TMI Blog2016 (7) TMI 456X X X X Extracts X X X X X X X X Extracts X X X X ..... under consideration, neither has there been a change in the shareholding pattern of the assessee nor has there been any claim for set off of carried forward of losses of the year’s prior to A.Y. 2005-06. Hence, in our view, and as contended by the learned A.R. for the assessee the conditions precedent for invoking and bringing into play the provisions of section 79 of the Act are absent and have been wrongly applied by the AO to disallow the aforesaid losses, the set off of which were never claimed in this year. We, therefore, delete the order of the AO on this issue as the same matter is to be examined in the year in which such claim is preferred. - Decided in favour of assessee - ITA No. 8763/Mum/2010 - - - Dated:- 22-6-2016 - Shri Jason P. Boaz, Accountant Member And Shri Pawan Singh, Judicial Member For the Appellant : Shri P. J. Pardiwalla For the Respondent : Shri Jasbir Chouhan ORDER Per Jason P. Boaz, A. M. This appeal by the assessee is directed against the order of assessment passed under section 143(3) r.w.s. 144C(13) of the Income Tax Act, 1961 (in short 'the Act') dated 12.10.2010 for A.Y. 2007-08, in pursuance of the directions issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ears and thereby did not set off the loss arising from early settlement of forward contracts for foreign currency of ₹ 68,434,804/- against income from other sources by treating the loss as capital loss instead of loss under the head other sources . 2. The Assessing Officer and DPR has erred in applying the provisions of section 79 of the Income-tax Act, 1961 (the Act) and denying carry forward of long term capital losses incurred in financial year relevant to assessment years 2003-04 of ₹ 49,464,507/- and 2004-05 of ₹ 67,363,681/- on the grounds that there was a change in shareholding pattern in April 2004, ignoring the fact that Appellant has not claimed set-off of losses during the year under consideration. 3. The Assessing Officer erred in initiating the penalty proceedings under section 271(1)(c) of the Act for furnishing inaccurate particulars of income leading to a concealment of income. 4. Ground No. 1 4.1 In this ground, the assessee contends that the authorities below had erred in changing the stand taken by the Department in earlier years and thereby did not set off the loss of ₹ 6,84,34,840/- arising from early settlement of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arising on early settlement of forward contracts for foreign currency is to be assessed as Income from other sources , then the AO ought to re-characterise the said amount for this year in accordance with the consistent view taken by Revenue. 4.2 Per contra, the learned D.R. supported the order of the authorities below on this issue. 4.3.1 We have heard the rival contentions of both the parties and perused and carefully considered the material on record, including the judicial decision cited. Admittedly, in the year under consideration, the assessee had declared capital loss of ₹ 6,84,34,804/- from early settlement of forward contracts for foreign currency which the AO has accepted as returned. We find that the Coordinate Bench of this Tribunal in the assessee s own case for A.Y. 1998-99 and A.Y. 2005-06 in ITA No. 2877/Mum/2003 and ITA No. 910/Mum/2009 dated 08.06.2011 has considered the very same issue and held that the loss arising from early settlement of forward contracts in foreign exchange taken by the assessee to safeguard the foreign exchange loan taken for acquisition of shares/debentures was capital loss. At para 4.3 of the aforesaid order (supra), the Coor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ibunal in the assessee s own case for assessment years 1998-99 and 2005-06 (supra), we do not find any error in the orders of the authorities below, in the year under consideration, in holding that the loss arising from settlement of forward contract taken by the assessee to safeguard the foreign exchange loan taken for acquisition of shares/debentures is capital loss as returned by the assessee. In our considered view, there is no requirement for us to issue directions to the AO as urged by the assessee, since the AO is bound to follow the directions of the Hon'ble High Court when the appeals before their Lordships is decided. Finding no merit in this ground raised and in the light of the decision of the Coordinate Bench (supra) upholding the assessee s claim in the matter, we dismiss ground No. 1 raised by the assessee. 5. Ground No. 2 5.1 In this ground, the assessee contends that the authorities below had erred in applying the provisions of section 79 of the Act and thereby denying the assessee carry forward of long term capital loss incurred in the financial year relevant to A.Y. 2003-04 of ₹ 4,94,64,507/- and A.Y. 2004-05 of ₹ 6,73,63,681/- on the ground ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be disallowed in this year by invoking the provisions of section 79 of the Act. On appeal, the DRP upheld this view of the AO. 5.4.2 The issue before us is whether the provisions of section 79 of the Act would come into play or be attracted in the year under consideration, i.e. A.Y. 2007-08. A perusal of the provisions of section 79 of the Act indicates that the provisions thereof are attracted in the event that if the year under consideration there is a change in patterns of shareholding, then no loss incurred in any previous year shall be carried forward and set off against income of this year, i.e. A.Y. 2007-08 in the case on hand. From the facts on record, we notice that admittedly the aforesaid long term capital losses incurred by the assessee amounting to ₹ 4,94,64,507/- of A.Y. 2003-04 and of ₹ 6,73,63,681/- in A.Y. 2004-05 were allowed by the AO in the orders of assessment for those years. It is seen from a perusal of the assessee s return of income filed for the year under consideration i.e. A.Y. 2007-08, that no claim for set off has been made in respect of the aforesaid losses of assessment years 2003-04 and 2004-05 against the income of the year under ..... X X X X Extracts X X X X X X X X Extracts X X X X
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