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2018 (8) TMI 1186 - AT - Income TaxSet off of unabsorbed business loss - set off against Short Term Capital Gain U/s. 50 - Held that - u/s.72 of the Act gains out of business or profession carried on by the assessee and assessable to tax though under the head other than income from business and profession of that assessment year can be set off against loss under the head profits and gains of business or profession carried forward from earlier years. - further, income arising out of a sale of business asset though not taxable as profits and gains from business or profession is an income in the nature of business and unabsorbed business losses can be set off against such income. Following the decision in the case of Digital Electronics Ltd.vs. Addl. CIT 2010 (10) TMI 722 - ITAT, MUMBAI , Decided in favor of assessee.
Issues Involved:
1. Set off of business loss against deemed gain under section 50 of the Income Tax Act, 1961. Detailed Analysis: Issue 1: Set off of business loss against deemed gain under section 50 of the Income Tax Act, 1961 The appellant filed an appeal against the order of the Commissioner of Income Tax(Appeals) for Assessment Year 2011-12. The appellant claimed set off of unabsorbed business loss against short term capital gain under section 50 of the Act. The appellant sold a building, a business asset, resulting in a short term capital gain of ?7,12,735. The appellant sought to set off the unabsorbed business loss of ?3,81,997 against this gain, with the balance to be taxed. The Central Processing Centre (CPC) calculated the gain at ?7,12,735, rejecting the appellant's claim for set off. The appellant's rectification application was also rejected by the CPC and the Commissioner, leading to the current appeal. During the appeal hearing, the appellant argued that the gain from the sale of the business asset should be considered as business income, allowing for the set off of carried forward business losses. The appellant relied on a judgment by a Co-ordinate Bench in Digital Electronics Ltd. vs. Additional Commissioner of Income-tax to support this argument. The Departmental Representative, on the other hand, supported the order of the first appellate authority. The Tribunal observed that the Commissioner did not consider the claim for setting off carried forward business loss against the capital gain under section 72(1)(i) of the Act. The Tribunal noted that as long as gains are from business or profession assessable for that year, they can be set off against loss under the head "profits and gains of business or profession" carried forward from earlier years. The Tribunal referred to the judgment in Digital Electronics Ltd. vs. Additional Commissioner of Income-tax, which allowed set off of business losses against income from the sale of a business asset, even if not taxable as "profits and gains from business or profession." Following this precedent, the Tribunal allowed the appeal, directing the Assessing Officer to grant the set off of business loss against the capital gains. In conclusion, the Tribunal allowed the appeal of the assessee, holding that the set off of business loss against the income of capital gains was justified under the provisions of the Income Tax Act, 1961. This detailed analysis provides a comprehensive overview of the judgment, focusing on the issue of setting off business loss against deemed gain under section 50 of the Income Tax Act, 1961.
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