2010 (5) TMI 870 - AT - Income Tax

Tribunal allows set off of speculation loss from 2001-02 against current year profits

The Tribunal ruled in favor of the assessee, directing the Assessing Officer to allow the set off of the speculation loss brought forward from the ... Vested right - carry forward of speculation loss - set off of brought forward losses against current year speculation profits - retrospective effect of legislative amendment on accrued rights - distinction between losses brought forward and losses to be carried forwardVested right - retrospective effect of legislative amendment on accrued rights - Assessee's vested right to carry forward speculation loss computed for AY 2001-02 was not taken away by the amendment reducing the carry forward period. - HELD THAT: - The Tribunal applied the settled principle that an accrued or vested right can be taken away by subsequent legislation only by express words or by necessary implication. Relying on Supreme Court authority, it held that the Finance Act, 2005 amendment substituting 'four assessment years' for 'eight assessment years' did not expressly or by necessary implication extinguish the assessee's pre existing right to carry forward the speculation loss computed for AY 2001 02. The amendment was construed as affecting losses computed from AY 2006 07 onwards, and not as retrospectively depriving assessees of rights already accrued under the earlier provision. [Paras 5]Assessee entitled to retain the pre amendment right to carry forward the speculation loss computed for AY 2001-02.Set off of brought forward losses against current year speculation profits - distinction between losses brought forward and losses to be carried forward - Sub section (4) of section 73, as amended, does not apply to bar set off of speculation loss brought forward from earlier years against speculation profits of AY 2006 07. - HELD THAT: - The Tribunal emphasised the statutory and practical distinction between a loss already brought forward from earlier years and a loss 'to be carried forward' to subsequent years. Sub section (4) governs the period for carrying forward losses to future years and, by its terms and nature, cannot operate to nullify the right to set off a loss already quantified and brought forward before the amendment. The return forms and schedules demonstrate the legislative recognition of this distinction, supporting the view that the amended limitation on carry forward applies prospectively. [Paras 6]Sub section (4) does not operate to deny set off of the brought forward speculation loss against AY 2006 07 speculation income.Final Conclusion: Appeal allowed; Assessing Officer directed to allow set off of the speculation loss brought forward from AY 2001-02 against the speculation profits of AY 2006-07. Issues involved: The issue involves whether the income-tax authorities were correct in not allowing the set off of unabsorbed speculation loss of Rs. 4,55,30,494/- from the assessment year 2001-02 against the speculation income for the current year.Judgment Details:Issue 1: Set off of speculation loss- The assessee claimed the right to set off speculation loss from 2001-02 against profits for 2006-07.- The Assessing Officer refused, citing section 73(4) limiting loss carry forward to four years.- Assessee argued for an eight-year carry forward period pre-amendment.- Citing legal precedents, the Tribunal held that vested rights can only be taken away by express language or implication.- Referring to previous cases, the Tribunal emphasized that accrued rights must be preserved unless expressly revoked.- The Tribunal found no provision in section 73(4) or elsewhere expressly removing the assessee's right to carry forward speculation loss for eight years.- The Tribunal noted the distinction between loss brought forward and loss to be carried forward, emphasizing that section 73(4) pertains to the latter.- The Tribunal rejected the argument that a procedural provision applied, emphasizing the vested substantive right of the assessee.- Consequently, the Tribunal upheld the assessee's claim to set off the speculation loss from 2001-02 against profits for 2006-07.Conclusion:The Tribunal ruled in favor of the assessee, directing the Assessing Officer to allow the set off of the speculation loss brought forward from the assessment year 2001-02 against the speculation profits for the year under appeal.