Gouranga Cement Pvt. Ltd. Vs DCIT (ITAT Kolkata)
We have heard the rival contentions and perused the material available on record. In the instant case the assessee has shown business income of ₹13,36,761/- and LTCG income of ₹86,30,498/- only. Besides the above assessee has shown unabsorbed brought forward business loss of ₹16,64,542/- which was set off against the business income to the extent of ₹13,36,761/- by the assessee. The assessee has offered the tax on LTCG at special rate @ of Rs. 20% for Rs. 17,26,100.00 (20% of Rs. 86,30,498.00 only) which transpires that the assessee has not set off the remaining brought forward business loss of Rs. 3,27,763.00 (16,64,542.00 – 13,36,761.00) against the LTCG. Thus the balance amount of unabsorbed brought forward business loss of ₹3,27,763/- was carried forward to the subsequent year by the assessee.
However, the AO set off the entire business brought forward loss against the LTCG income declared by assessee. Thus, AO levied tax on the business of ₹13,36,761/- as well as charged LTCG tax @ 20% on the remaining amount of LTCG income i.e. Rs. 69,65,974.00 (Rs. 86,30,498.00 – 16,64,542.00). The view taken by the AO was upheld by the Ld. CIT(A). Now the issue before us arises for our consideration so as to whether the impugned loss of ₹16,64,824/- i.e. unabsorbed brought forward loss should be set off against the business income of ₹13,36,761/- and balance of ₹3,27,763/- against the LTCG income.
A plain look at the above statutory provision makes it clear that the unabsorbed brought forward business loss needs to be set off against the business income declared by assessee for the year under consideration. There is no dispute that assessee has shown business income of ₹13,36,761/- for the year under consideration. Therefore, in our considered view, assessee is very much entitled to claim the set off of the brought forward unabsorbed business loss against the income declared under the head “business”.
The amount which has not been set off against the business income of the assessee can be set off against the LTCG income of the assessee in view of the order of Hon’ble Mumbai Tribunal in the case of Digital Electronics Ltd.
It is undisputed fact that the assessee has the earned the long term capital income by way of transfer of the business assets such as factory building, Plant & Machinery, electric installation under the head slum sale. Thus the nature of LTCG is in the nature of business profit & gains which is liable to be taxed under the head capital gain by virtue of the provisions of law. But the nature of LTCG is business only as discussed above in the case of Digital Electronics Ltd.(supra).
In view of above, we direct the AO to set off the business loss of Rs.13,36,761.00 against the business income and the remaining loss of Rs. 3,27,763.00 should be set off against the LTCG as discussed above. This ground of assessee’s appeal is partly allowed.
FULL TEXT OF THE ITAT JUDGMENT
This appeal by the assessee is directed against the order of Commissioner of Income Tax (Appeals), Durgapur dated 28.11.2016. Assessment was framed by DCIT, Circle- Bankura u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) vide his order dated 25.03.2013 for assessment year 2010-11. The grounds raised by the assessee per its appeal are as under:-
1. For that the order of assessment passed u/s. 143(3) and sustained by the Ld. CIT(A), Durgapur is arbitrary, illegal and bad both in law and fact.
2. For that the Ld. CIT(A), Durgapur, in consideration of the facts and circumstances of the case, erred in sustaining order of the AO in making adjustment of unabsorbed business loss of Rs.16,64,524/- of the earlier year against capital gain.
3. For that the Ld. AO in consideration of facts and circumstances of the case is not justified to adjust unabsorbed business loss of the earlier year against capital gain during the year.
4. For that the Ld. AO in consideration of the facts and circumstances of the case, erred in charging interest for Rs.1,598/- u/s. 234A and Rs.3,71,166/- u/s. 234C of the Income Tax Act, 1961.
5. For that the appellant reserves its right to add to, to alter and/or to amend the ground/s taken and adduce paper/s document/s at the time of hearing.”
Shri D.K. Sen, Ld. Advocate appeared on behalf of assessee and Shri Soumyajit Dasgupta, Ld. Departmental Representative appeared on behalf of Revenue.
2. In this appeal various grounds have been raised by assessee out of which ground No. 1 and 5 are general in nature and do not require separate adjudication.
3. First issue raised by assessee in ground No.2 and 3 are inter-related and therefore being taken up together. The issue raised is that Ld. CIT(A) erred in confirming the order of Assessing Officer by adjusting the unabsorbed business loss of ₹16,64,524/- against the capital income.
4. Briefly stated facts are that assessee in the present case is a private limited company and engaged in the business of civil construction and broker activities. The assessee during the year has fled its return of income inter alia disclosing the following items of income / loss:-
