2016 (9) TMI 1576 - AT - Income Tax

Set off of inter head adjustment of income from other sources against business loss of 10A unit - DR explained that it is in the nature of exempted business loss - AR submitted that under the provisions of sec. 70(1), set off of loss for one source against income from another source under the same head of income is allowed - HELD THAT - As relying on material on record and judicial decisions and provisions of sec. 70 of the Act, we are of the opinion that the assessee-company is eligible for set off of business loss against other income including interest under the same head. And the Assessing Officer is directed to allow set off of the other income with business loss determined u/s 10A of the Act. - Decided in favour of assessee.

Summary

Issues:
Denial of set off of income from other sources against business loss u/s 10A unit.

Analysis:
The appeal was against the order of the Commissioner of Income-tax (Appeals)-15, Chennai, regarding the denial of set off of inter head adjustment of income from other sources against business loss of a 10A unit for the assessment year 2003-04. The Assessing Officer found that the admitted loss included set off claimed by the assessee of interest on bank deposit, dividends, and miscellaneous income, which were claimed as exempt and set off. The Assessing Officer issued a notice u/s 148 as income was believed to have escaped assessment. The Assessing Officer computed the business loss and subjected interest income and miscellaneous income to taxation, resulting in total income of a certain amount.

The CIT(A) upheld the Assessing Officer's action, stating that there should be a nexus between the income earned in respect of the industrial undertaking. The appellant argued that under sec. 70(1), set off of loss for one source against income from another source under the same head of income is allowed. The appellant relied on judgments supporting the set off of losses of a unit against income of another unit under the same head of income. The Tribunal considered the circular issued by the Government of India, Central Board of Direct Taxes, and held that the assessee is entitled to set off losses against the income of the eligible unit, as long as the loss was not liable to be excluded.

Therefore, the Tribunal, after considering the facts, material on record, judicial decisions, and provisions of sec. 70 of the Act, held that the assessee is eligible for set off of business loss against other income, including interest, under the same head. The Assessing Officer was directed to allow set off of the other income with the business loss determined u/s 10A of the Act.

In conclusion, the appeal of the assessee was allowed, and the order was pronounced on Friday, 23rd September 2016, at Chennai.