Need Tally
for Clients?

Contact Us! Here

  Tally Auditor

License (Renewal)
  Tally Gold

License Renewal

  Tally Silver

License Renewal
  Tally Silver

New Licence
  Tally Gold

New Licence
Open DEMAT Account with in 24 Hrs and start investing now!
From the Courts »
Open DEMAT Account in 24 hrs
 Inordinate delay in income tax appeal hearings
 Income Tax leviable on Tuition Fee in the Year of Rendering of Services: ITAT
 Supreme Court invoked its power under Article 142 of Constitution to validate notices issued under section 148 as notices issued under section 148A. However the same shall be subject to amended provisions of section 149.
 ITAT refuses to stay tax demand on former owner of Raw Pressery brand
 Bombay HC sets aside rejection of refund claims by GST authorities
 [Income Tax Act] Faceless Assessment Scheme does not take away right to personal hearing: Delhi High Court
 Rajasthan High Court directs GST Authority to Unblock Input Tax Credit availed in Electronic Credit Ledger
 Sebi-taxman fight over service tax dues reaches Supreme Court
 Delhi High Court Seeks Status Report from Centre for Appointments of Chairperson & Members in Adjudicating Authority Under PMLA
 Delhi High Court allows Income Tax Exemption to Charitable Society running Printing Press and uses Profit so generated for Charitable Purposes
 ITAT accepts Lease Income as Business Income as Business Investments were mostly in nature of Properties

Narita Investments Pvt. Ltd. Swati Building, Ground Floor, North Avenue Road, Santacruz (W), Mumbai-400 054 Vs. The Income Tax Officer 9(2)(3), Aayakar Bhavan, 2nd Floor, 101, M. K. Road, Mumbai-400 020
September, 19th 2014

       ,     . .  . . ,                                            ,                    

                     ./I.T.A. No. 6282/Mum/2011
                    (   / Assessment Year: 2008-09)

Narita Investments Pvt. Ltd.                        The Income Tax Officer ­ 9(2)(3),
Swati Building, Ground Floor,                       Aayakar Bhavan, 2nd Floor,
North Avenue Road,                         /        101, M. K. Road, Mumbai-400 020
Santacruz (W), Mumbai-400 054              Vs.

     . /  . /PAN/GIR No. AAACN 1873 H
         ( /Appellant)                       :             (     / Respondent)

         / Appellant by                      :     Shri Vipul Joshi

           /Respondent by                    :     Shri Sambit Mishra

                          /                  :     19.06.2014
                    Date of Hearing
                                             :     18.09.2014
           Date of Pronouncement

                                    / O R D E R
Per Sanjay Arora, A. M.:

      This is an Appeal by the Assessee directed against the Order by the Commissioner
of Income Tax (Appeals)-20, Mumbai (`CIT(A)' for short) dated 21.06.2011, partly
allowing the assessee's appeal contesting its assessment u/s.143(3) of the Income Tax
Act, 1961 (`the Act' hereinafter) for the assessment year (A.Y.) 2008-09.

2.    The background facts of the case are that the assessee-company, a real estate
developer, returned its income for the year on 26.09.2008, disclosing income from house
                                                         ITA No. 6282/Mum/2011 (A.Y. 2008-09)
                                                             Narita Investments Pvt. Ltd. vs. ITO

property at Rs.38.80 lacs and business loss (at Rs.14.95 lacs). The entire net income was
adjusted against the brought forward unabsorbed depreciation (Rs.23.85 lacs), returning
nil income, as well as nil book profit u/s.115JB, adjusting the entire book profit (Rs.38.54
lacs) against brought forward unabsorbed loss and depreciation (refer computation of
income at PB pgs. 1-3).

