TaxTMI 
TaxTMI 
2017 (6) TMI 821
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.... (Vishkaha.) It was also contended that the nature of income is to be decided on commercial principles and not based on classification of income u/s 14 of the Act for which reliance was placed upon the decision in CIT vs Cocanada Radhaswamy Bank ltd. 57 ITR 306 (SC), CIT vs Ramnath Goenka 259 ITR 26 (Mad.), CIT vs Excellent Commercial Enterprices and Investment Ltd. 282 ITR 423 (Del.), Southern Travels vs ACIT 232 taxman 689 (Del.) and Lavish Apartment Pvt. Ltd. vs ACIT 210 taxman 9 (Del.). On the other hand, Shri Suman Kumar, Ld. DR, defended the addition confirmed by the Ld. Commissioner of Income Tax (Appeal). 2.1. We have considered the rival submissions and perused the material available on record. The facts, in brief, are that the assessee declared income of Rs. 13,14,110/- in its return, which was completed u/s 143(3) of the Act on 28/03/2013 at an income of Rs. 44,90,720/-. The assessee earned short term capital gain on sale of depreciable asset u/s 50 of the Act, which was set off against carry forward business loss of Rs. 27,08,953/-. The Ld. Assessing Officer disallowed the claim of the assessee on the plea that the case relied upon by the assessee in Digital Electronic....
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....our client had sold the factory building along with plant and machinery/furniture and fixture lying therein for a sum of Rs. 1,75,00,000. On the above sale our client had made a profit of `. 1,56,41,001. Against the said profit, unabsorbed depreciation of the previous year amounting to Rs. 47,83,368 was set off. 2. Further, as this was a profit realized on sale of business assets, the said profit being business income, unabsorbed business loss was set off against the said profit. It is submitted that prior to insertion of section 50, the sale of factory building/plant and machinery/furniture and fixture was covered by section 41(2) wherein the excess of sale proceeds over the written down value was treated as section 41(2) profits and the loss, if any, were treated as balancing charge/terminal allowance while computing income from business. Applying the same yardstick, it is submitted that the profits/loss on sale of factory building/plant and machinery/furniture and fixture is to be treated as business income. It is therefore, submitted that the gains, if any, arising on sale of plant and machinery is to be treated as forming part of business income. 3. Though the profit rea....
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....decisions of Supreme Court and the Mumbai Tribunal, has correctly treated the income arising on sale of business asses as business income and has correctly set off brought forward the business loss of Rs. 39,85,596/- against the profit realised on sale of business assets viz Factory building/plant and machinery/furniture and fixture." 8. The Assessing officer, however, was not impressed by any of these submissions. He was of the view that the provisions of section 72 are very clear that brought forward business losses can only be set off against profits and gains of business or profession and, therefore, brought forward business losses of Rs. 39,85,596/- cannot be allowed to set off against short term capital gains. He, thus, declined to set off the claim of the assessee. Aggrieved by the stand of the AO, the assessee carried the matter in appeal before the CIT (A) but without any success. The CIT (A) upheld the stand of the Assessing Officer and observed that there is no ambiguity in section 72 and it cannot be said that the sale of capital asset will result into capital gains and the income earned shall be treated under the head 'capital gains and not income from business'. As....
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....isions of section 71, so much of the loss as has not been so set off is to be carried forward to the following assessment year and is allowable for being set off "against the profits, if any, of that business or profession carried on by him and assessable for that assessment year". It is thus for setting off the income that while the loss to be carried forward has to be under the head "profits and gains of business or profession", the gains against which such loss can be set off, has to be profits of "any business or profession carried on by him and assessable in that assessment year. In other words, there is no requirements of the gains being taxable under the head "profits and gains of business or profession" and thus, as long as gains are "of any business or profession carried on by the assessee and assessable to tax for that assessment year", the same can be set off against loss under the head profits and gains of business or profession carried forward from earlier years. In the case of CIT v. Cocanada Radhaswami Bank ltd(supra), Their Lordships of the Hon'ble Supreme Court took note of this distinction and the implications of these provision regarding carry foreward and set of....
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....0. Ground No.2 is thus allowed." 2.3. We find that in the aforesaid order, the Tribunal reached to a particular conclusion by placing reliance upon the decision from Hon'ble Apex Court in the case of CIT vs Cocanada Radhaswamy Bank Ltd. (1965) 57 ITR 306 (SC), Hon'ble Gujarat High Court in CIT vs Milind Trading Co. Pvt. Ltd. (1994) 118 CTR (Guj.) 154 and the decision in CIT vs Urmila Ramesh (1998) 146 CTR (SC) 81 was distinguished. The Bench concluded that the assessee is entitled to set off of brought forward business losses against the capital gains, thus, the observation of the Ld. Commissioner of Income Tax (Appeal) that contrary decision, mentioned in the order, were not considered is of no help to the Revenue because, the coordinate Bench duly considered the decisions from Hon'ble Gujarat High Court as well as Hon'ble Apex Court. Even otherwise, the ratio laid down in the order of the Tribunal in the case of Nirmal Plastic Industries and Shri Padmavati Shrinivasa Cotton Ginning and Processing Factory (supra) further supports the case of the assessee. Respectfully following the aforesaid decisions, we reverse the order of the Ld. Commissioner of Income Tax (A....