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Sky Lite Electro Fixtures P. Ltd. Versus ITO Ward- 7 (2) (3) , Mumbai

2017 (2) TMI 693 - ITAT MUMBAI

Non setting off carried forward business loss against the Capital Gain computed u/s 50 - sale of depreciable assets - Held that:- The co-ordinate bench of Pune Tribunal in ACIT vs. Demech Heavy Equipments Pvt. Ltd. [2017 (2) TMI 652 - ITAT JAIPUR] held that provision of section 50 makes explicitly clear that deemed fiction under sub-section 1 & 2 is restricted only to the mode of computation of capital gain contend in section 48 & 49 and legal fiction is to be deemed the capital gain as STCG and .....

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, following the decision of co-ordinate bench, the appeal of the assessee is allowed. The AO is directed to allow the set off of carried forward business loss against the Capital Gain computed u/s 50 of the Act. - Decided in favour of assessee - ITA No.4893/Mum/2014 - Dated:- 1-2-2017 - SHRI D.KARUNAKARA RAO, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH, JUDICIAL MEMBER For The Assessee : Shri Anil Sathe (AR) For The Revenue : Shri B.C.S. Naik (CIT-DR) Order Under Section 254(1) of Income Tax Act PER .....

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mpany. In the application and the affidavit the assessee has contended that the ld. CIT(A) passed the impugned order on 30.06.2010. The order passed by ld. CIT(A) was not served at the address given in the Form-35. In the application the assessee/applicant further pleaded that the assessee-company was suffered loss over several years and the assessee had been in the process of winding up or closure business activity. Hence, the registered office was closed, the affairs of the company were being .....

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rit. The applicant further pleaded that the impugned order was collected only on 15.05.2013. The applicant/assessee could not approach their counsel as the assessee was not in a position to meet out the expenses and the appeal fee to file the appeal. The assessee arranged the counsel s fees on 15.05.2014. And, thus, the present appeal was filed on 24.07.2014. The assessee prayed that there was no intention or deliberate delay in filing the appeal. The main delay in filing the present appeal was .....

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nd, ld. DR for the Revenue submitted that the assessee never communicated the change of their address to the Income Tax Authorities as required under the law. 4. We have considered the contentions of both the parties and noticed that on 16.08.2016, while hearing this case, the ld. DR for the Revenue was directed to verify the correctness of non-service of impugned order at the known address of assessee. In compliance of Tribunal s order, the ld. DR for the Revenue filed the report along with the .....

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from the date of passing of impugned order till 15.05.2013 appears to be correct. The other contentions of ld. AR of the assessee which is duly supported with the affidavit of Shri Sandeep Arjan Khetwani. Thus, considering the contention, we are inclined to condone the delay and to decide the appeal on merit, hence, the delay in filing the appeal is condoned. Now, we shall take up the grounds of appeal raised on merits. 5. The assessee has raised the following grounds of appeal: 1. The learned .....

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appreciating the fact that the depreciable asset continues to be a business asset and consequently the gain so computed continues to be business income. 4. The learned CIT-(A) has failed to appreciate that Section 50 is deeming fiction and must be limited to the purpose for which it was incorporated in the Act. 5. The learned CIT-(A) erred in considering the provisions of Sec 50C as applicable while computing capital gain in case of sale of depreciable asset u/s 50. If fiction under Sec 50C is a .....

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nd substantive issue relates to confirming of the action of AO for not setting off carried forward business loss against the Capital Gain computed u/s 50 of the Act. 7. Brief facts of the case are that the assessee filed return of income for relevant AY on 31.10.2007 declaring total income of ₹ 12,85,473/- after claiming set off of carried forward business loss and unabsorbed depreciation amounting to ₹ 49,84,450/- under the normal provision and book profit of ₹ 44,43,266/- u/s .....

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arried forward business loss against the capital gain computed u/s 50 of the Act and relied upon the decision of Mumbai Tribunal in Digital Electronics Ltd. vs. ACIT (2011) 49 DTR 484, Sri Padmavathi Srinivasa Cotton Ginning & Pressing Factory vs. DCIT (2009) 29 DTR 0001 (Mumbai Trib.) Visakhapatnam Tribunal and Pune Tribunal in DCIT vs. Demech Heavy Equipments Pvt. Ltd.(2016) 47 CCH 0109 (Pune Trib.). On the other hand, ld. DR for the Revenue honestly supported the order of authorities belo .....

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, section 50 is a charging section independent of section 45 & 48, thus, being deeming provision is required to be strictly interpreted. (ii) Even a fiction is created u/s 15, the transfer of assets/block of asset will result in STCG which cannot change the nature of assets. Nature of asset and the capital gain earned cannot be a business income. 10. We have seen that the co-ordinate bench of Mumbai Tribunal in Demech Heavy Equipments Pvt. Ltd vs. ACIT (Supra) while considering the similar g .....

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, so much of the loss as has not been so set off or, where he has no income under any other head, the whole loss shall, subject to the other provisions of this chapter, be carried forward to the following assessment year and,-(i) it shall be set be off against the profits and gains, if any, of any business or profession carried on by him and assessable for that assessment year ..... ". It is thus clear that s. 72 of the Act provides that where for any assessment year, the net result of the .....

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on carried on by him and assessable for that assessment year". It is thus for setting off the income that while the loss to be carried forward has to be under the head "Profits and gains of business or profession", the gains against which such loss can be set off, has to be profits of "any business or profession carried on by him and assessable in that assessment year". In other words, there is no requirement of the gains being taxable under the head "Profits and ga .....

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e provisions regarding carry forward and set off of business loss. It was noted by the Hon'ble Supreme Court that while one set of provisions, i.e., the nature of loss incurred by the assessee, classifies the same on the basis of income being taxable under a particular head for the purpose of computation of the net income, the other set of provisions is concerned, only with the nature of gains being from business and not with the head of tax. Their Lordships held that as long as the profits .....

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P) Ltd. (1994) 118 CTR (Guj) 154 : (1995) 211 690 (Guj), their Lordships were concerned with the question whether or not the assessee had option of not setting off the losses incurred against the income from different sources under the head "Business income". The issue was thus confined to the question as to how the total come for a particular assessment year is to be computed. This decision has no bearing on the issue in appeal before us. So far as the Hon'ble Supreme Court judgme .....

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