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2016 (6) TMI 530 - ITAT DELHI

2016 (6) TMI 530 - ITAT DELHI - TMI - Priority of Adjustment of business loss against the Long Term Capital Gains and interest income - contention of the assessee company for adjustment of business loss first against the interest Income and then against the Long Term Capital, thereby leaving only LTGC to be taxed at 20% as applicable on it - Held that:- Section 71(2) makes it clear that in respect of any assessment year, when the net result of the computation under any head of income, other than .....

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other than ‘Capital gains’, is a loss and the assessee’s income is assessable under the head ‘Capital gains’, the assessee would be entitled to set off such loss against his income which is assessable for that assessment year under any other head including income assessable under the head ‘Capital gains’.

The ITAT, Pune Bench decision in case of Coated Fabrics (P.) Ltd. Vs. JCIT [2006 (1) TMI 228 - ITAT PUNE-A] is applicable in the present case as facts are similar in both the matter .....

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. No. 225/DEL/2014 - Dated:- 9-6-2016 - Shri G. D. Agrawal, Vice President And Smt Suchitra Kamble, Judicial Member For the Appellant : Sh. Vinay Kumar, CA For the Respondent : Sh. P. Dam. Kanunjna, Sr. DR ORDER Per Suchitra Kamble, JM This appeal is filed by the assessee against the order dated 10/10/2013 passed by CIT(A)-XVI, New Delhi. 2. The grounds of appeal are as under:- 1. The Learned Assistant Commissioner of Income Tax, Circle 13(1), New Delhi has erred in law as well as on facts of th .....

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The assessee company is in the business of Property Development and Share Trading, beside this assessee company also earned interest income under the income from other sources. The assessee filed return of income declaring ₹ 1,12,19,604/-. The assessee declared loss from business amounting to ₹ 70,32,63,487/-, income from long term capital gains of ₹ 70,43,33,287/- and income from other sources in the form of interest received on FDR of ₹ 1,01,49804/- in his return of inc .....

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iness loss against LTCG, the held that net result remains is long term capital gains of ₹ 1,18,77,864/- which has to be taxed @20% plus applicable surcharge and education cess and the interest income of ₹ 1,01,49,804/- is to be taxed at normal rate. 5. The assessee filed appeal before the CIT(A) on the ground that AO erred while allowing the adjustment of business loss against the Long Term Capital Gains only, as against the contention of the assessee company for adjustment of busine .....

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ried on business during the year under consideration it was entitled to the set off of the business loss against its other income . The Ld. AR further submitted that the business loss should have been adjusted first, by the Assessing Officer. 7. The Ld. DR relied upon the order of the CIT (A) and assessment order u/s 153(3) as well as rectification order u/s 154. 8. We have perused all the records and heard both the parties. Section 71(2) makes it clear that in respect of any assessment year, wh .....

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year, when the net result of the computation under any head of income, other than Capital gains , is a loss and the assessee s income is assessable under the head Capital gains , the assessee would be entitled to set off such loss against his income which is assessable for that assessment year under any other head including income assessable under the head Capital gains . The Ld. AR relied upon the order of the ITAT, Pune Bench in case of Coated Fabrics (P.) Ltd. Vs. JCIT (2006) 101 ITD 297 (Pun .....

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e, other than "Capital 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). As the heading of the section indicates i e., "set off of loss from one head agains .....

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f Income-tax Act, If, however, such losses cannot be so set off, then Section 71 comes into operation, which provides for set off of loss against income for the same assessment year under any other head. Hence, the set off as provided under Section 70 appears to be itemwise or sourcewise whereas the set off of the loss under Section 71 appears to be headwise. This is the basic principle laid down as far asSection 70 compared with Section 71 is concerned. However, as far as the issue in hand is c .....

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e assessable for that assessment year under any other head. So, the first step is that in case assessee has no income under the head 'Capital gains', then a loss under any head of income is subject to set off against income under any other head. Next comes into operation is Sub- section (2) which is applicable in such cases where the assessee has income assessable under the head "Capital gains". In the present appeal, Sub-section (2) is applicable because the assessee has a pos .....

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e has given a choice to a tax payer in respect of loss arising from any other head except capital gain to set off the same either against the income under any head of the income or against the income under the head "Capital gains" whether relating to short-term capital asset or any other capital asset. If we further compare another Sub-section of Section 71 i.e., Sub-section (3), it is evident that similar choice was not made available to an assessee because in case the net result is a .....

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ure has made its intention very much clear that wherever a restriction was required to be imposed against set off of income against a particular head of income, the same was prescribed under the statute. As far as application of Sub-section (2) is concerned, we are of the considered view that an assessee is entitled to the set off of business loss against any head of income as also against capital gains. 2.1 Our view is further fortified by an old Circular No. 26(LXXVI-3) [F.No. 4(53)-IT)/54], d .....

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eneral rule to be followed in all fiscal enactments is that where words used are neutral in import, a construction most beneficial to the assessee should be adopted]. The words "he shall be entitled to have the amount of loss set- off" occurring in Section 24(1), would seem to be consistent with the conferment of a benefit on the assessee which he can claim as of right. Hence, in the above illustration, the assessee's contention should prevail and the department should adopt that m .....

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e section and also in a manner which gives maximum benefit to the assessee. So, it was held by the Tribunal that the assessee had the option to get the short-term loss set off either against the capital gain or against other income, since the assessee had claimed set off of loss against ineome under the other head; the same was held as acceptable. 2.3. Having regard to the pith and substance of the afore-cited circular further buttressed by the language of Section 71(2) itself as elaborately dis .....

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as beneficial to the assessee. 3. To sum up, we hereby direct the Assessing Officer to first set off the business loss against the income under the head "Other sources" and if balance is left, the same is directed to be set off against the income under the head "Capital gains". Resultantly, the ground raised by the assessee is hereby allowed. The said ITAT decision is applicable in the present case as facts are similar in both the matter as relates to whether option is availa .....

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