9911796707
|
Home
Issues Involved:
1. Classification of the asset as business asset or capital asset. 2. Nature of profit arising from the sale of rights in the property. 3. Set off of business loss and unabsorbed depreciation against income from license fees. 4. Entitlement to set off of unabsorbed loss and depreciation of earlier years. Summary: Issue 1: Classification of the Asset The primary issue was whether the rights in the property 'Nirmal building' acquired by the assessee were a business asset forming stock-in-trade or a capital asset. The Tribunal's finding that the asset was a business asset was challenged by the Revenue. The court held that the asset was not a business asset but a capital asset. The court emphasized that the transaction was a sole transaction with no connection to the ordinary business activities of the assessee. The intention to earn profit alone was not sufficient to classify the asset as stock-in-trade. The court concluded that the Tribunal's decision was unjustified and answered the question in the negative, favoring the Revenue. Issue 2: Nature of Profit The second issue was whether the profit arising from the sale of rights in the property was business income or capital gain. Given the court's finding on the first issue that the asset was a capital asset, it followed that the profit from its sale was not business income but capital gain. The court answered this question in the negative, favoring the Revenue. Issue 3: Set Off of Business Loss and Unabsorbed Depreciation The third issue concerned the set off of business loss and unabsorbed depreciation against income from license fees. The court noted that unabsorbed loss from one head of income cannot be set off against income under another head in a subsequent year. Since the property was not stock-in-trade, the license fee income could not be considered business income. Consequently, the question became academic and was not answered. Issue 4: Entitlement to Set Off of Unabsorbed Loss and Depreciation The fourth issue was whether the assessee was entitled to set off unabsorbed loss and unabsorbed depreciation of earlier years. The court held that the assessee's business continued despite a shift to job work, and thus, the assessee was entitled to set off. The court clarified that unabsorbed loss could only be adjusted against income under the same head as per section 72(1)(ii) of the Act. However, unabsorbed depreciation could be set off against income under any head in subsequent years as per section 32. The court answered this question affirmatively, favoring the assessee. Conclusion: The court ruled in favor of the Revenue on the first two issues, determining that the asset was a capital asset and the profit was capital gain. The third issue was deemed academic and not answered. The fourth issue was resolved in favor of the assessee, allowing the set off of unabsorbed loss and depreciation under the specified conditions. No order as to costs was made.
|
