2014 (7) TMI 511 - AT - Income Tax

Non-set off of the brought forward business loss against the speculation income Held that - The Revenue s objection to the assessee s claim as misplaced - The section governing the carry forward and set off of business loss, other than of a speculation business, is covered by section 72 and not by section 73, which is only qua the carry forward and set off of speculation loss, i.e., loss of a speculation business, which stands, to the extent brought forward, already allowed set off by the AO it would include speculation business as well, whether it is so by virtue of section 43(5) read with Explanation to s. 28 or Explanation 2 to section 73 - The brought forward business loss is to be allowed set off of against the speculation income assessable for the current year - the quantum of the brought forward loss liable to be set off is that assessed for the relevant years, and not that as returned - the figures of the brought forward business loss adopted by the assessee include (unabsorbed) depreciation as well thus, the matter is remitted back to the AO Decided in favour of Assessee.

Summary

Issues Involved:
1. Maintainability of non-set off of brought forward business loss against speculation income.

Detailed Analysis:

Issue 1: Maintainability of non-set off of brought forward business loss against speculation income:
The appeal was against the Order by the Commissioner of Income Tax (Appeals) dismissing the assessee's appeal contesting its assessment under section 143(3) of the Income Tax Act, 1961 for the assessment year 2006-07. The primary issue in this case was the non-set off of the brought forward business loss against the speculation income for the current year. The assessee sought to adjust the speculation income against the brought forward speculation loss and the balance against the brought forward business loss. However, the Assessing Officer accepted the claim only with respect to the speculation loss, disallowing the set off of the brought forward business loss based on section 73 of the Act. The CIT(A) upheld the decision, noting that the loss claimed by the assessee was reflected as business loss and speculation loss separately in the computation of income for the relevant assessment year.

Upon hearing the parties and examining the material on record, the Tribunal found the Revenue's objection to be misplaced. The Tribunal clarified that the carry forward and set off of business loss, other than speculation business loss, is governed by section 72, while section 73 pertains to speculation loss. The Tribunal ruled that the brought forward business loss should be allowed to set off against speculation income assessable for the current year. However, the Tribunal directed the Assessing Officer to determine the quantum of the brought forward loss eligible for set off based on the assessed figures for the relevant years and to consider the unabsorbed depreciation as well. The Tribunal allowed the assessee's claim in principle and remanded the matter back to the Assessing Officer for appropriate action in accordance with the relevant provisions of the Act.

In conclusion, the Tribunal allowed the assessee's appeal on the terms mentioned, emphasizing the correct application of sections 72 and 73 of the Income Tax Act, 1961, in determining the set off of brought forward business loss against speculation income for the assessment year 2006-07.