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TMI Blog2023 (2) TMI 625X X X X Extracts X X X X X X X X Extracts X X X X ..... ear losses against the addition made u/s 68 - We have held above that the assessee has earned genuine commodity profit but even for academic discussion if it is presumed that the action of the Assessing Officer is found to be correct and the alleged commodity profit is treated as unexplained cash credit u/s 68 of the Act, even then the losses for the year which have not been disputed by the revenue authorities deserves to be setoff against the unexplained income u/s 68 of the Act. The restriction for setoff has been brought into the Act by the Finance Act, 2016 w.e.f. 01/04/2017. Now, going through sub-Section (2) of Section 115BBE of the Act, the words set off of any loss appearing in second line was inserted from 01/04/2017. Before this insertion, there was no bar on setting off of any losses incurred during the year against the income referred to in Section 68, 69, 69A, 69B, 69C or 69D of the Act. Further to remove the confusion, the CBDT has come out with a Circular being no. 11/2019 dated 19/06/2019. Going through the above Circular, there remains no ambiguity regarding interpretation that prior to 01/04/2017, the assessee is entitled to claim of set-off of losses in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le ITAT? 3. In the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs. 7,60,123/- made by the AO on account of the employees contribution to PF/ESI as because it violates the provision of Sec 36(1)(va) read with Sec 2(24)(x) of the IT Act and it contradicts the Board's Circular no. 22/2015 dated 17.12.2015, Para no. 5 where it is clarified that this circular does not apply to claim of deduction relating to employee's contribution to welfare fund which are governed by Sec 36(1)(va) of the Act . 4. The appellant craves leave to make any addition, alteration or modification etc. of the grounds either before the appellate proceedings, or in the course of appellate proceedings. 3. Brief facts of the case are that the assessee is a Private Limited Company engaged in the business of manufacturing of TMT bars. Loss of Rs. 2,26,20,205/- was declared in the return filed for Assessment Year 2014- 15 on 26/11/2014. Case selected for scrutiny followed by service of valid notice u/s 143(2) 143(1) of the Act. After considering the details filed by the assessee, the ld. Assessing Officer firstly made the disallowance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gned order also referred to the CBDT Circular No. 11/2019 dated 19/06/2019 regarding clarification on allowability of set-off of losses against the deemed income u/s 115BBE of the Act, prior to Assessment Year 2017- 18. Reference was made to various decisions which are as under:- ITO vs. M/s Prism Share Trading Pvt. Ltd. (ITA No. 5650/Mum/2017 dated 30/11/2018) DCIT vs. M/s. Atbir Hi-Tech Pvt. Ltd. (ITA No. 1747/Kol/2017 dated29/03/2019) M/s. Skipper Ltd. vs. DCIT (ITA No. 55/Kol/2022 dated 09/09/2022) DCIT vs. M/s. Atha Mines Pvt. Ltd. (ITA No. 601/Kol/2014 dated 05.04.2017) Vijaya Hospitality and Resorts Ltd. v. CIT in [2020] 114 taxmann.com 91 (Kerala) dated 07/03/2019 ACE Infracity Developers (P) Ltd. v. DCIT in [2021]127 taxmann.com 264 (Delhi-Trib.) Sangeet Resorts vs. DCIT in ITA No. 561/Chd/2019 dated 29/01/2020 Amirt Hatcheries Pvt. Ltd. vs. PCIT in ITA No. 915/Kol/2019 dated 06/09/2019 PCIT vs. Aacharan Enterprises(P) Ltd. in [2020] 1147 taxmann.com 745 (Rajasthan) dated 21/01/2020 Famina Knit Fabs vs. ACIT in [2019] 104 taxmann.com 306 (Chandigarh Trib.) dated 08/02/2019 ACIT vs. Sanjay Bairathi Gems Lt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome u/s 68 of the Act. The restriction for setoff has been brought into the Act by the Finance Act, 2016 w.e.f. 01/04/2017. For better understanding of the issue, we will first go through Section 115BBE of the Act, which reads as follows:- 115BBE. 59[(1) Where the total income of an assessee,- (a) includes any income referred to in section 68, section 69, section 69A, section 69B, section 69C or section 69D and reflected in the return of income furnished under section 139; or (b) determined by the Assessing Officer includes any income referred to in section 68, section 69, section 69A, section 69B, section 69C or section 69D, if such income is not covered under clause (a), the income-tax payable shall be the aggregate of- (i) the amount of income-tax calculated on the income referred to in clause (a) and clause (b), at the rate of sixty per cent; and (ii) the amount of income-tax with which the assessee would have been chargeable had his total income been reduced by the amount of income referred to in clause (i).] (2) Notwithstanding anything contained in this Act, no deduction in respect of any expenditure or allowance 60[or set off of an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... against income referred to in section 115BBE. It also further mentions that the pre-amended provision of section 115BBE of the Act did not convey the intention that losses shall not be allowed to be set-off against income referred to in section 115BBE of the Act and hence, the amendment was made vide the Finance Act, 2016. 4. Thus keeping the legislative intent behind amendment in section 115BBE(2) vide the Finance Act, 2016 to remove any ambiguity of interpretation, the Board is of the view that since the term 'or set off of any loss' was specifically inserted only vide the Finance Act 2016, w.e.f. 01.04.2017, an assessee is entitled to claim set-off of loss against income determined under section 115BBE of the Act till the assessment year 2016- 17. 