3.     The Assessing Officer (A.O.) in the assessment proceedings noted absence of any
construction or business activity. It was explained that the assessee-company had got
embroiled in serious litigation with the Revenue department, with the matter being
pending at the appellate stage before the hon'ble High Court (for A.Y. 1998-99) and the
Appellate Tribunal (for A.Y. 2000-01); both the office premises as well as stock-in-trade
of the assessee having been attached for recovery, and also the bank account. The
company was under the circumstances constrained not to undertake any business. The
business had to, in any case of the matter, incur establishment expenditure (Rs.3.21 lacs)
as well as in defending itself in the tax disputes (Rs.10.33 lacs), apart from of-course
depreciation (Rs.1.46 lacs). It cannot therefore be said that no business activity had at all
been carried on by the assessee in-as-much as it is required to attend court proceedings as
well as comply with the income-tax and company law matters. Accordingly, the entire
expenditure claimed, i.e., with reference to the profit and loss account, as well as
depreciation, which is computed as per the Income-tax Rules, was deductible as business
expenditure for the current year, i.e., in computing the assessable income u/s.28 of the
Act. The assessee's claim, however, did not find acceptance by the A.O. The rental
income was assessable u/s.22, i.e., as income from house property, while no expenditure
could be allowed as no business had been carried out during the relevant year, having in
fact ceased to exist. The same found favour with the ld. CIT(A), and for the same
reason/s. Further, the assessee's claim for unabsorbed depreciation against income
assessed u/s.22 was also not valid in-as-much as unabsorbed depreciation is, by legal
fiction of section 32(2), a part of the current depreciation, and which could be allowed
                                                         ITA No. 6282/Mum/2011 (A.Y. 2008-09)
                                                             Narita Investments Pvt. Ltd. vs. ITO

only in the computation of the business income, i.e., where the business exists.
Aggrieved, the assessee is in appeal. The assessee raises the following grounds (Gd.):
       `I.   On Facts & in Law, the Commissioner of Income tax (Appeals) 20,
       Mumbai (the CIT(A)) erred in confirming disallowance of entire
       administrative and other expenses of Rs.19,26,208/-.
       The appellant therefore prays that the order of the CIT (A) be set aside
       and the AO be directed to delete the entire disallowance.
       II.    On Facts & in Law, the CIT(A) erred in confirming action of the AO
       in not allowing set off of brought forward unabsorbed depreciation against
       the rental income taxed under the head Income from House Property.
       The appellant therefore prays that the order of the CIT(A) be set aside
       and the AO be directed to allow set off of brought forward unabsorbed

In addition, it also raises the following additional grounds (A-Gd.):

       `I.    On facts & in law, the learned Assessing Officer (AO) erred in not
       considering the correct amount of unabsorbed depreciation as per the books
       of accounts while making the adjustment to arrive at the book profit under
       Section 115JB of the Income Tax Act, 1961 (the Act).
       II.   The learned AO erred in not allowing set off of brought forward
       unabsorbed loss against income assessed by him.
       III.   The Learned AO failed to appreciate that the rental income had
       arisen out of office premises and stock in trade temporarily let out and there
       by erred in not allowing set off of brought forward unabsorbed business
       The appellant therefore prays that the order of the CIT (A) be set aside
       and the AO be directed to allow set off of brought forward unabsorbed

The appeal thus raises four issues, which we shall take up in seriatim.

Issue # 1
4.     The first issue, which is the subject matter of Gd. I and A-Gd.III (partly), is with
regard to the deductibility of administrative expenses as business expenditure. The same,
though claimed at Rs.19.26 lacs, i.e., per the ground of appeal, is patently incorrect and
inconsistent with the assessee's own claim per it's return together with the underlying
                                                          ITA No. 6282/Mum/2011 (A.Y. 2008-09)
                                                              Narita Investments Pvt. Ltd. vs. ITO

documents in-as-much as the same includes property tax (Rs.10,32,697/-) and society
maintenance charges (Rs.74,268/-) which stand claimed and allowed in computing its
income under the head `income from house property'. We, therefore, restrict the
assessee's claim for business loss to that preferred per it's return of income, based on it's
accounts, i.e., at Rs.14,94,946/-, including depreciation at Rs.1,45,818/-. The basis of the
assessee's claim, as we understand, is that in-as-much as house property had been let as a
temporary measure, i.e., so as to generate revenue to be able to meet its on-going
expenditure, business cannot be said to have ceased to exist. As such, though for tax
purposes the rental income is assessable as income from house property, it should be
considered to have carried on the business during the relevant year and, consequently,
expenditure allowed, which is only towards protecting the business assets as well as to
meet the establishment costs necessitated by the regulatory framework.

