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TMI Blog2022 (9) TMI 402X X X X Extracts X X X X X X X X Extracts X X X X ..... share of loss allocated by the partnership firm, was legally unsustainable. CIT(A) following the decision of the coordinate bench of ITAT, Kolkata in assessee s own case [ 2018 (2) TMI 868 - ITAT KOLKATA] deleted the addition in the present case on account of share of loss from the partnership firm while computing the book profit u/s. 115JB of the Act. Since there is no change in the facts and law in the present case before us, we respectfully following the decision of the Co-ordinate bench of ITAT, Kolkata in assessee s own case find no reason to interfere with the finding given by the Ld. CIT(A) in deleting the addition made by the Ld. AO. Thus, no interference is called for in the relief granted by the ld. CIT(A). These grounds of appeal are thus dismissed. Ingenuine sale of shares by the assessee through off market trade - Carry forward of long term capital loss on off market sale of shares of eleven listed companies - Revenue contends that assessee by effecting off market sale of the said shares has perpetuated a mischief and the transaction is a colorable device - case of the assessee is that it has sold the shares of listed companies on the price range on Bombay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... account of share of loss of the assessee in the partnership firm while computing book profit u/s. 115JB of the Act. Ground no. (c) raised by the revenue relates to allowance of long term capital loss of Rs.3,79,12,054/- for carry forward and set off as held by the Ld. CIT(A). 3. Before us, Shri Akkal Dudhwewala, FCA represented the assessee and Smt. Ranu Biswas, Addl. CIT, DR represented the department. 4. Brief facts of the case are that assessee is engaged in the business of trading and investment in shares and securities, running financial consultancy services. Return of income was filed on 26.09.2014 reporting a total income of (-) Rs.69,89,990/-. In the assessment completed by the Ld. AO, he had disallowed the share of loss of Rs. 7,724/- from the partnership firm in assessing the book profit u/s 115JB of the Act. Ld. AO did not accept the explanation of the assessee and held that the share of loss from the partnership firm is liable to be added back to net profit for MAT computation u/s 115JB of the Act. 4.1 On the other issue of disallowance of long term capital loss of Rs.3,79,12,054/-, ld. AO disallowed it and also did not allow it to carry forward for subsequent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n case and submitted that the present case is squarely covered by the said order, there being no change in the facts and circumstances and the applicable law. 6. On the second issue of claim of carry forward of long term capital loss, ld. Counsel for the assessee submitted that in the return of income assessee had disclosed loss of Rs.3,79,12,054/- which it had incurred on sale of shares of eleven (11) companies listed on Bombay Stock Exchange. He submitted that assessee had acquired these shares in the prior years at a cost of Rs.26,56,82,551/- for which the aggregate indexed cost was Rs.36,38,85,241/-. These shares were sold by the assessee in the year under consideration in off-market transaction, realizing gross sale consideration of Rs.32,59,73,187/-. Ld. Counsel stated that full particulars in respect of purchase and sale of these shares were furnished before the ld. AO along with DMAT statement to establish that all the shares were transferred from its DMAT account to the DMAT account of the buyers. He also submitted that the sale consideration was received through proper banking channel for which bank statements were furnished. It was also brought on record in the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, service tax, stamp duty, etc. These costs and expenses, according to him totals up to Rs.11,99,073/- which were avoided by executing the transaction of sale off-market. It was further stated that on the sale of these shares off-market, the assessee per se did not incur any monetary loss but earned profit. According to him, the loss was incurred as a consequence of deduction claimed for indexed cost of acquisition in terms of section 48 of the Act. He thus explained that on monetary terms, there is a real and actual profit of Rs.6,02,90,636/- [Rs.32,59,73,187 Rs.26,56,82,551] which is reported in the audited Profit Loss account and taken into consideration for computing book profit u/s 115JB of the Act. However, in terms of section 48, by taking indexed cost of acquisition, there is a long term capital loss of Rs.3,79,12,054/- [Rs.32,59,73,187 Rs.36,38,85,241] which has been claimed for carry forward and set off in subsequent years. Ld. Counsel referred to detailed working of computation of long term capital loss in the form of a chart placed in the paper book page at 28 which is reproduced as under: 6.4 By referring to the above