2017 (2) TMI 693 - AT - Income Tax

Non setting off carried forward business loss against the Capital Gain computed u/s 50 - sale of depreciable assets - Held that - The co-ordinate bench of Pune Tribunal in ACIT vs. Demech Heavy Equipments Pvt. Ltd. 2017 (2) TMI 652 - ITAT JAIPUR held that provision of section 50 makes explicitly clear that deemed fiction under sub-section 1 & 2 is restricted only to the mode of computation of capital gain contend in section 48 & 49 and legal fiction is to be deemed the capital gain as STCG and not to deemed asset as Short Term Capital Asset and accordingly the exemption u/s 54E cannot be denied on account of deemed fiction and the Tribunal held that assessee is entitled for setting off of brought forward loss from deemed STCG. In view of the above legal position as discussion by co-ordinate bench in the decision cited above, we are of the view that the assessee is entitled for setting off of carried forward business loss against the capital gain computed u/s 50 of the Act. Thus, following the decision of co-ordinate bench, the appeal of the assessee is allowed. The AO is directed to allow the set off of carried forward business loss against the Capital Gain computed u/s 50 of the Act. - Decided in favour of assessee

Summary

Issues:
1. Delay in filing the appeal due to non-service of impugned order.
2. Whether carried forward business loss can be set off against capital gain computed under Section 50 of the Income Tax Act.

Issue 1: Delay in filing the appeal due to non-service of impugned order

The appeal by the assessee was directed against the order of the Ld. Commissioner of Income-tax (Appeals) for Assessment Year 2007-08. The appeal was found to be barred by 375 days of limitation period due to non-service of the impugned order. The assessee filed an application for condonation of delay, explaining that the order was not served at the given address, as the registered office was closed, and the affairs were being managed by another individual. The delay was also attributed to financial constraints preventing the timely filing of the appeal. The Tribunal, after considering the contentions and verifying the non-service of the order, decided to condone the delay and proceed with hearing the appeal on merit.

Issue 2: Set off of carried forward business loss against capital gain under Section 50

The assessee had filed the return of income for the relevant assessment year, claiming set off of carried forward business loss against the total income. However, the Assessing Officer disallowed the set off of the business loss against the capital gain computed under Section 50 of the Act. On appeal, the action of the AO was confirmed. The main issue revolved around whether the carried forward business loss could be set off against the capital gain. The assessee argued that the set off was permissible and relied on precedents from various Tribunals. The Tribunal analyzed the legal provisions and cited decisions from Mumbai and Pune Tribunals to support the contention that the assessee was entitled to set off the carried forward business loss against the capital gain computed under Section 50 of the Act. The Tribunal allowed the appeal, directing the AO to permit the set off as claimed by the assessee.

In conclusion, the Tribunal decided to condone the delay in filing the appeal due to non-service of the impugned order and allowed the appeal on the issue of setting off carried forward business loss against the capital gain under Section 50 of the Income Tax Act. The decision was based on legal interpretations and precedents supporting the assessee's claim for the set off.