TMI Blog2011 (6) TMI 960X X X X Extracts X X X X X X X X Extracts X X X X ..... Commissioner of Income Tax on examination of the records observed that : There was a Long Term Capital Loss of ₹ 1, 01, 23, 377/- on account of conversion of units of UTI US64 to Tax Free Bonds. After set off of Long Term Capital Gains against this loss, the net resultant Long Term Capital Loss is shown at ₹ 62, 53, 815/- and the same has been claimed to be carried forward to subsequent asstt. year. The Assessing Officer in his assessment order passed under section 143(3) has allowed the assessee s claim. It means, during the year the assessee has earned Long Term Capital Gains of ₹ 38, 69, 562/- which is set off against the Long Term Capital Loss from conversion of UTI US64 to Tax free Bonds of ₹ 1, 01, 23, 377/- However, in view of provisions of section 10(33) of the I. T. Act, any income arising from the transfer of capital asset being units of Unit Scheme 1964 of Unit Trust of India and where the transfer of such asset takes place on or before 1st April 2002 is exempt from tax. Similarly, the loss from sale of such units is also not to be considered and cannot be carried forward. Under the circumstances, there was under assessment of in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee is entitled to setting off the Loss. 4) To substantiate our claim we enclose here with the Legal opinion of Shri V. H. Patil on the subject which is self explanatory. 5) In view of the above position and expert opinion enclosed the set off of losses have been rightly claimed allowed in the Assessment of A. Y. 2004-05 and 200506. We request you to maintain Status Co without revision of assessments and oblige The learned Commissioner of Income Tax after considering the assessee s submissions, however, observed that during the period relevant to the assessment year 2004-05 the assessee has converted units of Unit Scheme 1964 of UTI into tax free Bonds of UTI. The purchase value of these units was ₹ 1, 66, 06, 907. 21 and the conversion value was ₹ 1, 17, 82, 600. 00. Thus the assessee suffered a loss of ₹ 48, 24, 307. 21 and after indexation of the purchase value the total loss under the head Capital Gains/Loss was arrived at ₹ 1, 01, 23, 377. 32. This loss was set off against other Capital Gains on sale of shares of the year under consideration and the balance Capital Loss of ₹ 62, 53, 815. 17 was claimed to be carried fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... natural corollary that during the previous year relevant to the assessment year under consideration the assessee s income from conversion of units of UTI was not chargeable to tax as per section 45 r. w. s 10(33) under the head capital gains , and assessee was not required to compute losses on the same merely for the purpose of getting the same set off against other Capital Gains and carried forward to next year. The capital gains or if capital losses on account of conversion of units of UTI did not form part of the total income of the assessee which could be brought to charge, and were, therefore, not required to be set off against the other capital gains and carried forward. 12. Taking into consideration all the facts of the case and the views upheld by the Hon ble Supreme Court in the case of Harprasad And Co. Pvt. Ltd. (99 ITR 118) and Hon ble Patna High Court in the case of Dalmia Jain Co. (65 ITR 408) (Pat), I am of the opinion that since the income from conversion of units of UTI US64 is exempt from tax under section 10(33), the assessee was not required to claim the loss in its computation of Capital Gains/Loss . The Long Term Capital Loss of ₹ 1, 01, 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... one of the courses permissible in law and for this proposition the reliance was also placed on the decision in Malabar Industrial Co. Ltd. v. CIT [2000] 243 ITR 83 (SC), Mannesmann Demag A. G. V. Dy. CIT ((1995) 59 ITD 599 (Del) and others. He further submits that the decision of the AO cannot be held to be erroneous simply because in his order he did not make elaborate discussion in that regard and for this proposition the reliance was also placed on the decision in CIT Vs. Gabriel India Ltd. (1993) 203 ITR 108 (Bom). He further submits that since the learned Commissioner of Income Tax has not dealt with the assessee s objection, the order passed by the learned Commissioner of Income Tax is not a valid order in the eyes of law and for this proposition the reliance was also placed on T. P. Srivastava Sons Ltd V. CIT (1978) 111 ITR 326 (All) and Orient (Goa) Ltd V/c CIT (1998) 66 ITD 479 (Pune). The learned counsel for the assessee while relying on the decision of the Hon ble Supreme Court in the case of Distributors (Baroda) P. Ltd V/s Union of India and others (1985) 155 ITR 120 (SC), and CIT V/s Industrial Investment Trust Co. Ltd (1968) 67 ITR 436 (Bom), strongly relied on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovisions of income. It is settled law that while taxing the income if two views are possible, the view favourable to the assessee should be taken. However, in the case of exemption the view favourable to the Revenue should be applied. Since it is a case of exemption provision, therefore the view favourable to the Revenue is applicable and for this provision the reliance was also placed on the decision of Hon ble Supreme Court in Mangalore Chemicals and Fertilizers Ltd. V/s Dy. Commissioner of Commercial Taxes and ors. (1992) Suppl. 1. S. C. C. 21, and Novopan India Ltd. V/s Collector of Central Excise and Customs in Appeal (Civil) 3556 of 1984 order dated 14. 9. 1994, (1994) Suppl. (3) SCR 459 wherein it has been held that The principle that in case of ambiguity, a taxing statute should be construed in favour of the assessee assuming that the said principle is good and sound does not apply to the construction of an exception or an exempting provision, they have to be construed strictly . He further submits that the decisions relied upon by the learned counsel for the assessee are not applicable as those cases are under different provisions of Income Tax Act, 1922 and not on the is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act has to be read in the conjunction with an erroneous order passed by the Assessing Officer. Thus, it is not, as if in every case where there is loss of revenue, as a consequence of an order passed by the Assessing Officer, it can be treated as prejudicial to the interests of the Revenue. Consequently, if the Assessing Officer has adopted one of the courses permissible in law, which resulted in loss of revenue or where two views are possible and the Assessing officer has taken one view with which the Commissioner of Income Tax does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the Revenue unless the view taken by the Assessing officer is unsustainable in law. 8. In Jewel of India v. ACIT [2010] 325 ITR 92 (Bom) it has been observed (page 94): Section 263 of the Income Tax Act, 1961 has already been interpreted by the apex court in the case of Malabar Industrial Co. Ltd. V. CIT [2000] 243 ITR 83, wherein the apex court held that a bare reading of section 263 of the Income Tax Act, 1961, makes it clear that the pre-requisite for the exercise of jurisdiction by the Commissioner suo moto under it, is that the order of the Income-tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... est of revenue. The same is proposed to be revised u/s 263 of the Act. However, if we turn to the order of the Commissioner of Income Tax passed under section 263 of the Act, it would be clear that no finding is recorded by the learned Commissioner of Income Tax that the order passed by the AO is erroneous and in so far as it is prejudicial to the interests of the Revenue. The impugned order passed by the learned Commissioner of Income Tax, the relevant paragraphs of which have already been reproduced in paragraph 2 of this order, only lead to the conclusion that the learned Commissioner of Income Tax while exercising his power under section 263 of the Act directed the AO to complete the assessment in a particular manner i. e. to re compute the total income of the assessee by disallowing the long term capital loss of ₹ 1, 01, 23, 377/- claimed in the return. Thus, in the absence of any positive finding that the order passed by the AO is erroneous in so far as it is prejudicial to the interest of the revenue, it is not open for the learned Commissioner of Income Tax to assume jurisdiction and hence the learned Commissioner of Income Tax was not justified in setting asid ..... X X X X Extracts X X X X X X X X Extracts X X X X
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