5. The contents of this Circular may be circulated widely for information of all stakeholders and departmental officers. The pending assessments and litigations on this issue may be handled accordingly. 9.1. Going through the above Circular, there remains no ambiguity regarding interpretation that prior to 01/04/2017, the assessee is entitled to claim of set-off of losses in the income determined u/s 115BBE o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Shristi Ispat Alloys Ltd. - Mr. Sankar Lal Agarwal is said to be presently out of stn. Mr. Neera Jain also attends today filed a letter claiming no relation with Sidhsilver Commodities P. Ltd. The A.R. files a submission dt. 30/11/ 16 in which he states that the assessee co. had no nexus with Neeraj Jain who is alleged to be an entry operator for Sidhsilver Commodities P L account. Mr. Neeraj Jain and Mr. Sanjay Dalmia who are present here agrees. Universal Commodity Exchange is closed on action of SEBI, as on date. In other words, there was no nexus between the broker and the assessee. 10. No adverse inference can be drawn from the order sheet entry. In fact, the order sheet entry helps the assessee in his case. 11. I have vetted the decision of Calcutta High Court in CIT vs. Bhagwati Prasad Agarwal in ITA No. 22 of 2019. It, inter alia, states as follows:- It is submitted by Mr. Prithu Dudharia, learned advocate for the revenue that the records from the Calcutta Stock Exchange shows that the name of the assessee is not appearing in respect of the transactions-in-question. The tribunal found that the chain of transaction entered into by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... does not allow set off of income assessed as cash credit u/s 68 against the loss under any other head as per the provisions of section 71. The legislature in all its wisdom has decided not to allow set off of loss under any provisions of this Act w.ef. 01.04.2017 in computing the income as per the provisions of Sec. 115BBE. This amendment by itself clarifies the legislative intent that for the year under consideration set off of loss under any other head except under the head Capital Gain is allowable from the assessed u/s 69. 10. The ld. DR strongly supported the order passed by the A.O. on this issue and submitted that the decision of the Tribunal rendered in the case of Shri Pradeep Kumar Todi vs ITO vide its order dated 22.09.2017 passed in ITA No. 984/Kol/2017 fully supports the case of the Revenue on this issue. 11. The ld. counsel for the assessee, on the other hand, submitted that the issue involved in the case of Kerala Sponge Iron Ltd. (supra) relied upon by the A.O. in the assessment order as well as in the case of Shri Pradeep Kumar Todi (supra) cited by the learned DR in support of the Revenue's case was relating to the set off of brought forward bus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a perusal of the said statutory provision, as was then so available on the statute and was applicable to the case of the assessee for the year under consideration i.e. A. Y. 2013-14, no restriction was placed as regards 'set off of losses against the income referred to in Sec. 68, 69, 69A, 69B, 69C and 69D. Rather, the legislature in all its wisdom by amending Sec. 115BBE vide Finance Act, 2016 w.e.f 01.04.2017 had only w.e.f. A. Y. 2017-18 plac d a restriction on 'set off of losses, in addition to raising of any claim of expenditure and allowance against such income The fact that the aforesaid amendment of Sec. 115BBE by the Finance Act, 2016, w.ef. 01.04.2017 is prospective in nature can safely be gathered from a perusal of the CBDT Circular No. 3/2017, dated 20.01.201 7. In the backdrop of our aforesaid observations, it can safely be gathered that there was no embargo to claim 'set off of losses in the year under consideration ie. A. Y. 2013-14. We thus in terms of our aforesaid observations are persuaded to subscribe to the view taken by the CIT(A) that the loss suffered by the assessee from F %O transactions could be 'set off against the income of Rs.5,73,96,3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e case of Checkmate Services (P.) Ltd. v. Commissioner of Income-tax-1 [2022] 143 taxmann.com 178 (SC), dealing with this issue has settled down the controversy deciding in favour of the revenue holding that strict compliance with Section 36(1)(va) r.w.s. 2(24)(x) is a must to claim deduction and provisions of Section 43B of the Act cannot be applied on employees contribution to PF ESI and further held that the High Court rulings favouring the assessee had not laid down the correct law and further held that the position of law stands well settled and such employees contribution towards PF ESI if not deposited before the due date prescribed under the relevant Act governing PF ESI, then in view of the provisions u/s 36(1)(va) r.w.s. 2(24)(x) of the Act, all such amounts shall be added to the income of the assessee. Therefore, respectfully following the ratio of law laid down by the Hon ble Supreme Court in the case of Checkmate Services (P.) Ltd. (supra), we uphold the findings of the ld. CIT(A) in this respect and dismiss Ground No. 3 raised by the revenue. 11. In the result, appeal of the revenue is partly allowed. Order pronounced in the Court on 13th December, 2022 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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