TaxTMI 
TaxTMI 
TaxTMI 
2011 (2) TMI 61
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.... the property and thereafter the property consisted of ground plus five upper floors. The assessee has let out the property to the following companies (1) Jindal Steel Ltd. (2) Jindal Thermal Power Co. Ltd. (3) Jindal Iron & Steel Co. Ltd. (4) Jindal Vijay Nagar Ltd., on a monthly rent of Re. 1 per sq.ft. and collected security deposit totalling to 85 crores from them. The deposits so collected were interest free deposits and they do not carry any interest as per terms of these agreement. The total area so let out was 26,200 sq.ft. According to the AO, the Assessee has used the interest free deposit to make investment in equity shares of group companies. In this background, the AO called upon the Assessee to show cause as to why interest on such security deposit should not be taken as indirect rent for purpose of determining the annual value for the purpose of determining income under the head "income from house property". According to the AO, the assessee filed its explanation and the same has been placed on the records. 4. Thereafter, the AO has observed in the order of assessment that similar issue has been discussed in assessment order for A.Y. 1996-97 to 2002-03 and in view o....
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....al in ITA N0.3799/Mum./99 for A.Y 1999-2000 in assessee's own case. For the reasons given in the said order, we uphold the order of CIT(A) and dismiss the appeal by the revenue. 9. Now we will take up for consideration ITA No.678/M/07, the appeal of the assessee. Ground raised by the Assessee reads as follows: "The learned Assessing erred in disallowing set off of brought forward losses of Rs. 43,48,809 against dividend income of Rs. 43,48,809 earned on the shares held in stock in trade." 10. We have already seen that the assessee is in the business of purchase and sale of shares, debentures and earning dividend income. The assessee had suffered a loss under the head business and profession in A.Y. 95-96. That loss could not be set off in that year against any head of income in accordance with the provisions of section 71 of the Income-tax Act, 1961 (the Act). It was accordingly carried forward for the following assessment year to be set off in accordance with the provisions of section 72 of the Act. The loss so carried forward for being so set off remained unabsorbed till A.Y.03-04. In A.Y.03-04, the assessment Year to which this appeal relates to, the Assessee had income under....
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....ssessee, dividend income was offered to tax by the assessee as income from other sources and was assessed as such and therefore prohibition u/s.72 of the Act clearly applied. He therefore confirmed the action of the AO. Hence, the appeal by the assessee before the Tribunal. 13. We have heard the rival submissions. The learned counsel for the assessee reiterated the stand of the assessee as was put forth before the revenue authorities. The learned D.R. relied on the orders of the revenue authorities. 14. We have considered the rival submissions. The issue that arises for our consideration is as to whether the claim of the assessee for set off of carried forward business loss against income in the form of dividend which was assessed under the head "Income from other sources", can be set off. The relevant provision under the which the assessee made a claim for such set off was section 72(1)(i) of the Act, which is as follows : "Section 72(1) Where for any assessment year, the net result of the computation under the head "Profits and gains of business or profession" is a loss to the assessee, not being a loss sustained in a speculation business, and such loss cannot be or is not who....
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....b-section (2) provides for the carrying forward of the loss of one year and setting off of the same against the profits or gains of the assessee from the same business in the subsequent year or years. The crucial words, therefore, are "profits and gains of the assessee from the same business", i.e., the business in regard to which he sustained loss in the previous year. The question, therefore, is whether the securities formed part of the trading assets of the business and the income there from was income from the business. The answer to this question depends upon the scope of section 6 of the Act. Section 6 of the Act classified taxable income under the following several heads: (i) Salaries; (ii) interest on securities; (iii) income from property; (iv) profits and gains of business, profession or vocation; (v) income from other sources; and (vi) capital gains. The scheme of the Act is that income-tax is one tax. Section 6 only classifies the taxable income under different heads for the purpose of computation of the net income of the assessee. Though for the purpose of computation of the income, interest on securities is separately classified, income by way of interest from securit....
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....the business though the income there from falls under different heads under section 6 of the Act." 16. We are of the view that the aforesaid decision of the Hon'ble Supreme Court will squarely apply to a claim of set off u/s. 72(1)(i) of the Act, by the Assessee in the present case. In this regard, we find the provisions of the 1922 Act and the Act i.e., 1961 Act, to be identical, as can be seen from the chart given below : 1922 Act Section 24 of the Income-tax Act, 1922: "24. (1) Where any assessee sustains a loss of profits or gains in any year under any of the heads mentioned in section 6, he shall be entitled to have the amount of the loss set off against his income, profits or gains under any other head in that year ............. (2) Where any assessee sustains a loss of profits or gains in any year, being a previous year not earlier than the previous year for the assessment for the year ending on the 31st day of March. 1940. in any business, profession or vocation, and the loss cannot he wholly set off under sub-section (1), so much of the loss as is not so set off or the whole loss where the assessee had no other head of income shall be carried forward to the following ....
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....n-trade, would be "business income". Otherwise it was assessed as "Income from other Sources". The revenue has always been contending that merely holding of investments which yield dividend income can never be said to be carrying on "'Business". The 1922 Act was therefore amended by Finance Act, 1955, whereby Dividend Income was to be assessed as "income from other sources". Therefore dividend income even though it relates to shares held as stock-in-trade of business by an assessee had necessarily to be assessed under the head "Income from business". Though for the purpose of computation of the income, dividend is separately classified, income by way of dividend does not cease to be part of the income from business, because the shares on which dividend income was earned were admitted part of the trading assets. Whether a particular income is part of the income from a business falls to be decided not on the basis of the provisions of section 14 of the Act, but on commercial principles. 18. The argument of the learned D.R. was that the decision of the Hon'ble Supreme Court in the case of Cocanada Radhaswamy Bank (supra) was rendered in the context of interest income which was assess....