2017 (5) TMI 167 - AT - Income Tax

Tribunal allows set-off of losses against gains, affirms professional fees deduction

Income-tax Officer, Ward -1 (1) (3), Mumbai Versus M/s. Eminent Travels Pvt. Ltd.

The Tribunal upheld the CIT(A)'s decision, allowing the set-off of brought forward business losses against Short Term Capital Gains under Section 72 of ... Set off of carried forward Business losses against the Short Term Capital Gains - Scope of section 72 - Held that: - section 72 of the Act prescribes set-off of unabsorbed business loss against the profits and gains of any business or profession carried on by the assessee and assessable for that assessment year - the objection of the Assessing Officer that the gain on sale of office premises was assessable as short term capital gain is of no avail to deny the set-off envisaged under section 72 of the Act because in commercial sense, the gain on sale of office premises represents profits of business - the brought forward losses are eligible for set-off against short term capital gain on sale of office premises - decision of CIT(A) upheld. Allowance of expenses - professional fees, ROC, Audit fees and Tax Audit fees - Whether the Ld. CIT(A) was correct in allowing expenses of professional fees, ROC, Audit fees and Tax Audit fees of ₹ 1,18,772/- against income from other sources even though there was no business activity during the year and ROC expenses claimed pertains to prior period? - Held that: - the CIT(A) has noted that the impugned expenses are statutorily required to be incurred and, therefore, the same was allowable. In our considered opinion, the CIT(A) made no mistake in allowing the claim of the assessee because even in the absence of regular business activity, such expenses are required to be statutorily incurred and, therefore, the same are allowable against the assessed income - decision of CIT(A) upheld. Appeal dismissed - decided against Revenue. Issues involved:1. Set-off of carried forward business losses against Short Term Capital Gains under Section 72 of the Income Tax Act.2. Allowability of expenses of professional fees, ROC, Audit fees, and Tax Audit fees against income from other sources.Analysis:Issue 1: Set-off of carried forward business losses against Short Term Capital Gains under Section 72 of the Income Tax Act:The appeal filed by the Revenue challenged the order passed by the CIT(A) regarding the set-off of brought forward business losses against the Short Term Capital Gains for the assessment year 2010-11. The Assessing Officer denied the set-off, treating the gain on the sale of office premises as short term capital gain under section 50 of the Act. However, the CIT(A) allowed the set-off, citing section 72 of the Act and the decision of the Mumbai Tribunal in Digital Electronics Ltd. vs. CIT. The Revenue contended that the gain on the sale of office premises should be deemed as short term capital gain and not eligible for set-off against business losses. The Tribunal analyzed the provisions of section 72 and upheld the decision of the CIT(A), citing the decision of the Hon'ble Bombay High Court in CIT vs. M/s. Hickson & Dadajee Pvt. Ltd., where it was held that brought forward business losses can be set off against profits of any business or profession, including gains from the sale of assets. Therefore, the Tribunal affirmed the CIT(A)'s decision, allowing the set-off of business losses against short term capital gain.Issue 2: Allowability of expenses of professional fees, ROC, Audit fees, and Tax Audit fees against income from other sources:The second ground of appeal related to the deduction of expenses amounting to &8377;1,18,772 incurred by the assessee on professional fees, ROC expenses, audit fee, and tax audit fee. The Assessing Officer disallowed the deduction, stating that there was no business income and the only income was from interest, dividend, and miscellaneous sources. However, the CIT(A) allowed the claim, noting that the expenses were statutorily required to be incurred. The Tribunal agreed with the CIT(A), stating that even in the absence of regular business activity, statutory expenses are allowable against the assessed income. Therefore, the Tribunal affirmed the CIT(A)'s decision on this aspect as well.In conclusion, the Tribunal dismissed the appeal of the Revenue, upholding the decisions of the CIT(A) regarding both the set-off of business losses against short term capital gains and the allowance of statutory expenses against income from other sources.This detailed analysis covers the issues involved in the legal judgment, providing a comprehensive understanding of the Tribunal's decision on each aspect of the case.