5.     We have heard the parties, and perused the material on record, giving our careful
consideration to the matter. The question that is relevant, to our mind, is not as to why or
the circumstances under which the assessee had let its house property, or even of the head
of income under which the rental income (from house property) is assessable, but of why
it is so, i.e., assessable as `income from house property'; the assessee itself returning it as
such, so that to that extent there is no dispute between the parties. This is as letting is an
incident of ownership, and the law provides for ownership of house property as a separate
source of income, precluding assessment of rental income as business income, even
where undertaken as a part of business, i.e., in a systematic or organized manner. Why,
the Act seeks to assess the income of a house property, so that the fair rental value, which
it describes as `annual value', is assessable to tax even where there is no (actual) letting,
i.e., at the sum for which the property might reasonably be expected to let from year to
year. The rental income is, thus, irrespective of the circumstances leading to its letting, is
to be considered as sourced from the house property per se , or still better, its ownership,
against which specific deductions towards expenses, viz. municipal taxes, repairs,
interest, etc. are mandated for being allowed, and which have been independently
                                                         ITA No. 6282/Mum/2011 (A.Y. 2008-09)
                                                             Narita Investments Pvt. Ltd. vs. ITO

claimed and allowed in the instant case. The assessee's claim for expenditure would
therefore have to be considered as separate and distinct from the act of letting its house
property, and which would again make it irrelevant as to whether the same is its capital
asset or was the stock-in-trade of its business. Why, as claimed, these have in any case to
be incurred. Toward this, in our view, even if the expenditure had to be necessarily borne
by the assessee, the same would not by itself be regarded as a circumstance for
considering the same as incurred in the course of carrying on or for the purpose of
business, i.e., where no business had in fact been carried out during the year, i.e., at any
time during the year. The reason is simple. How could any expense be regarded as
having been incurred for its purpose when no business had in fact been carried out? This
leads us to the question as to whether the assessee's act of letting could be regarded as a
temporary measure, so that the business could be said to be in a state of suspension and
not having ceased to exist. Toward this, in our view, a finding as to a ceasure or
otherwise of business is neither necessary nor relevant. The assessee could, in future,
commence the same business, in the same or modified manner, or in fact even a new
business. If and when it does so, it could claim all the expenditure incurred in relation to,
and for the purpose of, the said business, as also, in our view, set off of brought forward
losses, i.e., subject to the time limitation stipulated for its carry forward under the Act.
Further, a finding as to the business having been only temporarily suspended, so that it
continues to exist, could only be rendered in the light, and on the basis, of some material
on record evidencing some activity/s toward the same. Its capital is at a mere Rs.10.0 lacs
as against accumulated losses of Rs.238.78 lacs as on 31.03.2007, the beginning of the
year (Pb pg. 9). The assessee cannot contend to be in business merely on the basis of
having incurred some expenditure or having employed some persons, unless the business
purpose of their employment is not specified or exhibited. The skeletal staff, which
appears to be the case, is stated to have been kept or retained, as the case may be, to
attend court proceedings. No evidence toward the same is on record. Two, proceedings
under the Act cannot be said to be either a part of the assessee's business or undertaken in
the course of carrying the business. Income-tax is a tax on income. It is thus not a
                                                        ITA No. 6282/Mum/2011 (A.Y. 2008-09)
                                                            Narita Investments Pvt. Ltd. vs. ITO

