is thus clear that s. 72 of the Act provides that 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 s. 71, so much of the loss as has not been so set off is to be carried forward to the following assessment year and is allowable for being set off "against the profits, if any, of that business or profession carried on by him and assessable for that assessment year". It is thus for setting off the income that while the loss to be carried forward has to be under the head "Profits and gains of business or profession", the gains against which such loss can be set off, has to be profits of "any business or profession carried on by him and assessable in that assessment year". In other words, there is no requirement of the gains being taxable under the head "Profits and gains of business or profession" and thus ..... X X X X Extracts X X X X X X X X Extracts X X X X
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