Sahara India Corp Investment Ltd. Vs ACIT (ITAT Delhi)
Sahara India NBFC’s Share Loss Not Business Loss, Yet Eligible for Set-Off in Future -Accounting Classification Decides Nature of Loss, Not NBFC Status
Assessee, an NBFC engaged in financing, claimed ₹5.00 crore loss on sale of Pipavav Defence & Offshore Engineering Co. Ltd. shares as business loss. AO held it as capital loss, since shares were reflected as non-current investments in balance sheet, not as stock-in-trade, & were sold pursuant to Supreme Court’s directions.
CIT(A) affirmed, observing that the investment was held for over three years, no trading motive was shown, & transaction was not business-driven. CIT(A) also denied carry-forward of the loss, reasoning that since long-term capital gains were exempt u/s 10(38) during F.Y.2016-17, corresponding losses could not be carried forward.
Before Tribunal, Assessee argued that as an NBFC, share transactions formed part of its business activity; alternatively, even if capital in nature, loss should be eligible for carry-forward per decisions in Raptakos Brett & Co. Ltd., Bennett Coleman, Rare Investments, & Shiv Kumar Jatia. Department relied on CIT(A)’s reasoning.
ITAT noted that the shares had always been shown as investment, never as trading stock, & were held for 3½ years. The sale arose under Supreme Court directions; hence the intention was investment, not trading. Relying on Associated Industrial Development Co. (P) Ltd. (82 ITR 586, SC) & Bhanuprasad D. Trivedi (HUF) (Guj HC), Tribunal upheld CIT(A)’s view treating the loss as capital loss. However, on the alternate plea, Tribunal held that carry-forward of such capital loss cannot be denied, since s.10(38) exempts only long-term capital gains, not losses. Following Raptakos Brett & Co. Ltd. & other coordinate bench rulings, AO was directed to allow carry-forward of LTCL as per law.
