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SAC Steel Rolling Mills Pvt. Ltd. Versus Jt. Commissioner of Income Tax, Range 2, Income Tax Office, Jalgaon

Set off of brought forward business loss against deemed S.T.C.G. u/s. 50 - Held that:- As decided in case of Nandi Steel Ltd., V. ACIT [2011 (12) TMI 162 - ITAT BANGALORE] held that the capital gains on sale of capital assets is not to be set off against the brought forward loss of earlier years. Only the business loss can be carried forward u/s 72 of the Act and it can also be set off only against the business income of the assessee - Decided in favour of revenue - ITA No. 652/PN/2013 - Dated:- .....

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tal income of ₹ 49,09,660/-. The assessee filed revised return of income on 29-03-2010 declaring total income of ₹ 57,39,126/-. The case of the assessee was selected for scrutiny under CASS and accordingly notice u/s. 143(2) was issued to the assessee on 18-08-2010. During the period relevant to the impugned assessment year, the assessee had sold plant and machinery of the discontinued business and earned profit of ₹ 95,61,163/-. The assessee treated the aforesaid surplus as sh .....

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isallowed the claim of the assessee. Aggrieved by the assessment order dated 05-09-2011, the assessee preferred an appeal before the Commissioner of Income Tax (Appeals), inter alia challenging the rejection of claim of set off of brought forward business loss of ₹ 38,67,378/- and unabsorbed depreciation of ₹ 8,90,945/-. The Commissioner of Income Tax (Appeals) vide impugned order rejected the claim of the assessee with respect to claim of set off of brought forward business loss aga .....

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. It is only because of the deeming fiction that profit arising from sale of capital asset is treated as short term capital gains. The ld. AR prayed for reversing the findings of authorities below. 4. On the other hand Shri M.K. Singh representing the Department vehemently supported the findings of Commissioner of Income Tax (Appeals) in rejecting the claim of assessee with respect to set off of brought forward business loss of ₹ 38,67,378/- against the short term capital gains arising out .....

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rayed for dismissing the appeal of the assessee and upholding the findings of Commissioner of Income Tax (Appeals). 5. We have heard the submissions made by the representatives of rival sides and have perused the orders of the authorities below. The assessee has assailed the findings of Commissioner of Income Tax (Appeals) by raising following grounds : 1. The learned CIT (A) erred in confirming the rejection of set off of brought forward business loss of ₹ 38,67,378 against deemed S.T.C.G .....

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of b/fd. business loss against such income. 3. The learned CIT (A) erred in not following the decision of ITAT Mumbai in Digital Electronics Ltd., V. Addol. CIT (2011) 135, TTJ, 419 and other cases relied upon by the appellant. 4. The learned CIT (A) failed to appreciate that facts in the case of Nandi Steel Ltd., V. ACIT (ITA No. 546/Bangalore/2008) were distinguishable and as such not comparable and consequently erred in rejecting appellant's claim for set off of business loss against dee .....

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/- brought forward from the earlier years against the Short Term Capital Gains taxable u/s 50 and interest income offered to tax in this year. 2. The learned CIT(A) erred in not allowing the set off of brought forward business loss pertaining to the earlier years against the business income offered to tax in this year. 6. The ld. AR of the assessee has stated at the Bar that he is not pressing the additional grounds raised in the appeal. In so far as the ground nos. 1 to 4 are concerned, all the .....

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ings of Assessing Officer by placing reliance on the decision of Special Bench of the Tribunal in the case of Nandi Steels Ltd. Vs. Assistant Commissioner of Income Tax (supra). The grounds raised before the Special Bench for adjudication were : 4. Ground no.5 & 6 raised by the assessee in the appeal are as under : "Ground no.5: That the learned CIT(A) erred in law and on facts that the appellant is not entitled to set off carry forward business loss of ₹ 39,99,652/- against the l .....

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ntentions and the material on record, we find that the only question before us for consideration is whether the brought forward loss from the earlier years can be set off against the income from "capital gains" u/s 72 of the IT Act. For the purpose of ready reference, the relevant portion of sec.72 is reproduced here under : "72 (1) Where for any assessment year, the net result of the computation under the head "Profits and gains of business or profession" is loss to the .....

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ness or profession carried on by him and assessable for that assessment year. Much stress has been laid by both the parties on the term "profits and gains if any, of any business or profession" mentioned in sub-clause -(i) of sub-sec.(1) of sec.72 of the IT Act. What are the profits and gains of business or profession ?. Whether it should be the income earned out of the business carried on by the assessee or it may be the income in any way connected to the business or profession carrie .....

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has been that they have direct nexus with the business carried on by the assessee and therefore, are business assets and any gains from the sale of such assets would also have the character of business income. We are unable to agree with this contention of the assessee that the assets sold by the assessee were business assets. Undisputedly, they were capital assets and the capital receipts are not taxable nor are the capital payments deductible from the income of the assessee. The capital is to .....

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taking into account the receipts and payments for carrying on the business of the assessee only the profit or gain or loss from the business is computed. If the profit or loss relate to the same assessment year from one source then it can be set off from another source under the same head of income u/s 70 Act, and it can be set off against the income from any other head of income u/s 71 of the Act. Sec.72 of the Act however, permits the carry forward business loss to subsequent assessment years .....

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