B/F business losses can be set off against other sources of income which are in the nature of business income, though chargeable to tax under another head of income

Brought forward business losses can be set off against other sources of income which are in the nature of business income, though chargeable to tax under another head of income

Gagan Trading Co. Ltd Vs. DCIT. (ITA No. 678/Mum/07) Mum ITAT dated 18 February 2011

Fact of the case:- The taxpayer was engaged in the business of purchase and sale of shares and debentures. During the assessment year 2003-04, the taxpayer had earned dividend from the shares held as stock in trade. The taxpayer set off the brought forward business losses against the dividend income chargeable to tax under the head ‘Income from other sources’, dividend was taxable in the relevant assessment year. The Assessing Officer (“AO”) disallowed the claim of the set off of brought forward business losses on the ground that dividend income is brought to tax under the head ‘Income from other sources’, even though shares from which dividend income is earned are held as stock in trade by the taxpayer.

Issue before the Tribunal

• Whether the brought forward business losses can be set off against the dividend income earned from the shares held as stock in trade?

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