2012 (2) TMI 557 - AT - Income Tax

Summary

Issues Involved:
The issues involved in the judgment are the set off of business loss/unabsorbed depreciation against short term capital gains u/s.50 on sale of depreciable assets and the interpretation of the term "profits and gains of any business or profession" u/s 72 of the Income Tax Act, 1961.

Issue 1: Set off of Business Loss/Unabsorbed Depreciation against Short Term Capital Gains u/s.50:
The Assessee, a company, appealed against the order of the ld CIT(A) Central-5, Mumbai for A.Y. 2006-07, which disallowed the set off of business loss/unabsorbed depreciation against short term capital gains u/s.50 on sale of depreciable assets. The AO held that as per Sec.72 of the Act, loss under the head "Profits and gains of business or profession" can only be set off against profits of any business in the subsequent year. The Assessee argued that the profit on sale of assets, though short term capital gain, was income from business and should be allowed for set off. However, the AO maintained that the loss adjustment was not permissible as there was no loss under any heads of income during the year. The ld CIT(A) upheld the AO's decision, leading to the appeal before the Tribunal.

Issue 2: Interpretation of "Profits and Gains of Any Business or Profession" u/s 72:
During the appeal hearing, the parties referred to a Special Bench decision in the case of M/s. Nandi Steels Ltd. Vs. A.C.I.T., where the issue of set off of brought forward loss against income from capital gains u/s 72 was discussed. The Tribunal emphasized the term "profits and gains of any business or profession" in Sec.72(1) of the Act. It was clarified that only business loss can be carried forward u/s 72 and set off against business income assessable for the relevant assessment year. The Tribunal concluded that the capital gains on sale of capital assets should not be set off against brought forward loss from earlier years. Citing the decision in the case of M/s Express Newspapers Ltd., the Tribunal rejected the Assessee's grounds of appeal, aligning with the revenue.

In conclusion, the Tribunal dismissed the appeal by the Assessee, upholding the decisions of the ld CIT(A) and the AO. The judgment emphasized the specific provisions of the Income Tax Act regarding the set off of losses against income, particularly in the context of short term capital gains and business income.