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2016 (5) TMI 585 - ITAT MUMBAI

2016 (5) TMI 585 - ITAT MUMBAI - TMI - Set off of loss from one source against income from another source under the same head of income - adjustment of non-speculative business loss incurred on F & O derivative trading business - Held that:- On perusal of the Section 71 of the Act , it is observed that it deals with set-off of losses incurred under one head of income against another head of income. The language of Section 71(2) of the Act is plain and clear and it allows the losses incurred unde .....

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virtue of Section 71(2A) of the Act which debar adjustment of losses incurred under the head ‘Profits and gains of business or profession’ to be set off against salary income. Section 71(2A) has a non-obstante clause and creates a bar notwithstanding what is contained in Section 71(1) and 71(2) of the Act. The assessee has incurred losses in F & O trading in derivatives which is assessable as non-speculative business loss under the head ‘Profit and Gains of business or profession’ and bar as con .....

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return of income with Revenue with-in due date stipulated u/s 139(1) of the Act , rather the return was filed belatedly u/s 139(4) of the Act. Provisions of Section 139(3) of the Act read with Section 80 of the Act ,post amendment by the Direct Tax Laws (Amendment) Act ,1987 w.e.f. 01-04-1989, clearly stipulate that for losses sustained by the tax-payer under the head ‘Profit and gains of business or profession’ or ‘Capital gains’ whereby the tax-payer claims to take benefit of carry forward of .....

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me filed with Revenue. Admittedly, the assessee in the instant case did not file return of income within due date as prescribed u/s 139(1) of the Act and hence , the assessee will not be allowed to carry forward un-adjusted business loss arising from F & O derivative trading business chargeable to tax under the head ‘Profit and gain of business or profession’ which remained un-adjusted after adjusting the same under the other heads of income except salary income , as per our decision in precedin .....

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he CIT(A) arose from the assessment order dated 29-11-2011 passed by the learned assessing officer (Hereinafter called the AO ) u/s. 143(3) of the Income Tax Act,1961(Hereinafter called the Act ) read with Section 147 of the Act, for the assessment year 2008-09. 2. The grounds raised by the assessee in the memo of appeal filed with the Tribunal read as under:- 1.In the facts and circumstances of the case and in law the learned CIT(A) erred in not holding that loss of ₹ 55,14,312 incurred b .....

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e learned CIT(A) erred in not holding that the assessment in appeal made u/s 147/148 was bad in law and was not tenable. The learned CIT(A) also erred in not holding that the notice issued u/s 148 was in itself bad in law as it was issued for reasons that would not justify initiation of reassessment. 4. The learned CIT(A) erred in holding that ground related levy of interest u/s 234A/234B and 234C was consequential in nature. It is submitted that in the facts and circumstances of the case and in .....

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and notice u/s 148 of the Act was issued on 14-03-2011 which was duly served on the assessee, after recording of reasons for re-opening of the assessment. 4. The assessee had returned a loss from trading in F & O of ₹ 55,14,313/- and short term capital gains of ₹ 48,39,634/- in the return of income filed with Revenue. This short term capital gains has been set-off by the assessee against the business loss from F & O business. The assessment was re-opened u/s 147 of the Act du .....

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t of such loss set off against his income from any other source under the same head. (2) ***** (3) Where the result of the computation made for any assessment year under sections 48 to 55 in respect of any capital asset (other than a short-term capital asset) is a loss, the assessee shall be entitled to have the amount of such loss set off against the income, if any, as arrived at under a similar computation88a made for the assessment year in respect of any other capital asset not being a short- .....

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res against loss on F & O trading business as claimed by the assessee was disallowed and added back to the income of the assessee by the AO. The claim of loss from F & O business was also not allowed to be carried forward as the assessee has not filed the return of income with the Revenue within prescribed due date. Further , in view of provisions of Section 71(2A) of the Act, set off of loss on Futures and Options business was also not allowed to be set-off against salary income of the .....

