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TMI Blog2021 (1) TMI 474X X X X Extracts X X X X X X X X Extracts X X X X ..... -97 and said submissions was before Ld. CIT(A) in compilation and issue was not in dispute. 2. Ld. CIT(A) erred in holding that legal submission made by appellant that prior to amendment of section 70 & 74 by Finance Act, 2002, carry forward loss was only capital loss without any distinction between short term and long term is not falling within the directions of ITAT under its order without properly appreciating the fact that all the grounds of appeal including additional ground was set aside for adjudication under ITAT order. 3. Ld.CIT(A) failed to appreciate that in the written submission filed before Ld. CIT(A), legal submissions were made and reliance was placed on Special Bench decision in case of Kotak Mahindra Capital Co. Ltd. 148 TTJ 393 (Mumbai) (SB) 4. It is prayed that capital gain arising during the year be adjusted against carry forward loss for A.Y. 2001-02. 3. Briefly stated, the facts of the case are that the assessee-company filed its return of income for the assessment year (AY) 2005-06 on 29.10.2007 declaring Nil income under the normal provisions and Rs. 12,49,990/- as book profit u/s 115JB of the Act. It is a non-banking public financial company engaged ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (URO) etc. Some of these decisions were not available to the AO / CIT (A) at the appropriate point of time. Therefore, in our considered opinion, the issue should be remanded to the file of the CIT (A) with a direction to examine the applicability of the said decisions to the facts of the present case and decide the grounds as well as the additional grounds as the case may be after granting a reasonable opportunity of being heard to the assessee. Accordingly, ground no.2 and 3 as well as the additional grounds are allowed in the above mentioned manner. 8. In connection with ground nos. 3 & 4, Ld Counsel for the assessee brought our attention to the fact that the provisions for diminution of the value of investment constitutes an allowable deduction for the purpose of computing the book profits and the same issue stands covered by the decision of the ITAT, Kolkata Bench in the case of DCIT vs. Mcleod Russel India Ltd (2013) 24 ITR 262 (Kolkata) and the relevant conclusion of the said decision reads as under: "Conclusion:- Assessee was held entitled to deduction of provision for diminution in value of investment and provision for contingency written back in P & L Account w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no distinction between the short term capital gain and long term capital gain for carry forward and set off. The reasons given by the Ld. CIT(A) are that the scope of the proceedings before him is limited by the direction contained in the order of the Tribunal. 5. Before us, the Ld. counsel for the assessee submits that the appellant acquired depreciable plant in AY 1996-97, being electric meters which were disposed off during the year giving rise to capital gain of Rs. 39,99,990/- taxable u/s 50 of the Act. It is explained that total capital gain earned during the year under consideration amounted to Rs. 54,38,407/- ; balance capital gain was short term capital gains on mutual funds; said capital gain was set off against carry forward loss for AY 2001-02 of Rs. 90,12,331/-. 5.1 It is explained by the Ld. counsel that the Tribunal set aside all the grounds to the Ld. CIT(A). Further, it is explained by him that the issue herein is covered in favour of the assessee by the order of the Special Bench of the Tribunal in Kotak Mahindra Capital Co. Ltd. v. ACIT 148 TTJ 393 (Mum) (SB), where in AY 2004-05, the assessee returned short term capital gain of Rs. 2.22 crore, which was set o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rence to your honour's query regarding loss on sale of fixed assets we have to state that certain buses leased to M.S.R.T.C, numbering 8, were abandoned by the said Corporation. The assessee took delivery thereof and sold for Rs. 8.0 lacs. The written down value of these buses were Rs. 16,48,777/-, thus resulting in loss of Rs. 8,48,777/-. The electric meters leased to H.S.E.B. were sold during the year for Rs. 39,99,990/- being written down value of Rs. 40,01,641/- thus there has been a loss of Rs. 1,651/-. While filing the return of income assessee has included total sales price of electric meters in the short term capital gain u/s 50 of Rs. 39,99,990/-. As the assessee has claimed 100% depreciation on the said meters in AY 1996-97 it has been denied by the department. The assessee is agitated against the same and has filed an appeal which is still pending for disposal. In view of the same it is submitted that if the assessee is not allowed 100% depreciation in AY 1996-97, the short term capital offered for taxation u/s 50 will not be taxable and assessment is to be revised accordingly." 7.1 In the order dated 08.04.2010, the Ld. CIT(A) in appeal No. CIT(A)- 19/IT-163/07-08 has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to Haryana State Electricity Board on which depreciation was denied in 1996-97. The depreciation being denied in A.Y.1996-97 no capital gain will arise in the current year on sale of said Plant and Machinery. It is pleaded that the issue has not been considered by the Ld. Assessing Officer. 