incident of the assessee's business, and comes into effect only once `income' is
generated, and which is by definition the residual sum, positive or negative, after
excluding or deducting all expenses of the trade or business, or the relevant activity qua
which income is being determined. It is for this reason that tax under the Act is not
allowable as expenditure u/s.37(1) in computing business income. Reference in this
context may be made to the decision in the case of East India Pharmaceutical Works Ltd.
vs. CIT [1997] 224 ITR 627 (SC). In fact, tax would stand attracted irrespective of
whether income is from business or any other source. Litigation costs qua tax levied or
other proceedings under the Act would thus not qualify as business expenditure.
Similarly, compliances under the Companies Act form part of the regulatory framework,
to which it is subject as a corporate entity, and which the assessee undertakes not for the
reason that it is in, and in fact independent of, its business. The impugned expenditure
stands accordingly rightly disallowed as expenditure of the business or as business
expenditure. We decide accordingly.

Issue # 2
6.     The second issue, raised per Gd. II, is toward set off of unabsorbed depreciation
allowance against the assessee's income assessable for the current year, being income
from house property. The issue is no longer res integra, having been answered in clear
terms by the apex court vide its decision in CIT vs. Virmani Industries Pvt. Ltd. [1995]
216 ITR 607 (SC), following the decisions by its larger bench in the case of CIT vs.
Jaipuria China Clay Mines (P.) Ltd. [1966] 59 ITR 555 (SC) and Rajapalayam Mills Ltd.
vs. CIT [1978] 115 ITR 777 (SC). Though the hon'ble Allahabad high court, whose
decision (reported at [1974] 97 ITR 461), it affirms therein, had opined of the necessity
for a business being carried on during the relevant (following) year, the apex court has
clearly stated of it being not so. The basis thereof is that the unabsorbed depreciation is
deemed as a part of the current year's depreciation, so that it would be allowable against
income under any other head. Further, the words `profits or gains chargeable for that
previous year' in section 32(2) are not confined to profit and gains from business whose
                                                          ITA No. 6282/Mum/2011 (A.Y. 2008-09)
                                                              Narita Investments Pvt. Ltd. vs. ITO

income is being computed, but refer to the totality of the profits and gains computed
under the various heads and chargeable to tax.
       The Revenue's case, on the other hand, is that section 32(1), entitling the claim for
depreciation allowance, comes into play only in computing business income under
section 28, which in terms of section 29 has to be in accordance with the provisions of
sections 30 to 43D. As such, in the absence of any business, there would be no occasion
to compute business income and, thus, give effect to section 32(1), allowance where-
under includes the brought forward unabsorbed allowance u/s.32(2). Further, true, section
32(2) employs the words `where, in the assessment of the assessee'. However,
assessment in this context would imply computation of income chargeable to tax (for the
relevant year) in accordance with the provisions of the Act and, accordingly, determining
the assessee's liability to tax as well as, correspondingly, losses/allowances which it is
entitled to carry forward. Thus the said words, even if taken as indicative of the stage of
aggregation of income, may not be determinative of the matter, i.e., of any business being
required to be carried on or not necessarily so in the following year, i.e., whereat effect is
sought to be given to s.32(2) r/w s.32(1). The said view is, as shall be apparent from the
foregoing, in agreement with that expressed by the hon'ble Allahabad high court in
Virmani Industries (supra), holding the carrying on of any business during the following
year as a condition for the set off of carry forward unabsorbed business loss.
       However, there is no doubt whatsoever that in-so-far as the apex court has in
Virmani Industries Pvt. Ltd. (supra) clarified that carrying any business during the
relevant (following) year is not a condition for allowing set off of brought forward
unabsorbed depreciation, it has departed from and modified the decision by the hon'ble
Allahabad high court. The decision by the apex court is declaratory of the law of the land
and binding on all the courts and tribunals. The decision by the Revenue authorities in the
instant case has been taken de hors and without taking into consideration the said
decision. Further, the hon'ble court in Malabar Agricultural Co. Ltd. vs. CIT [1998] 229
ITR 548 (Ker), relied upon by the Revenue, says nothing that digresses from or
contradicts our understanding of the decision by the apex court in Virmani Industries Pvt.
                                                          ITA No. 6282/Mum/2011 (A.Y. 2008-09)
                                                              Narita Investments Pvt. Ltd. vs. ITO

