TaxTMI 
TaxTMI 
2021 (9) TMI 708
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....005-06. The appeal is admitted on the following substantial questions of law. "1. Whether on the facts and in the circumstances of the case the Tribunal is justified in law in disallowing the deduction of Rs. 2,76,00,000/- being advances paid to Continental Group of Companies for supply of machinery and written off during the year, holding that the amount is of the nature of capital expenditure? 2. Whether on the facts and in the circumstances of the case, the Tribunal is justified in law in disallowing the setting off of long term capital loss on sale of shares and units of mutual funds against long term capital gain on sale of land? 3. Substantial question no.1 relates to disallowance of the deduction of Rs. 2,76,00,000/- being advances paid to the supplier of machinery and written off on account of failure on the performance of obligations by the supplier. The assessee has filed ITA No.26/2013 for the Assessment Year 2003-04 and question no.4 in the said appeal relates to disallowing the deduction of advances written off by the assessee. The Counsel appearing for the parties state that the same reason could be adopted for answering the instant question as we....
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....ssee. Comparing the details of the case on hand, the receipt in the form of sale proceeds on the sale of long term capital assets is suffering a loss at the hands of the assessee. In the view of the Assessing Officer, the loss is not computed under Sections 48 to 55 of the Act and, for all purposes, the entry is ignored both by the assessee and the Department. Therefore, the loss suffered by the assessee on the sale of a long term capital asset covered by Section 10(38) cannot be set off under Section 70(3) of the Act, unless the computation of such income or loss is made under Sections 48 to 55 of the Act. The Assessing Officer thus rejected the claim of set-off made by the assessee. The CIT (Appeals) examined the rival assertions, and, on being satisfied with the view taken by the Assessing Officer, confirmed the view taken by the Assessing Officer. The assessee carried the matter in appeal before the Tribunal. The Tribunal confirmed the view taken by the Assessing Officer and the CIT (Appeals). Hence the Appeal. 5. Senior Advocate Mr Joseph Markos, while reiterating the arguments put forward by the assessee before the statutory authorities and the Tribunal, expanded the conte....
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.... first source, namely income from the sale of shares/units in mutual funds is a non-taxable source in view of Section 10(38) of the Act and excluded from computation for arriving at income. Therefore, the loss from these non-taxable sources is not available for set-off against any of the incomes from the second source i.e., a source computed under Sections 48 to 55 of the Act. 6.1 Therefore, the first contention is that the assessee is mixing up heterogeneous heads as homogeneous heads and claiming the set-off. He further contends that the decisions in Royal Calcutta Truf Club case and Netesoft India v. DCIT ITA No.5359/Mum/2017 (Mumbai Tribunal) are distinguishable both in law and in fact. The ratio of the Supreme Court in Harprasad & Co. case that the words 'income' or 'profits and gains' should be understood as including losses also. So that, in one sense, 'profits and gains' represent plus income, whereas losses represent minus income. In other words, the loss is negative profit. Both positive and negative profits are of a revenue character. Both must enter into computation wherever it becomes material in the same mode of the taxable income of the assessee. Therefore, the ef....
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....t do not form part of total income. Sections 10 to 13 are various incomes that are treated as not forming part of the income of the assessee. Chapter IV deals with the computation of total income. Section 14 deals with heads of income. Sections 45 to 55 deal with computation of capital gains. Chapter VI deals with aggregation of income and set-off or carry forward of loss. Set-off of loss from one source against income from another source under the same head of income. Section 70 reads thus: "(1) xxxxx (2) xxxxx (3) Where the result of the computation made for any assessment year under sections 48 to 55 in respect of any capital asset (other than a short-term capital asset) is a loss, the assessee shall be entitled to have the amount of such loss set-off against the income, if any, as arrived at under a similar computation made for the assessment year in respect of any other capital asset not being a short- term capital asset." 7.2 There is no quarrel between the assessee and the Revenue that the shares and units of mutual funds sold by the assessee would come under Section 10(38) of the Act. Thus had there been income such income is excluded from t....