2019 (7) TMI 301 - HC - Income Tax

Merger of order passed u/s 254(2) with main order of Tribunal - set off of brought forward losses and unabsorbed depreciation - against capital gains arising from sale of a business undertaking - AO held that unabsorbed depreciation cannot be said set off as against capital gain u/s 32(2) - applicability of Section 72 - CIT(A) allowed the appeal - order of appeal was upheld bu Tribunal despite he mooved a MA stating that it has not considered adjustment of business loan against capital gain, same was allowed. against that MA tribunal filed appeal which was approved by HC in judgment reported in 2008 (3) TMI 328 - MADRAS HIGH COURT on the ground that no question of law much less a substantial question of law is involved. HELD THAT - The Revenue cannot prosecute the present case as the order passed in the miscellaneous petition stood merged with the earlier order and the composite order being questioned before the Court and the challenge at the instance of the revenue having been rejected in 2008 (3) TMI 328 - MADRAS HIGH COURT , the present appeal should also fail. Accordingly the appeal is dismissed on the ground that there is no substantial question of law involved in the case as also for the reasons set out.

Summary

Issues:
- Interpretation of provisions of the Income Tax Act regarding set off of brought forward losses against capital gains.

Analysis:
The High Court of Madras heard an appeal filed by the Revenue under Section 260 A of the Income Tax Act, 1961 against an order passed by the Income Tax Appellate Tribunal Madras. The substantial question of law raised was whether brought forward losses could be set off against capital gains from the sale of a business undertaking, contrary to Section 72 of the Income Tax Act. The Assessing Officer initially held that unabsorbed depreciation cannot be set off against Long Term Capital Gains and that the assessee cannot claim set off against capital gains. However, the Commissioner of Income Tax (Appeals) decided in favor of the assessee, allowing the set off. The Tribunal also confirmed this decision in a common order for multiple appeals.

The High Court noted that the Tribunal had allowed the set off of carried forward business losses against the profit assessed as capital gains. The Revenue filed an appeal before the High Court challenging this decision. However, the High Court referred to a previous judgment in a similar case where it was held that no substantial question of law was involved. Therefore, the High Court dismissed the appeal, stating that there was no substantial question of law in the case and that the order passed by the Tribunal stood confirmed.

In conclusion, the High Court upheld the decision of the Tribunal to allow the set off of carried forward business losses against capital gains, as there was no substantial question of law involved in the case. The judgment emphasized the interpretation of provisions of the Income Tax Act and the application of relevant legal principles in determining the tax treatment of losses and gains for the assessee.