Ltd. (supra), which is in fact explicit and on the point, and toward which we may refer to
sub-para 2 at pg. 618, placitum C to F of the reports. True, the hon'ble high court
distinguishes the assessee's reliance on the said decision by stating that it is not called
upon to express anything as to whether suspension (of business) was temporary or
otherwise (pg. 554, placitum B to H of the reports). However, how we wonder is the
same relevant when the apex court has unequivocally held the carrying of any business
during the current year as not an ingredient for allowance of claim for brought forward
unabsorbed depreciation, even as the hon'ble high court itself notes in the earlier part of
the same para. A decision, it is trite law, is only an authority on what it actually decides,
and not what may remotely or even logically flow from it (refer: Goodyear India Ltd. v.
State of Haryana [1991] 188 ITR 402 (SC)). Accordingly, we do not consider, in
whatever manner one may look at it, the said decision as carrying the Revenue's cause
any further.
       The assessee shall, accordingly, be entitled to set off its unabsorbed brought
forward depreciation against the rental income. We decide accordingly, and the assessee
succeeds on its Gd.III.

Issue # 3
7.     The next issue, raised per A-Gd. II and III (partly), is in respect of set off of
unabsorbed brought forward business loss against income from house property. The said
set off is claimed u/s. 72(1) of the Act, which reads as under:

       `Carry forward and set off of business losses.
       72.    (1)     Where for any assessment year, the net result of the
       computation under the head "Profits and gains of business or profession" is
       a loss to the assessee, not being a loss sustained in a speculation business,
       and such loss cannot be or is not wholly set off against income under any
       head of income in accordance with the provisions of section 71, so much of
       the loss as has not been so set off or, where he has no income under any
       other head, the whole loss shall, subject to the other provisions of this
       Chapter, be carried forward to the following assessment year, and ­
       (i)    it shall be set off against the profits and gains, if any, of any business
       or profession carried on by him and assessable for that assessment year;
                                                          ITA No. 6282/Mum/2011 (A.Y. 2008-09)
                                                              Narita Investments Pvt. Ltd. vs. ITO

       (ii)   if the loss cannot be wholly so set off, the amount of loss not so set
       off shall be carried forward to the following assessment year and so on:
       Provided ..........'

In-as-much as the words employed in clause (i) sub-section (1) of section 72 are `against
the profits and gains, if any, of any business or profession carried on by him and
assessable for that assessment year', it is contended that it would take within its ambit all
such activities undertaken by the assessee which are dictated by business or commercial
considerations, so that they wear the badges of trade. The set off of loss under the head of
income `profits and gains of business or profession' is not restricted, in view of the
language of section 72(1)(i), to income assessed under the said head, but to any income
that could be said to represent business income, i.e., judged by the application of
commercial principles. Reliance for the purpose is placed on the decision in Lavish
Apartment (P.) Ltd. vs. Asst. CIT [2012] 210 Taxman 9 (Del) (23 414). The
letting of the assessee's office premises and one flat, which represented the stock-in-trade
of its business, is for the reason that they stand proscribed by the hon'ble jurisdictional
high court for being dealt with in any manner whatsoever during the pendency of the
appeal with it (vide Notice of Motion No. 424 of 2004 in ITA No. 84 of 2004 dated
26.02.2004/pgs. 1-4 of the Additional Evidence). The assessee on that basis claims to be
obliged to follow the said course (letting), which thus assumes the character of business
income, though assessable as income from house property, even as returned by the
assessee itself.

