Case Law Details
Pan Emami Cosmed Limited Vs DCIT (ITAT Kolkata)
Introduction: The Income Tax Appellate Tribunal (ITAT) Kolkata has ruled in favor of Pan Emami Cosmed Limited in a case against the denial of Long-Term Capital Gain (LTCG) exemption for the Assessment Year 2018-19. The ITAT order dated November 7, 2023, overturned the decision of the Commissioner of Income-tax (Appeals) and directed the Assessing Officer (AO) to allow the exemption after thorough examination.
Background: The assessee had claimed a loss on the sale of equity shares amounting to Rs. 2,66,49,388/- as exempt under section 10(38) of the Income Tax Act. However, the AO, during the processing of the return, disallowed the claimed loss without proper examination. The adjustment was made without providing an opportunity, and subsequent rectification moves were summarily rejected. The CIT(A) upheld the AO’s decision.
ITAT Decision: After considering the arguments and examining the records, the ITAT found that the assessee genuinely earned LTCG of Rs. 2,66,49,388/- on the sale of shares, eligible for exemption under section 10(38) of the Act. The AO had incorrectly computed the business income, resulting in an erroneous assessment. The ITAT concluded that the issue required a detailed examination at the AO level to verify facts related to business income and the claimed loss on the sale of shares.
Conclusion: The ITAT, on November 7, 2023, set aside the order of the CIT(A) and directed the AO to reexamine the issue. The AO is instructed to allow the exemption under section 10(38) for LTCG and permit the loss to be carried forward to subsequent years. The appeal by Pan Emami Cosmed Limited is allowed for statistical purposes.
This ruling emphasizes the importance of a meticulous examination of facts and adherence to the provisions of the Income Tax Act in determining exemptions and losses in the assessment process.
FULL TEXT OF THE ORDER OF ITAT KOLKATA
This appeal preferred by the assessee is against the order passed by Learned Commissioner of Income-tax (Appeals)-NFAC, Delhi [hereinafter referred to Ld. ‘CIT(A)’] dated 28.06.2023 for the Assessment Year (in short ‘AY’) 2018-19.
2. The only issue raised in the various grounds of appeal is against the order of Ld. CIT(A) upholding the order passed by the AO thereby not allowing long term capital gain on sale of shares being exempt u/s 10(38) of the Act by CIT(A).
3. The facts in brief are that the assessee filed the return of income during the year on 09.10.2018 by claiming a loss on sale of equity shares of Rs. 2,66,49,388/- as exempt. However, while processing the return the said loss was not allowed and added to the income of the assessee by stating that by computing the income this has been reduced from the business income but has not been added as income from LTCG/other sources. It is pertinent to note that intimation u/s 143(1) of the Act was passed and the adjustment was made without giving any opportunity to the Rectification moved thereafter was also rejected summarily. Ld. CIT(A) without appreciating the facts in correct perspective directed the AO to verify genuineness of the loss claimed by the assessee and allow the same to be set off against the income from business and capital gain in accordance with law.
4. After hearing the rival contentions and perusing the material on record, we find that the assessee has genuinely effected the purchase and sale of shares on which it had earned LTCG of Rs. 2,66,49,388/- which was rightly claimed as exempt u/s 10(38) of the Act. Since the said gain was credited in the profit and loss account while computing the income, the same was reduced from profits in statement of total income and the correct income was filed by the assessee and the LTCG was claimed exempt accordingly. In our opinion, the AO has wrongly computed the income from business and profession at Rs. 58,67,024/- instead of loss of Rs. 2,00,50,550/- as filed in the return of income by the assessee. In our opinion, the issue needs to be examined at the level of the AO as this involves the verification of facts and issues concerning the business income and loss on sale of shares. Accordingly, we restore this issue to the file of the AO with the direction to examine the same and allow the exemption u/s 10(38) of the Act in respect of LTCG and also allow the loss resulting from the instant year to be carried forward to the subsequent years. We, therefore set aside the order of Ld. CIT(A) and allow the appeal of the assessee.
5. In the result, the appeal filed by the assessee is allowed for statistical purpose.
Kolkata, the 7th November, 2023.
