TMI Blog2021 (2) TMI 284X X X X Extracts X X X X X X X X Extracts X X X X ..... may not be entirely in agreement with the ITAT on the aspect of invocation of the revisional jurisdiction under Section 263 of the said Act by the PCIT, we feel that the impugned order made by the ITAT warrants no interference because there is nothing fundamentally wrong in the view taken by the ITAT having regard to the decisions of the Hon'ble Supreme Court in the case of Chugandas Co.[ 1964 (7) TMI 8 - SUPREME COURT] , Cocanada Radhaswami Bank Ltd[ 1965 (4) TMI 11 - SUPREME COURT] and the decision of this Court in Hickson and Dadajee (P.) Ltd. [ 2020 (1) TMI 1399 - SUPREME COURT] . Therefore, there is no point in dilating on the first substantial question of law when the second substantial question of law which relates to the merits will have to be answered against the Revenue and in favour of the assessee. Assessee based on instructions from the assessee has fairly stated that the assessee will pay proportionate tax on the basis that the AO allowed excess set off to the extent of ₹ 22,34,366/-. In fact, even the ITAT, in paragraph 10 of its order had held that the AO, if at all, had allowed excess set-off of ₹ 22,34,366/- and therefore the appeal of the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase is a firm involved in the business of building and property development as also the manufacture of ground granulated blast furnace slab (GGBS), microfine slag, microfine cement, and cement products. 5. For the assessment year 2011-12, the assessee filed a return of income declaring total income of ₹ 23,28,174/- after setting off the brought forward loss of ₹ 4,45,36,935/-. The assessment officer (AO) vide order dated 31.03.2014 assessed under Section 143(3) of the Income Tax Act, 1961 (said Act) and determined the total income of the assessee at ₹ 88,47,561/- after making addition of ₹ 65,19,381/- to the returned income of the assessee. 6. The Principal Commissioner of Income Tax (PCIT) vide order dated 24.03.2016 made under Section 263 of the said Act invoked his revisional jurisdiction and set aside the assessment order dated 31.03.2014 on the ground that the same was both erroneous and prejudicial to the interest of the Revenue since the brought forward loss of ₹ 4,45,36,935/- was allowed to be set off against the income from the capital gains of the assessee during the relevant assessment year, though, the same was not liable under Sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e law laid down in Express Newspapers Ltd. (supra) but rather is consistent with the decisions of the Hon'ble Supreme Court in Chugandas and Co. (supra) and Cocanada Radhaswami Bank Ltd. (supra). 10. Mr. Pardiwala also pointed out that the ITAT's decision is entirely consistent with the decision of the ITAT in Digital Electronics Ltd. v. Additional CIT 135 TTJ (Mumbai) 419, in which it is held that the unabsorbed business losses could be set off against the capital gains charged under Section 50 of the said Act. He submits that this Court in CIT v. Hickson and Dadajee (P.) Ltd. - (2020) 122 Taxmann.com 94 (SC) has noted the statement of the learned counsel appearing on behalf of the Revenue that the decision of the ITAT in Digital Electronics Ltd. (supra) had been accepted by the Revenue. He, therefore, submitted that it is now not open to the Revenue to urge any position contrary to that expressed in Digital Electronics Ltd. (supra). 11. Mr. Pardiwala submitted that in this matter there is no dispute that the assessee had sold one of its business undertaking namely the undertaking relating to the GGBS business and made a profit of ₹ 4,74,16,156/-. He su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the written down value, but does not exceed the original cost price, the difference between the original cost and the written down value shall be deemed to be profits of the year previous to that in which the sale takes place, that is to say, the difference between the price fetched at the sale and the written down value is deemed to be the escaped profits for which the assessee is made liable to tax. As the sale price was higher than the written down value, the difference represents the excess depreciation mistakenly granted to the assessee. Therefore, in substance, brings to charge an escaped profit or gain of the business carried on by the assessee. 17. Applying this reasoning, the ITAT, concluded that from out of the income of ₹ 4,74,16,156/- from the sale of the GGBS business undertaking, at least an amount of ₹ 2,84,31,062/- was nothing but the recoupment of depreciation which was allowed as a business deduction and therefore, this amount was like business income even though the same may have been assessed under the head capital gains for computing the total income in terms of the provisions of the ITAT. According to us, the view taken by the ITAT in this m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... computed under section 10 read with section 6(iv) and not in respect of all receipts which may be regarded as income of the business. The schemes of section 25(3) and section 26(2), proviso, are different. The first grants an exemption because there has been a double levy of tax, and an intention to exempt all income, profits, and gains of business from taxation may be attributed to the legislature. Section 26(2) fastens liability of the predecessor, if he cannot be found, upon the successor and must be strictly construed. The legislature has imposed by section 26(2) liability upon the successor to be assessed for profits earned in the business carried on by his predecessor, and unless there is a clear intention expressed in the statute to include in that expression what in reality is not income, but is deemed income, the liability to assessment would justifiably be limited to profits o the business which is computable under section 10. 21. Thus, it is clear that the observations in Express Newspapers Ltd. (supra) were in the context of the specific provisions of Section 26(2) of the I.T. Act, 1922, and the same were not intended to be of some general application as contended by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 16 invoking his revisional jurisdiction under Section 263 of the said Act. However, the PCIT, held that the decision of the ITAT in Digital Electronics Ltd. (supra) was made without taking into consideration the Apex Court decision given in identical factual text in the case of Express Newspapers Ltd. . The PCIT further relied upon the decision of the Special Bench Bengaluru in Nandi Steels Ltd. (supra), which had again relied upon Express Newspapers Ltd. (supra) and chosen to interpret the said decision widely and not restrictively. 26. In Hickson and Dadajee (P.) Ltd. (supra) the first substantial question of law was whether on the facts and in the circumstances of the case and law, the ITAT was justified in allowing set-off of brought forward business loss against deemed short-term capital gains arising from the sale of building and plant and machinery. The ITAT, in the said case, had allowed the appeal of the respondent-assessee on the issue of set-off of the brought forward losses against deemed short term capital gains arising on the sale of building, plant, and machinery following the decision of its coordinate bench in Digital Electronics Ltd. (supra). In Digital Electr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns of the Hon'ble Supreme Court in the case of Chugandas Co. (supra), Cocanada Radhaswami Bank Ltd. (supra) and the decision of this Court in Hickson and Dadajee (P.) Ltd. (supra) . Therefore, there is no point in dilating on the first substantial question of law when the second substantial question of law which relates to the merits will have to be answered against the Revenue and in favour of the assessee. 30. Besides, Mr. Pardiwala, the learned counsel for the assessee based on instructions from the assessee has fairly stated that the assessee will pay proportionate tax on the basis that the AO allowed excess set off to the extent of ₹ 22,34,366/-. In fact, even the ITAT, in paragraph 10 of its order had held that the AO, if at all, had allowed excess set-off of ₹ 22,34,366/- and therefore the appeal of the assessee is partly allowed . This would mean that the assessee was still to pay proportionate tax since the AO had allowed excess set-off of ₹ 22,34,366/-. 31. Accordingly, this appeal is disposed of by making the following order: (a) The substantial questions of law as framed are decided against the Revenue and in favour of the assessee ; ..... X X X X Extracts X X X X X X X X Extracts X X X X
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