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assessee against the loss incurred in the Future and Option derivative trading business of the assessee is to be allowed. The assessee submitted that in view of provisions of Section 43(5)(d) of the Act , Future and Option derivative trading loss is a non-speculative business loss assessable under the head Profit and gains of business or profession . Thus, the assessee submitted that as per provisions of Section 71(2) of the Act , the assessee claim for set off F&O derivative trading busines .....

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of the Act. The CIT(A) passed appellate orders dated 28-02-2014 rejecting afore-stated claims of the assessee. 7. Aggrieved by the appellate orders dated 28-02-2014 passed by the CIT(A), the assessee filed second appeal with the Tribunal. 8. The ld counsel for the assessee contended before the Tribunal that the assessee incurred derivative trading business loss in Futures and Options of ₹ 55,14,313/- which was sought to be set-off against short term capital gains of ₹ 48,39,634/- ea .....

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r different head of the income inter-se and the claim of the assessee is allowable in view of specific provisions as contained in Section 71(2) of the Act. The ld counsel submitted that on perusal of computation of income filed by the assessee with the Revenue along with return of income, loss arising from F & O derivative trading business cannot be set off against salary income in view of the bar and prohibition created by provisions of Section 71(2A) of the Act , while rest of the income d .....

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against income earned under the other heads of income except salary income. 9. Ld. DR on the other hand relied upon the orders of the authorities below. 10. We have considered the rival contentions and perused the material on records. We have observed that the assessee has incurred loss of ₹ 55,14,313/- in Futures and Options derivative trading business. In view of the provisions of Section 43(5)(d) of the Act, the said loss is a non-speculative business loss provided conditions stipulated .....

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assessee is relying on Section 71(2) of the Act. We have carefully analyzed the provisions of said sections which are reproduced hereunder: Set off, or carry forward and set off [Set off of loss from one source against income from another source under the same head of income. 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 .....

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tation made for any assessment year under sections 48 to 55 in respect of any capital asset (other than a short-term capital asset) is a loss, the assessee shall be entitled to have the amount of such loss set off against the income, if any, as arrived at under a similar computation made for the assessment year in respect of any other capital asset not being a short-term capital asset.] [Set off of loss from one head against income from another. 71. (1) Where in respect of any assessment year th .....

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gains", is a loss and the assessee has income assessable under the head "Capital gains", such loss may, subject to the provisions of this Chapter, be set off against his income, if any, assessable for that assessment year under any head of income including the head "Capital gains" (whether relating to short-term capital assets or any other capital assets). [(2A) Notwithstanding anything contained in sub-section (1) or sub-section (2), where in respect of any assessment .....

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not be entitled to have such loss set off against income under the other head.] [(4) Where the net result of the computation under the head "Income from house property" is a loss, in respect of the assessment years commencing on the 1st day of April, 1995 and the 1st day of April, 1996, such loss shall be first set off under sub-sections (1) and (2) and thereafter the loss referred to in section 71A shall be set off in the relevant assessment year in accordance with the provisions of t .....

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tive business loss on F&O derivative trading business against other heads of income being the income from short term capital gains earned on the sale of shares and other income earned by the assessee excluding salary income earned by the assessee in view of provisions of Section 71(2A) of the Act. On perusal of the Section 71 of the Act , it is observed that it deals with set-off of losses incurred under one head of income against another head of income. The language of Section 71(2) of the .....

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re is a specific bar and prohibition raised by the statute by virtue of Section 71(2A) of the Act which debar adjustment of losses incurred under the head Profits and gains of business or profession to be set off against salary income. Section 71(2A) has a non-obstante clause and creates a bar notwithstanding what is contained in Section 71(1) and 71(2) of the Act. The assessee has incurred losses in F & O trading in derivatives which is assessable as non-speculative business loss under the .....

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e. We order accordingly. The next contention of the assessee is that the assessee has filed return of income with revenue belatedly on 31-03-2010 which is beyond the time stipulated u/s 139(1) of the Act, while the assessee was required to file the same by 30-09-2008 i.e. the due date stipulated u/s 139(1) of the Act. Thus, the assessee did not file return of income with Revenue with-in due date stipulated u/s 139(1) of the Act , rather the return was filed belatedly u/s 139(4) of the Act. Provi .....

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