THE HIGH COURT OF DELHI AT NEW DELHI
% Judgment delivered on: 07.02.2013
+ ITA No.26/2013
COMMISSIONER OF INCOME TAX: DELHI-VIII ... Appellant
versus
ASHOK MITTAL ... Respondent
Advocates who appeared in this case:
For the Petitioner : Mr Abhishek Maratha, Sr. Standing Counsel.
For the Respondent : Mr Mohit Chaudhary and Mr. R.K.Srivastava,
Advocates.
CORAM:-
HON'BLE MR JUSTICE BADAR DURREZ AHMED
HON'BLE MR JUSTICE R.V.EASWAR
JUDGMENT
R.V. EASWAR, J
The revenue has proposed the following questions, stated to be
substantial questions of law, in this appeal filed under section 260A of the
Income Tax Act, 1961:-
"A. Whether the ITAT was correct in the eyes of law in
affirming the order of the CIT (A) directing the AO to re-compute
the income of the assessee in order to give the appeal effect by
first setting-off the carry forward speculative losses against the
speculative profit and then set-off the business losses to the extent
of the balance speculation profit and other income?
B. Whether the impugned order passed by the ITAT is
perverse both in facts and law?"
W.P.(C)26/2013 Page 1 of 7
2. The appeal arises out of the order passed by the Income Tax
Appellate Tribunal on 11.5.2012 in ITA No.4196/Del/2011 relating to the
assessment year 2000-01. In the return filed on 31.10.2000, the assessee
set off the brought forward loss from speculation business quantified at
`14,43,625/- and `75,39,186/- for the assessment years 1999-2000 and
1998-1999 respectively against the current year's speculation profit of
`1,46,56,512/-. In the assessment order passed under section 143(3) on
31.3.2003, the AO disallowed the set off claimed by the assessee on two
grounds. The first ground was that the assessment orders for the
assessment years 1999-2000 and 1998-1999 were silent on the issue of
carry forward of the speculation losses. The second ground was that the
assessee did not furnish the particulars of share trading so as to arrive at
the true profits from the speculation business in the current or earlier
years.
3. On appeal the CIT(Appeals) by order dated 14.8.2007 directed the
AO to allow the set off of the speculation losses of the assessment years
1998-1999 and 1999-2000 against the speculation profits for the
assessment years 2000-2001 as claimed by the assessee.
W.P.(C)26/2013 Page 2 of 7
4. The AO gave effect to the order of the CIT(Appeals) and in doing
so first adjusted the current year's loss from all the businesses of the
assessee against the current year's profits. The assessee had suffered loss
in the business carried on in the name and style of M/s Ashok Mittal &
Co.; M/s Carrara Marbles & Granite Ind. and M/s Light and Lighting.
The AO adjusted these losses against the speculation profits of
`1,46,56,512/-. This left a balance speculation profit of `19,42,970/-. It
was against this balance that the brought forward speculation losses were
adjusted. After this adjustment, the aggregate of the brought forward
speculation losses came to `1,01,39,841/- which were allowed to be carry
forward to the subsequent years. This method of adjustment of the
brought forward speculation losses was disadvantageous to the assessee
in the sense that under sub-section (2) of section 73 of the Act, the carried
forward losses can be set off only against the speculation profits and not
against other profits. Moreover the speculation loss could not at that time
be carried forward for more than eight assessment years immediately
succeeding the assessment year for which the loss was first computed.
Thus the method of adjustment adopted by the AO was disadvantageous
to the assessee in whose computation in the return of income, the entire
W.P.(C)26/2013 Page 3 of 7
brought forward losses stood adjusted against the speculation profit for
the current year.
5. The assessee therefore filed an application under section 154 of the
Act seeking rectification of the order passed by the AO on 14.12.2007,
reiterating his claim in the return of income and asking for the
rectification of the order. The AO, by order dated 20.6.2008 rejected the
application stating that the method adopted by him with regard to the
adjustment of the brought forward speculation losses was in accordance
with the provisions of section 71 of the Act.
6. Aggrieved, the assessee carried the matter in appeal before the CIT
(Appeals). He noted that the assessee's method of ad justment of the
brought forward speculation losses had the approval of the judgments of
the Calcutta High Court in CIT vs. New India Investment Corporation
Ltd. (1994) 205 ITR 618 and CIT vs. Pradeep Kumar Todi (2009) 181
Taxman 29=(2010) 325 ITR 96 and a judgment of the Bombay High
court in the case of Navnitlal Ambalal vs. CIT (1976) 105 ITR 735. He
noted that in these judgments the Calcutta and Bombay High Courts have
applied the circular No.23D of 1960 dated 12.9.1960 of the Central Board
of Direct Taxes which conceded that speculation losses carried forward
W.P.(C)26/2013 Page 4 of 7
from previous years may be first set off against the speculation profits
before being set off against any other current profits, if that procedure is
more beneficial to the assessee. The CIT(Appeals) also noted that the
courts have also recognized that though the circular was issued in the
context of section 24 of the 1922 Act, it has not been withdrawn and
therefore held the field even under section 73 of the 1961 Act. In this
view of the matter, he upheld the assessee's method of adjusting the
brought forward speculation losses against such speculation profits. This
method was found by the CIT(Appeals) to be more advantageous to the
assessee. He thus allowed the appeal.
7. The revenue carried the matter in appeal before the Tribunal. The
Tribunal after noticing the view taken by the income tax authorities
dismissed the appeal by observing as under:-
"14. We have heard the rival contentions in light of the material
produced and precedent relied upon. We find that Ld.
Commissioner of Income Tax (Appeals) has adopted the correct
approach. As per the Boart Circular and decision of Hon'ble
Calcutta High Court referred by the Ld. Commissioner of Income
Tax (Appeals), it is evident that carried forward speculation
losses have to be adjusted against the speculation profit before
allowing any other loss to be adjusted against those profits and
other incomes. The Board Circular though issued in the context
of Section 24 of the 1922 Act, has been held by the Courts hold the
field. We do not find any infirmity in the order of the Ld.
Commissioner of Income Tax (Appeals). Accordingly, we uphold
the same."
W.P.(C)26/2013 Page 5 of 7
8. Having considered the matter, we are of the view that there is no
merit in the appeal and no substantial question of law arises. The
Tribunal has applied the well-settled position that circulars issued by the
CBDT relaxing the rigour of the provisions of the Act are binding on the
AO and others who are executing the Income Tax Act (see: The
Constitution Bench judgment of the Supreme Court in the case of Navnit
Lal Zaveri vs. K.K.Sen (1965) 56 ITR 198). There is no dispute that the
circular (supra) has not been withdrawn and therefore would still govern
the treatment to be given to the brought forward speculation losses
though it was issued under the 1922 Act. It is not the case of the revenue
that the provisions of section 24 of the old Act and section 73 of the new
Act are materially different and therefore the circular can have no
application under the new Act. The order of the Tribunal is in conformity
with the legal position that beneficial circulars issued by the CBDT are
binding on the income tax authorities. It is not also the case of the
revenue that the working adopted by the AO was in fact more beneficial
to the assessee.
W.P.(C)26/2013 Page 6 of 7
9. In the above circumstances the appeal is without merit. No
substantial question of law arises for our consideration. The appeal is
accordingly dismissed with no order as to costs.
R.V.EASWAR, J
BADAR DURREZ AHMED, J
FEBRUARY 07, 2013
Bisht
W.P.(C)26/2013 Page 7 of 7
|
