2020 (1) TMI 1351 - HC - Income Tax

High Court Upholds ITAT Order on Taxability of Deemed Income under Income-tax Act

The High Court dismissed the Revenue's appeal against the ITAT order regarding the taxability of deemed income under the Income-tax Act, 1961 for AY ... Set off of loss against the deemed income determined u/s 115BBE - HELD THAT:- Indisputably, the provisions of Section 115BBE as existed prior to the amendment does not provide that the losses shall not be allowed to be set off against the income referred in Section 115BBE and it is only to dispel the uncertainty prevailing on the issue, the provision was amended. A bare perusal of the provisions makes it abundantly clear that it cannot be applied retrospectively. Moreover, now vide circular No. 11/2019, the CBDT has clarified in unequivocal terms that the term 'or set off of any loss' was inserted vide the Finance Act, 2016 w.e.f. 1.4.17 and therefore, an assessee is entitled to claim set off of loss against the income determined under section 115BBE till the Assessment Year 2016-17. It is further clarified that the pending assessment and litigation on this issue shall be handled accordingly. In this view of the matter, the contention sought to be raised by the Revenue as aforesaid, cannot be countenanced by this Court. Issues:Appeal against ITAT order dismissing Revenue's appeal regarding deemed income taxability under Income-tax Act, 1961 for AY 2014-15; Interpretation of Section 115BBE applicability for set off of loss against deemed income; Applicability of amendments made by Finance Bill 2016; CBDT circular clarification regarding set off of loss against income determined under Section 115BBE till AY 2016-17.Analysis:The appeal before the High Court was against the order of the Income-tax Appellate Tribunal (ITAT) which had dismissed the Revenue's appeal regarding the taxability of deemed income under the Income-tax Act, 1961 for the Assessment Year 2014-15. The Commissioner of Income-tax (Appeals) had held that the deemed income of the assessee is chargeable to tax under the head 'Income from Other Sources' and allowed set off of current year business loss and brought forward business loss against it. The CIT(A) rejected the assessee's contention that the sums are taxable as income from business or profession and held that the amendment made by Finance Bill 2016 to the provisions of Section 115BBE cannot be applied retrospectively.The appellant contended that the ITAT erred in holding that the provisions of Section 115BBE providing no set off of loss against deemed income are not applicable to AY 2014-15, and allowing set off of loss to the assessee was unjustified. On the other hand, the respondent's counsel argued that the amended provisions of Section 115BBE cannot be applied to AY 2014-15 and are applicable only from AY 2017-18 onwards. The CBDT's circular clarified that the term 'set off any loss' inserted by Finance Act, 2016 from 1.4.17 allows an assessee to claim set off of loss against income under Section 115BBE till AY 2016-17.The High Court considered the submissions and the material on record. It observed that the provisions of Section 115BBE, as they existed before the amendment, did not disallow set off of losses against the income referred to in the section. The amendment was made to dispel uncertainty and cannot be applied retrospectively. The CBDT's circular further confirmed that an assessee can claim set off of loss against income determined under Section 115BBE till AY 2016-17. The Court held that the Revenue's contention regarding disallowance of set off of loss cannot be accepted.No other grounds were pressed by the appellant before the Court. Consequently, the appeal preferred by the Revenue was dismissed, and no order as to costs was given.