chart, Ld. Counsel submitted that ir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /2016, dated 09.02.2018. From the perusal of this order, we note that in assessment year 2012-13 also, as in the present year, assessee was partner of M/s. C. D. Investments having the same 97.5% shares in its profit/loss. In AY 2012-13, the said partnership firm incurred substantial loss in which the share of assessee was Rs.18,91,12,786/- and was debited by the assessee in its P L Account. This debit of share of loss in the P L Account of the assessee was added back by the Ld. AO in arriving at the book profit u/s. 115JB of the Act. On this issue, the Co-ordinate bench in the assessee s own case (supra) held that in assessing the book profit u/s. 115JB of the Act, such share of loss from the partnership firm was not liable to be added to the net profit disclosed in the audited P L Account prepared in accordance with the provisions of Companies Act, 1956. The contention of the assessee was accepted by the Co-ordinate bench by holding that the provisions of section 115JB of the Act should be construed strictly and that in interpreting the said provisions, nothing more than what is specifically stated by the legislature can be read into the Act or inferred. According to the Co-ordin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... profit loss for the year under consideration. While computing the book profit u/s 115JB of the Act, the amount of such loss however was not added back by the assessee company by relying on the decision of Mumbai Bench of the ITAT in the case of DCIT vs Metro Exporters Ltd. 10 SOT 647 wherein it was held that the case of the assessee was not being the case of share of profit from partnership firm in the hands of the assessee credited to the profit and loss account, no addition for the purpose of computation of total income of the assessee u/s 115JA could be made with regard to the share of loss from the partnership firm. This stand of the assessee was not found acceptable by the A.O. By relying on the decision of Hon ble Kolkata High Court in the case of Eastern Aviation Industries Ltd. vs CIT 208 ITR 1023, he held that the general rule is that the income includes loss and by applying the said rule, he held that the share of its loss in the partnership firm amounting to Rs. 18,91,12,786/- was liable to be added back while computing the book profit of the assessee company under section 115JB of the Act as per clause (ii) of Explanation (1) to section 115JB(2). He accordingly a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e used in the Income-tax Act, 1961 includes loss . Even the Calcutta High Court in the case of Eastern Aviation Industries Limited (208 ITR 103) held that the loss is 'negative income'. Accordingly the contention of the assessee that the term 'income' as employed in clause (ii) of Explanation to Section 115JB cannot be said to include 'loss' is untenable. I therefore hold that the AO had rightly added back the share of loss of Rs.189,112,786/- from the partnership firm under clause (ii) of Explanation (1) to Section 115JB of the Act. Ground Nos. 1 to 3 are therefore dismissed. 5. We have heard the arguments of both the sides on this issue and also perused the relevant material available on record. As rightly contended by the learned counsel for the assessee, the decision of Hon ble Supreme Court in the case of J.H. Gotla (supra) and that of Hon ble Kolkata High Court in the case of Eastern Aviation Industries Ltd. (supra) propounding that the term income includes loss was rendered in different context and not in the context of application of clause (ii) of Explanation (1) to Section 115JB of the Act, which is the bone of contention in the pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure mentioned in the relevant sub-clause (f) to Explanation to section 115JA of the Act. In sub-clause (ii) Explanation to section 115JA provides for any amount of income to which any of the provisions of Chapter III applies, if such amount is credited to the profit and loss account of the assessee. In this case, the share of the assessee from a registered firm is a loss figure and therefore is debited to the profit and loss account of the assessee and cannot be credited to the profit and loss account of the assessee. In these facts of the case, we find that the CIT(A) has rightly observed that if any share of profit from the firm had been credited to profit and loss account the same would have to be reduced from the net profit for the purpose of computation of income under section 115JA by virtue of sub-clause (ii) to Explanation to section 115JA of the Act. This being not a case of share of profit from a firm in the hands of the assessee credited to the profit and loss account, we hold that no addition for the purpose of computation of total income of the assessee under section 115JA of the Act can be made with regard to share of loss from a registered firm of the assessee and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ares of listed companies on the price range on Bombay Stock Exchange prevailing on the relevant dates which were sold off market on which no STT was paid and, therefore, it is not governed by section 10(38) of the Act. Accordingly, the loss so arisen is eligible for carry forward and set off in future years. 