TaxTMI 
TaxTMI 
1993 (1) TMI 43
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....loss during the previous year. As per the profit and loss account, the loss suffered by the Indian branch was Rs. 39,87,929. The Income-tax Officer computed the loss from business at Rs. 7,14,759. The assessee had also earned considerable income by way of dividend (Rs. 21,79,245). The dividend income was taxable at a concessional rate and, therefore, the assessee claimed before the Income-tax Officer that its business loss should be carried forward to be set off against business profits in the subsequent year(s) and its dividend income for the year under consideration should be taxed at the concessional rate. The Income-tax Officer rejected the assessee's claim as, in his opinion, section 71(1) of the Income-tax Act, 1961 ( for short, " the....
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....further observed that wherever an option is given to the assessee, the Legislature itself has stipulated the same in the sections, as for example, in sections 3(2) and 48 of the Act. Further, the Appellate Assistant Commissioner was of the view that the words " entitled to " appearing in section 71(1) of the Act bestowed upon the assessee only a concession in the matter of set-off of income for the purpose of reducing the tax, larger tax burden that would have arisen, if it was merely provided that the loss under one head should be set off against the income under the same head and in the absence of any such income under the same head, this loss would have no meaning, for purpose of determining the tax liability (sic). In this view of the m....
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....ly not equivalent to 'must get it'. Apart from this plain meaning of the language, we find that the phraseology used in section 72(1), viz., and such loss cannot be or is not wholly set off assumes importance. In our opinion, the Appellate Assistant Commissioner has committed an error in not putting the word 'wholly' against both 'cannot be' and 'is not'. It is applicable to both. We agree with Shri Dastur that the phrase can reasonably refer to only one situation where the loss cannot be set off either because there are no profits or is not set off because the assessee has not exercised his right to the set off. Having regard to the above discussion, we accept the assessee's submissions and hold that it was open to the assessee not to clai....
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....nue, it would be necessary to refer to sections 70, 71 and 72 of the Act. It may be mentioned that these sections appear in Chapter VI which deals with "Aggregation of income and set off or carry forward of losses ". " Section 70. - (1) Save as otherwise provided in this Act, where the net result for any assessment year in respect of any source falling under any head of income other than "Capital gains" is a loss, the assessee shall be entitled to have the amount of such loss set off against his income from any other source under the same head. (2) (i) Where the result of the computation made for any assessment year under sections 48 to 55 in respect of any short-term capital asset is a loss, the assessee shall be entitled to have the....
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....sessee so desires, shall be set off only against his income, if any, assessable under any head of income other than 'Capital gains'. "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 wholly set off against income under any head of income in accordance with the provisions of section 71, so much of the loss as has not been so set off or, where the assessee has income only under the head 'Capital gains' relating to capital assets other than short-term capital assets and has exercised the option under subsection (2) of that section or ....