8.     We have heard the parties, and perused the material on record.
       We are afraid, we are unable to accept the assessee's plea, which we have
examined both on facts and in law. On facts, we have already clarified the levy of income
tax as not an incident of the trade or business, but on the income earned (or the loss
sustained) as the result thereof, or any other activity for that matter (also refer para 5). If
the tax under the Act on business income is liable to be considered, and for that reason, as
business expenditure, it could with equal felicity or ingenuity be argued to be an expense
                                                         ITA No. 6282/Mum/2011 (A.Y. 2008-09)
                                                             Narita Investments Pvt. Ltd. vs. ITO

in relation to any other activity yielding income assessable under other heads of income,
viz., salary, house property, capital gains, other source, i.e., where tax is liable on the
income assessable under the said heads. By all counts, it is only an appropriation of the
profit or income arising to the assessee from whatever source, with in fact adjustments by
way of set off being allowed for loss sustained under one head of income against income
under another. The argument is thus without basis in law, as also sought to be answered
earlier with reference to the decision in East India Pharmaceutical Works Ltd. (supra).
Further, the direction by the hon'ble court vide its order dated 26.02.2004 (supra) (which
we admit in-as-much as the Revenue itself is a party thereto), being in proceedings under
the Act would not therefore be regarded as proceedings arising out of or incidental to the
assessee's trade or business, even if they may impinge thereon. In fact, as we shall
presently see, they do not. What the hon'ble court has restrained the assessee is to deal
with its said two properties, being office premises (at Swati Building, Santacruz (W),
Mumbai) and one flat (at Flamingo, Khar, Mumbai), in any manner during the pendency
of its captioned appeal before it, so as to protect the interest of the Revenue. The assessee
could thus continue to use its office premises for its business. Rather, the assessee has by
letting the said properties, created third party interest therein, howsoever limited, so that
it has in fact `dealt' therewith, violating the direction by the hon'ble court. Further, even
construing the same broadly, so that it admits of letting as within the constraints laid
down by the hon'ble court, the same cannot be said to be a constraint arising out of the
assessee's business activity and, therefore, the letting to be for the purposes of its'
business. True, the second property represented the assessee's stock-in-trade, i.e., till the
time it was carrying its business of real estate development. However, the moot question
is: could it be said to so represent even after the assessee completely stops all it's
construction activity? Further, even as pointed out by the Bench during hearing, could it
possibly carry on the same with one flat? That is, could a restraint on one flat of a
builder-developer be considered as a jeopardizing its business. Rather, in our view, the
very fact that it has let its office premises at a monthly rent of Rs.5 lacs exhibits the
assessee's clear intention not to pursue its business, at least for the time being - in-as-
                                                          ITA No. 6282/Mum/2011 (A.Y. 2008-09)
                                                              Narita Investments Pvt. Ltd. vs. ITO

much as we cannot place any definite time frame thereto. No positive development in this
regard has been reported to us, i.e., even six years after the end of the relevant accounting
year, or 10 years after the placement of the embargo by the hon'ble court. In fact, it is
doubtful if both these properties could be or continue to be regarded as business assets of
the assessee-company. The assessee could commence business in future, employing these
assets, in which case the same shall again assume the character of business assets. As
explained by the hon'ble apex court in Sultan Brothers vs. CIT [1964] 51 ITR 353 (SC),
on the argument of the asset being a commercial asset advanced before it, that a thing is
not by its very nature a commercial asset. A commercial asset is only an asset used in
business and nothing else, and business may be carried on with practically all things.
       In the facts of the case in Lavish Apartment (P.) Ltd. (supra), on the other hand, as
its reading would show, the assessee was carrying on the business of sale and purchase of
properties and also earning rental and other income, being in fact incorporated for
carrying on those activities; its objects including leasing, selling and renting of real estate
properties, so that renting of property was among its main objects as per the
Memorandum of Association, as was also found to be the case in respect of hire charges
and commission income. It was in this context that the hon'ble court, interpreting the
provision of section 72(1)(i), held that even though the rent income would per force the
specific provision of law be assessable u/s.22, the same arises out of and is a part of the
assessee's trade and would therefore stand to be regarded as profits and gains of its
business. Another striking example would be of dividend income on shares held as stock-
in-trade. Though assessable as income from other sources u/s.56, again, in view of the
specific provision of the Act, the income is decidedly in the nature of the business
income, i.e., on commercial principles, as indeed found by the hon'ble court in CIT vs.
Cocanada Radhaswami Bank Ltd. [1965] 57 ITR 306 (SC), which decision stands
referred to and followed by the hon'ble court in Lavish Apartment (P.) Ltd. (supra). The
facts of the present case are clearly and decidedly different, so that the rental income can
by no stretch be considered as forming part of the assessee's business, with we on the
contrary, observing it to be perhaps within the scope of the restraint placed on the
                                                         ITA No. 6282/Mum/2011 (A.Y. 2008-09)
                                                             Narita Investments Pvt. Ltd. vs. ITO