9. Before adverting on this issue, let us peruse the relevant provisions of section 10(38) of the Act which is reproduced as under: 10(38) Any income arising from the transfer of a long term capital asset, being an equity share in a company or a unit of an equity oriented fund where - (a) the transaction of sale of such equity share or unit is entered into on or after the date on which Chapter VII of the Finance (No. 2) Act, 2004 comes into force; and (b) such transaction is chargeable to securities transaction tax under that Chapter : Provided that the income by way of long term capital gain of a company shall be taken into account in computing the book profit and income tax payable under section 115JB. 9.1 From the perusal of the above section, we note that if a transaction of sale on or after specified date (01.10.2004) of equity shares s char ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g instructions to its Participant to credit its account. 12.2.2 The aforementioned forms submitted by the Clients and Clearing Members shall be checked by the Participant to ensure the completeness of the form and validity of the signature of the Client and the Clearing Member before the requests on these forms are executed. 12.3 Off - Market Trades 12.3.1 Transfer of securities in respect of off market trades shall be effected on receipt of a duly filled in securities transfer instruction form from the Clients for delivery as well as a securities transfer instruction form from the Clients for receipt. The specimen of these forms have been laid out in Annexure Land M respectively as specified in Rule 12.2.1 above. Alternatively, a Client may give standing instructions to its Participant to credit its account. 12.3.2 The Participant should check for the completeness of the form and validity of the signature of the Client before effecting such transfers. 16. So, the module is provided on the NSDL platform under which any person while disposing of its security is given the option of trading the same in on market transaction and off market transaction. S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (A) has given a finding that no material is available on record to show that either the prices were manipulated or the transactions did not take place at all. Ld. CIT(A) also gave his finding that no claim of set off was made either in the year on in the subsequent year so as to justify AO s claim that loss was artificially generated to gain unfair tax advantage. We thus hold that no interference is called for on these factual findings by the ld. CIT(A). 12. From the perusal of the decision of Co-ordinate bench of Delhi ITAT in the case of Mridu Hari Dalmia Pariwar Trust (supra) on which the ld. Counsel placed his strong reliance, we note that ld. CIT(A) also relied upon it for giving his findings in favor of the assessee. However, in the said decision, we observe that a casus omissus in section 10(38) has been noted which the assessee has exploited to its advantage in the form of tax planning in respect of the issue being addressed hereunder. In our considered understanding, such a defect can be remedied only by the legislation and not by judicial interpretation since fiscal statute has to be interpreted on the basis of the language used therein and not de hors the same. Be tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laim set off and carry forward of such a loss. The AO has held these off-market sale transactions as a colorable device and tax avoidance scheme adopted by the assessee to evade payment of legitimate tax due to the exchequer. In our considered opinion, this is a glaring example of tax planning rather than the tax avoidance as has been held by the AO. In view of the fact that the assessee entered into valid transactions of transfer of shares of Bajaj Hindustan Ltd., Tata Consultancy Ltd. and Reliance Communications Ltd. to Shri M.H. Dalmia and Smt. Abha Dalmia, we hold that the loss suffered on such transactions is a genuine loss which cannot be disallowed as it does not fall within the ambit of section 10(38) because of non-payment of STT. Overturning the impugned order on this issue, we direct the allowing of carry forward of loss amounting to Rs.1.86 crore. 13. We also find force in the submissions made by the ld. Counsel which are stated in the above paragraphs. Considering the facts on record, submissions made and judicial precedents relied upon, we hold that no interference is called for in the observations and findings given by the ld. CIT(A) on the issue relating to ca ..... X X X X Extracts X X X X X X X X Extracts X X X X
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