2024 (8) TMI 128 - HC - Income Tax

Exemption u/s 10 (2A) from share of income - notional net business loss - total loss was claimed to be carried forward to the next year under the head capital gain - ITAT set aside the order of CIT (Appeals) and held that the income set off derived by the assessee under the head capital gain was accessible as income under the head income from business or profession . The assessee was held to be a dealer in share and the matter was, therefore, remanded back to the AO - subsequently ITAT directed the AO to allow the carry forward of business loss to subsequent years. HELD THAT - As we find that the fall in the value has been worked out based on the market quotation in Ludhiana Stock Exchange, wherein prior to the right issue on 13.10.1992, last-cum-right price of the shares were Rs. 610/- per share and the first Ex.-right price of the share on 11.11.1992 was Rs. 400/- per share, resulting in fall in the price of the share by Rs. 210/- per share. This aspect has not been disputed by the revenue. We further find that the judgments passed by the Hon ble Supreme Court in Miss Dhun Dadabhoi Kapadia 1966 (10) TMI 52 - SUPREME COURT and Bombay High Court in K.A. Patch 1970 (2) TMI 39 - BOMBAY HIGH COURT have been followed by this Court in the case of Naveen Jindal vs. ACIT 2005 (8) TMI 44 - PUNJAB AND HARYANA HIGH COURT wherein identical issue was decided in favour of the assessee. Keeping in view that the question of law stand already decided and no substantial question of law arises for fresh adjudication before this Court, the appeal is dismissed.

Summary

Issues:
Challenge to ITAT order allowing appeal by assessee for assessment year 1993-1994 based on capital loss and exemption under Section 10 (2A) of the Act, 1961.

Analysis:
The revenue challenged the ITAT order allowing the appeal filed by the assessee for the assessment year 1993-1994. The counsel argued that the Tribunal erred in considering the notional net business loss due to a fall in the share price. The assessee claimed capital loss on equity shares and debentures, along with exemption under Section 10 (2A) of the Act, 1961. The Assessing Officer disallowed the claim for carry forward of capital loss, but the CIT (Appeals) allowed part of the claim. The Tribunal held that the income set off under "capital gain" was accessible as income under "income from business or profession," remanding the matter back to the AO.

The AO contended that gain or loss under "income from business or profession" arises only upon actual share transfer, not due to notional loss from share value fall. The case went through various levels of appeal, with the ITAT examining the matter in light of relevant judgments. The ITAT referred to the Supreme Court's ruling in a specific case and a Bombay High Court case, emphasizing that the method of calculating profits remains the same for capital gains and business profits. Based on these precedents, the ITAT set aside the AO's and CIT (A)'s orders, directing the AO to allow the carry forward of the business loss to subsequent years.

The fall in share value was calculated based on market quotations, and the judgments of the Supreme Court and Bombay High Court were followed. The Court cited a previous case where a similar issue was decided in favor of the assessee. As the question of law had already been settled, the Court dismissed the appeal, stating that no substantial question of law required fresh adjudication. All pending miscellaneous applications were also disposed of.