2019 (4) TMI 1159 - AT - Income Tax

Set off of brought forward business loss and brought forward long term capital loss against the deemed short term capital gain computed u/s 50 - CIT-A allowed the claim - HELD THAT - High Court in M/S. MANALI INVESTMENT 2013 (12) TMI 333 - BOMBAY HIGH COURT has considered the issue of allowance of set off of long term capital loss in terms of section 74 of the Act against the short term capital gain computed u/s 50. Hon ble High Court has observed that by virtue of Section 50 of the Act, only the capital gains is to be computed in terms thereof and be deemed to be short-term capital gains and this deeming fiction is restricted only for the purposes of Section 50 of the Act but the benefit of set off of long term capital loss under section 74 of the Act is to be allowed. Hon ble High Court has also followed its decision in the case of CIT vs. . Ace Builders (P.) Ltd, 2005 (3) TMI 36 - BOMBAY HIGH COURT As regards to set off of business loss against gain on sale of depreciable asset of factory building by the assessee, We find that the co-ordinate Bench of the Tribunal in the case of M/s. Raj Shree Roadlines vs ITO 2013 (3) TMI 811 - ITAT MUMBAI for A.Y . 2007-08 has considered the issue of business loss of unabsorbed depreciation and eligible business loss can be set off against short term capital gain computed u/s 50 of the Act. We find that the Tribunal after considering the provisions of section 32(2), 72(2) and 73(3) of the Act opined that while deciding the issue of carrying forward of loss/unabsorbed depreciation and the amendment made in these section from time to time are applicable for carrying forward of depreciation/loss with effect from 1.4.2002. In the case of Manali Investment 2013 (12) TMI 333 - BOMBAY HIGH COURT wherein, it is held that short term capital gain computed under section.50 of the Act can be set off against brought forward capital loss and also brought forward business loss. Accordingly, we are of the considered view that the CIT(A) has rightly allowed the claim of the assessee and we affirm the same - Decided against revenue

Summary

Issues:
- Allowance of set off of brought forward business loss and brought forward long term capital loss against deemed short term capital gain.

Analysis:

1. The appeal pertains to the order of the Commissioner of Income Tax (Appeals) allowing the set off of brought forward business loss and brought forward long term capital loss against the deemed short term capital gain computed by the assessee. The Revenue raised two grounds challenging this decision.

2. The Assessing Officer disallowed the claim of set off of brought forward losses against short term capital gain, citing provisions of sections 72 and 74 of the Income Tax Act, which specify the types of losses that can be set off against specific types of income.

3. The Commissioner of Income Tax (Appeals) allowed the set off after considering the submissions of the assessee and relevant case laws. The CIT(A) referred to various decisions, including the Hon'ble Bombay High Court's rulings, supporting the set off of losses against short term capital gains.

4. The Revenue appealed the CIT(A)'s decision before the Tribunal, arguing that the set off was not permissible under sections 72 and 74 of the Act. The Departmental Representative contended that the CIT(A) erred in allowing the claim.

5. The Tribunal examined the issue in detail, citing the decision of the Hon'ble Bombay High Court in the case of Manali Investments, which held that set off of long term capital loss against short term capital gain is permissible under section 74. The Tribunal also referred to a previous case involving business loss set off against short term capital gain.

6. Relying on the precedents and legal provisions, the Tribunal upheld the CIT(A)'s decision, stating that the set off of brought forward business loss and brought forward long term capital loss against short term capital gain was allowable. The appeal of the Revenue was dismissed, affirming the decision of the CIT(A).

In conclusion, the Tribunal's detailed analysis and reliance on relevant legal precedents led to the dismissal of the Revenue's appeal, upholding the allowance of set off of brought forward losses against the deemed short term capital gain.