Case Law Details
Share Aids Private Ltd. Vs ITO (Madras High Court)
The learned counsel for the Appellant/Assessee Ms. Madhupreetha Elango submitted that the if a loss is caused on the sale of the Capital Assets by the Assessee, the same should be allowed as Business Expenditure under Section 41(2) of the Act as it cannot be brought to tax under Section 50 of the Income Tax Act as held by the learned Tribunal. She submitted that the Assessee Company was in loss and was later on wound up and in the process of winding up, it not only sold some of its Assets on which depreciation was claimed by it under Section 32 of the Act and suffered losses thereon as the same was sold below the written off value of those assets in the Books of Accounts and therefore, such loss was clearly allowable as a Business Loss in the hands of the Assessee. She also drew the attention of the court to Section 70 of the Act to support her contention.
We have heard the learned counsel for the parties at length and perused the relevant records & relevant provisions of Section 41(2), Section 50 and Section 70.
From the aforesaid Scheme of Provisions of the Act and the argument of the learned counsel for the Assessee, we are satisfied that the learned Tribunal has erred in disallowing the loss suffered by the Assessee on the sale of the Assets on which it claimed depreciation under Section 32 of the Act.
Section 41(2) falls under Part D of Chapter IV which provides for ‘Computation of Total Income‘ . The provisions under Section 28 to 44DB of the Act are relating to ‘Computation of Profits and Gains of Business or Profession’. Part D of the said Chapter deals with Capital Gains and Sections 45 to 55A deals with ‘Capital Gains’. Though both these provisions talk of only deemed income and deemed Capital Gains where depreciable assets are sold by the Assessee, they do not clearly spell out the treatment of loss occurring at the stage of sale of such depreciated assets. We are of the opinion that even if these provisions talk only of taxability on the excess received by the Assessee over the written down value of the assets, it cannot exclude or ignore the minus figure or loss occurring on such sale transactions.
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