There is no provision in the Income-tax Act which permits the allowance of a loss which was suffered by an assessee to be adjusted and set off or deducted from the profits of another assessee

Deduction on account of loss of Rs.60 lacs as result of dacoity which took place on 7^th January 1999. It was explained that the aforesaid amount in cash formed part of the business receipts and that while it was being taken to the bank for being deposited was lost due to dacoity.

Since the conditions of section 36 (2)(i) of the Income-tax Act have not been satisfied the advance of RS.60 lacs cannot be successfully claimed as bad debts written off.

The alternative claim that the amount has to be allowed as a business loss under section 28 of the Act as loss incidental to the business cannot also be accepted because the loss, if at all, is that of Balaji Enterprises to whom the cash belonged, and not that of the assessee. There is no provision in the Income-tax Act which permits the allowance of a loss which was suffered by an assessee to be adjusted and set off or deducted from the profits of another assessee. The argument in the present case is that the business of Balaji Enterprises was taken over by the assessee-company and thus the loss suffered by Balaji Enterprises can be allowed in the assessment of the assessee-company. But the assessees are different. It is only in respect of the same assessee that losses, if they are assessed under the head “Business” and allowed to be carried forward to the subsequent year, can be set off against the business income for a later year; and this is because of the specific provisions of section 72 of the Income-tax Act. There is no similar provision permitting the loss suffered by one assessee to be adjusted against the income of another assessee. Section 72A was a specific provision made to permit carry-forward and set-off of accumulated loss and depreciation in cases of amalgamation of companies. The fact that the a specific provision had to be made permitting the loss suffered by an amalgamating company to be adjusted against the profits of the amalgamated company, itself shows that but for such specific provision the loss could not have been adjusted. The assessee’s claim is opposed to the basic postulates of income-tax law and, therefore, cannot be countenanced. No direct decision in support of the assessee’s plea has been brought to our notice by the assessee. The judgments which have been compiled in the assessee’s paper-book filed on 14.2.2008 (pages 21 to 36) are cases of debts taken over by an assessee from another entity. Even these cases are not applicable, as we have already seen that the conditions of section 36(2)(i) have not been satisfied in the present case, whereas in the decided cases such conditions were found to be satisfied. No case was cited in support of the proposition that a business loss of one entity can be carried forward and adjusted against the profits of an entirely different entity. The cases listed in the “Brief Synopsis” filed by the learned representative for the assessee are not cases matching the assessee’s case on facts. They are cases where it was held that loss on account of theft of cash belonging to the business must be allowed as business loss. There can be no quarrel with such a proposition but the controversy in the case before us is different. Herein, we are concerned with a loss which, even if it is assumed to be a business loss, is sought to be claimed as a deduction in the hands of a different entity/assessee in a different year. There is no direct authority which was brought to our attention in support of this proposition.

IN THE INCOME TAX APPELLATE TRIBUNAL

(DELHI BENCH ‘A’ : NEW DELHI)

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