2012 (7) TMI 433 - AT - Income Tax

Addition on account of surrender of income - set off the surrendered income against business losses Held that - Offer of surrender cannot effect the profit or loss declared by the assessee for that year. It will be added if there is profit and it will be reduced if there is a loss - books of accounts were produced before Ld Assessing Officer during the course of assessment proceedings and the Ld Assessing Officer has not pointed out any difference/discrepancy in the audited accounts - Provisions of section 71(1) clearly allows the set off of loss from one head against income from another head - computation of total income of an assessee as per provisions of section 71 & 72 of the Income Tax Act, 1961 and the assessee has computed its total income keeping in view these provisions, therefore, we do not see any reason to interfere in the order of Ld CIT(A) In favor of assessee

Summary

Issues:
1. Deletion of additional income offered by the assessee for taxation.
2. Set off of surrendered income against business losses.

Analysis:
1. The appeal was filed by the revenue challenging the deletion of an addition of Rs. 40,00,000/- offered by the assessee as additional income for taxation. The Assessing Officer had assessed this amount as income without considering the set off from the losses. The assessee contended that the offer of surrender should not affect the profit or loss declared and relied on section 71(1) for set off provisions. The CIT(A) deleted the addition after verifying the factual position and concluded that the surrendered income was declared under section 69 and was to be taxed under the income from other sources, not as a separate addition for tax payment. The Tribunal upheld the CIT(A)'s decision, emphasizing that the surrendered income formed part of the total income computation and did not warrant a separate tax liability.

2. The second issue revolved around the set off of surrendered income against business losses. The revenue argued that surrendered income under section 69 cannot be set off against business loss, citing judgments of the Gujarat High Court and Punjab & Haryana High Court. However, the assessee contended that income tax is imposed on the total income after setting off losses, and relied on a Madras High Court case for support. The Tribunal noted that the cited cases by the revenue did not align with the present case's facts, as they involved different scenarios where surrendered income was not considered business income. The Tribunal emphasized that the present case was a straightforward computation of total income under the Income Tax Act, and as the assessee had followed the provisions of sections 71 and 72, there was no basis to interfere with the CIT(A)'s order. Consequently, the appeal by the revenue was dismissed, affirming the CIT(A)'s decision.