Comunidade of Chicalim Vs ACIT (ITAT Panaji)
The appeal concerns two primary issues arising from an assessment order passed under sections 143(3) and 250 of the Income Tax Act: (i) denial of set-off of carried forward capital losses, and (ii) disallowance of deduction under section 57(iv) relating to interest income received on enhanced compensation.
The assessee, a body of individuals governed under a state code, filed its return of income for Assessment Year 2016–17 declaring a total income of Rs. 2.38 crore. The case was selected for scrutiny based on factors such as a large refund claim, a high refund-to-TDS ratio, delayed tax payment, and late filing of the return. During assessment proceedings, the Assessing Officer (AO) examined the claim of set-off of carried forward capital losses amounting to Rs. 1.49 crore from Assessment Years 2007–08 and 2009–10 against current capital gains.
The AO observed that as per section 74 of the Act, capital losses can only be carried forward for eight assessment years immediately succeeding the year in which the loss was incurred. Accordingly, the loss from AY 2007–08 could only be set off up to AY 2015–16. Since the assessee attempted to set off the loss beyond this period, the AO denied the claim. Additionally, the AO noted that the assessee failed to establish the cost of acquisition for such losses, further weakening the claim.