5.3. I have carefully considered the facts of the case, the submissions of the appellant, assessment order. It is noticed that in A.Y. 1996-97 on plant and machinery leased to Haryana State Electricity Board 100% depreciation was claimed but the claim was denied by the A.O. treating the lease transaction as financing arrangement. The CIT(A) allowed the claim of the appellant and the departmental appeal is pending before ITAT. As on date the order of CIT(A) stands for A.Y. 1996-97 the A.O. ought to have given effect to the order of CIT(A) for A.Y. 1996-97 & if not given so far the same may be given now. Given these facts transaction in current year will give rise to capital gains. With these directions ground 2 is dismissed." 7.3 In view of the reply dated 19.10.2007 filed by the assessee before the AO and the order of the Ld. CIT(A) in appeal No. CIT(A)-19/IT 125/9(1)/10- 11 dated 06.09.2011, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act and the provision of section 74(1)(b) which was introduced w.e.f. the assessment year 2003-04 grants set off of long term capital loss only against long term capital gain, the assessee's counsel contended before the Tribunal that the assessee had already, prior to the amendment, a vested right to set off the long term capital loss against future short term capital gains. It was further submitted by him that the said vested right cannot get divested, unless specifically withdrawn either explicitly or by implication and further that the amendment brought w.e.f. AY 2003-04 cannot be given retrospective effect as there are no express words attributing retrospective. It was argued by the Ld. Departmental Representative before the Tribunal that the long term capital loss in question was incurred prior to the AY 2003-04 and that section 74(1)(b) was inserted w.e.f. AY 2003-04, and that as per the provisions of that section, long term capital loss cannot be set off against the short term capital gain and that Finance Act and law as on 1st April of that year is applicable. After careful considerations, the Tribunal held that : "9. The undisputed fact in this case is that the long term ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Tax Act, 1922, ss. 12B, 22(2A), 24(2B) - Income Tax Act, 1961, ss. 74(1)(b), 80, 297. This case law in our considered opinion supports the case of the assessee. The settled position of law is that all amendments are prima facie prospective, unless it is expressly stated that the same is retrospective. 13. In view of the above discussion, we accept the contention of the assessee and direct the AO to grant set off of long term capital loss incurred by the assessee in the assessment year 2002-03 against any income assessable under the head "Capital Gains" for any subsequent assessment year." 7.4.2 In Manali Investments (supra), the issue was not allowing set off of long term capital gain on the sale of depreciable assets against the brought forward loss from long term capital assets. The assessee was engaged in the business of investment and finance. During the AY 2005-06, it sold certain depreciable capital assets in the shape of Meters & Transformers for a total consideration of Rs. 1,45,99,988/-. The gain on the same was shown as long term capital gain, which was set off against the brought forward loss from long term capital assets. The core of controversy was about the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid to be more firmly established than this that the legislature uses appropriate language to manifest its intention. As already noted, the provisions of section 74(1) as amended with effect from 1-4- 2003, going by the plain language and grammatical construction used therein, make it very clear that the same would apply only to the long-term capital loss relating to assessment year 2003-04 and onwards and govern the carry forward and set off of such loss. In other words, the restriction imposed therein in terms of setting off the long-term capital loss only against long-term capital gain and not against the shortterm capital gain is applicable only in relation to the long-term capital loss incurred by the assessee in assessment year 2003-04 and subsequent years and the same is not applicable to the long-term capital loss relating to and brought forward from the period prior to assessment year 2003-04 which shall be governed by the provisions of section 74(1) as stood prior to amendment made with effect from 1-4-2003. The words used in the amended provisions of section 74(1) clearly indicate this position and it appears to be the intention of the legislature. If that was not the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ort term capital loss and long term capital loss w.e.f. 01.04.2003 by providing for one-way compulsory set off of short term capital loss against long term capital gains, while denying set off of long term capital loss against short term capital gains. Since the law regarding losses under the head "Capital gains" has undergone changes from time to time, a question often arises whether the law that should prevail is the law pertaining to the year in which loss was suffered or the year in which set off is claimed. The answer is where a right for more liberal treatment is already earned cannot be lost because of subsequent restriction, since vested right cannot be divested, unless specifically withdrawn either explicitly or by implication. In other words, existing rights of set off cannot be treated as withdrawn. 7.7 As mentioned earlier, in the instant case, the appellant acquired depreciation plant in AY 1996-97, being electric meters which were disposed off during the year giving rise to capital gain taxable u/s 50 of Rs. 39,99,990/-. Total capital gain earned during the year amounted to Rs. 54,38,407/-, balance capital gain was short term capital gain on mutual funds. Said capi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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