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2016 (1) TMI 807 - ITAT AHMEDABAD

2016 (1) TMI 807 - ITAT AHMEDABAD - TMI - Set off of accumulated losses against Long Term Capital Gain (LTCG) AND Short Term Capital Gain (STCG) even beyond 8 years - CIT(A) allowed the claim - validity of orders of BIFR - Held that:- Since the order of BIFR is inconsistent with the provisions of IT Act as far as setting off of accumulated losses beyond eight years against capital gain are concerned. But still BIFR order will prevail over the inconsistent provisions of IT Act. Accordingly appell .....

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section 143(3) of the Income Tax Act, 1961 ('the Act' hereinafter), for the assessment year 2007-08, on the following ground:- "The Ld. CIT(A)-VI, Ahmedabad erred in law and on facts in directing to allow set off of accumulated losses against Long Term Capital Gain (LTCG) of ₹ 12,34,98,829/- AND Short Term Capital Gain (STCG) of ₹ 44,20,752/- even beyond 8 years." 2. Briefly stated, the relevant material facts are like this. The assessee is a sick unit under the Si .....

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Income Tax Deptt., besides considering grant of other reliefs as envisaged in terms of the SS-04, would also exempt the company from payment of capital gains tax and permit the company to set-off the capital gains, if any, against the accumulated losses of the company in terms of provision vide para 7.6(ii) of the SS-04." [7.6(ii) of SS4 states "Exemption of capital gains from capital gains tax, if any, the company may be allowed to set off capital gains against accumulated losses] * P .....

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) Exemption of capital gains from capital gain tax, if any. The company may be allowed to set off capital gains against accumulated losses. iii) Exemption from applicability of section 41(1) of the Income Tax Act. iv) For the purpose of 8 years limitation period for carry forward of losses, 8 years period would be counted from the financial year 2002-2003. vi) To exempt the company from the applicability of provisions of sections 115JB of the Income Tax Act, 1961. vii) To allow the carry forward .....

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entitled to receive the reliefs and concessions. DGIT in a number of other cases have granted such reliefs to sick industrial company; however in the instant case DGIT chose not to take any action and keep the matter pending indefinitely. In rejoinder filed by DGIT, we have noted the stand taken by DGIT, inter-alia, stating that since the net worth of AAML has turned positive, no relief and concession can be granted. This stand of DGIT in our opinion, is not tenable. The revival scheme was sanc .....

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company to set-off the capital gains against accumulated losses. 15. In the hearing held on 19.06.2003, the submission of the DGIT on the DRS was that the appellant had filed their returns along with the justification for reliefs and concessions. On 23.01.2004, BIFR sanctioned the revival scheme directing the consideration of grant of exemption from capital gains tax. Thereafter, the appellant company filed an application on 19.09.2005 for grant of reliefs and concessions as per the sanctioned .....

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ital gin tax, the direction was given at para 8(iv) of the impugned order dated 21.08.2006. We find no infirmity in the order passed by BIFR. The appeal, is, therefore, rejected." 4. However, in the course of the assessment proceedings, the Assessing Officer declined to give effect to the above orders. The company had claimed set off of short term capital gains of ₹ 44,20,752/- and long term capital gains of ₹ 12,35,64,620/- against unabsorbed business losses of earlier years. H .....

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inst business loss brought forward. Therefore income tax act never allows set off of capital gain against business loss brought forward. However the BIFR under SICA has power to allow any concession it considered appropriate for the revival of the company. As discussed earlier, BIFR has clearly allowed set off of capital gain against accumulated losses. The order nowhere talks of brought forward business losses. The limitation of 8 years applies to brought forward business losses. However accumu .....

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r as setting off of accumulated losses beyond eight years against capital gin are concerned. But still BIFR order will prevail over the inconsistent provisions of IT Act. Accordingly appellant will be eligible to set off capital gains against accumulated losses even beyond 8 years. As mentioned by the appellant, in the immediately preceding year, assessing officer in the assessment order passed on 13.10.2008 allowed set off of accumulated losses beyond 8 years against long-term capital gains of .....

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