relevant properties by the hon'ble court. The said decision is thus distinguishable on
         We may examine the legal aspect of the matter, which though stands rendered as
academic in view of our finding of the assessee's income, against which set off is being
claimed, as not of business nature, i.e., on commercial principles. We consider it
incumbent to do so inasmuch as our order is appealable. With respect, we are not in
agreement with the decision by the hon'ble court in Lavish Apartment (supra). The said
decision, in contradistinction to that by the apex court or the by the hon'ble jurisdictional
high court is not binding on us (refer: CIT v. Thane Electricity Supply Ltd. [1994] 206
ITR 727 (Bom.)). The decision in Cocanada Radhaswami Bank Ltd. (supra), as well as
others by the apex court, referred to in Lavish Apartment (supra), stands rendered under
the 1922 Act, section 6 of which is worded differently from section 14 of the Act, which
requires all income, from whatever source, to be, for the purposes of its assessment under
the Act, classified under any of the six (five w.e.f. 01.04.1989) heads of income
prescribed therein. The Act, thus, prescribes a schedular system of taxation for the levy of
tax, which is one tax on the total income (from all sources) chargeable to tax for any year.
The same is to obtain save as provided otherwise by the Act. Chapter VI, which includes
inter alia provisions as to aggregation of income (ss. 66 to 69D) and set off, or carry
forward and set off (ss. 70 to 80) forms part of and toward determining this income, i.e.,
chargeable to tax for any year. The same nowhere breaks away or departs from the
schedular manner or classification, with separate provisions for aggregation and carry
forward and set off of losses sustained under different heads of income, viz. 70, 71, 71A,
71B, 72 et. al. The sub heads to different sections itself indicate the nature of the
provision, which fall under two broad categories, i.e., `intra head' and `inter head'
adjustments. In other words, each income continues to be assessable under a particular
head of income and its character is postulated for being retained from year to year, with
its carry forward regulated per specific provision/s for that head of income. Continuing
further, as a result, the gross total income (GTI), which is the aggregate of all incomes
falling under the different heads of income prior to allowing any deduction under Chapter
                                                           ITA No. 6282/Mum/2011 (A.Y. 2008-09)
                                                               Narita Investments Pvt. Ltd. vs. ITO

VI-A of the Act, i.e., by definition, can be known or profiled in terms of its various
constituents, i.e., the said incomes. In fact, many a deduction under Chapter VI-A is with
reference to the income computed under a particular head of income as included in the
GTI, so that the Act contemplates the said break-up, being as afore-stated, only the
aggregation of such incomes, i.e., assessable under the different heads of income. The
interpretation advanced by the hon'ble court, whereby the said classification is given a go
by at the stage of the aggregation, is thus in our humble view, with respect, not consistent
with the scheme of the Act. A departure, even if only qua loss under the head `business
income', cannot be lightly inferred. It may in fact not be possible to determine the income
assessable or carried forward under a particular head for any year once the scheduler
system is diluted. In fact, once the income is classified under a particular head of income,
which are non-overlapping, so that a particular income stands to be classified under a
particular head of income, there is no occasion for the A.O. to revisit the nature of the
income; the classification itself being on that basis, so that it determines it's nature for the
purposes of the Act. That the Act is to be read as one, composite whole, is trite law.
       Continuing further, in our humble view, the provision of section 72(1)(i) also does
not lend itself to the interpretation sought to be placed thereon by the hon'ble court. True,
clause (i) of section 72(1) does not speak of set off against income assessable under
Chapter IV-D, i.e., under the head `profits and gains of business or profession' but
`against profits and gains, if any, of any business or profession carried on by the assessee
and assessable for that year'. That, however is precisely what business (or professional)
income is, i.e., by definition, for which we may reproduce section 28(i), as under:

       `Profits and gains of business or profession.
       28.   The following income shall be chargeable to income-tax under the
       head "Profits and gains of business or profession",--
       (i)    the profits and gains of any business or profession which was carried
              on by the assessee at any time during the previous year ;
       (ii)   ....................'
                                                                   [emphasis, ours]
                                                            ITA No. 6282/Mum/2011 (A.Y. 2008-09)
                                                                Narita Investments Pvt. Ltd. vs. ITO

The words employed by the statute in both the provisions are identical. How, one may
ask, could the two be then interpreted differently? This is particularly so considering that
the same are used in the same context, i.e., are pari materia. Placing the same or a
uniform interpretation on both the identically worded provisions, an income would thus
either fall under both, i.e., section 28(i) and section 72(1)(i), or not so, i.e., in both, and it
cannot be that an income falls u/s.72(1)(i) (so that it is available for set off) but not
u/s.28(i) (so that it is not assessable under Chapter IV-D).
       For these reasons, we are, with respect, unable to subscribe to the view canvassed
by the hon'ble court in Lavish Apartment (supra), which we have already found as
distinguishable on facts, so that, either way, the said decision is of no assistance to the
assessee. The decisions by the apex court discussed therein, as clarified earlier, which
under the 1922 Act, section 6 of which did not oblige or envisage a classification of
income. A head of income, it is again settled is not the same as class of income, as
clarified by the hon'ble court in CIT vs. Bombay State Co-operative Bank Ltd. [1966] 59
ITR 31 (Bom) (affirmed in [1968] 70 ITR 86 (SC)). The assessee thus fails on its relevant
ground. We decide accordingly.

Issue # 4
9.     The fourth and the last issue, raised per A-Gd. I, is with regard to the correct
amount of the unabsorbed depreciation as per the books of accounts which is to be taken
into account while making the adjustment to arrive at the book profit u/s.115JB of the
Act. The ld. counsel would during hearing submit that the said issue, legal in nature,
though arising out of the assessment order, remained to be assumed before the first
appellate authority. The same was accordingly prayed for being admitted, and a
restoration back to the file of the ld. CIT(A) for adjudication in accordance with law. The
ld. Departmental Representative (DR) did not raise any objection. We, accordingly, have
no hesitation in, admitting the said ground, restoring the same to the file of the ld. CIT(A)
for the purpose. We decide accordingly.
                                                   ITA No. 6282/Mum/2011 (A.Y. 2008-09)
                                                       Narita Investments Pvt. Ltd. vs. ITO

10.    In the result, the assessee's appeal is partly allowed.

             Order pronounced in the open court on September 18, 2014

              Sd/-                               Sd/-
       (Dr. S. T. M. Pavalan)                 (Sanjay Arora)
          / Judicial Member                     / Accountant Member
 Mumbai;  Dated : 18.09.2014
. ../Roshani, Sr. PS
         /Copy of the Order forwarded to :
1.  / The Appellant
2.  / The Respondent
3.      () / The CIT(A)
4.       / CIT - concerned
5.               ,     ,   / DR, ITAT, Mumbai
6.      / Guard File
                                               / BY ORDER,

                                         /  (Dy./Asstt. Registrar)
                                      ,  / ITAT, Mumbai
Home | About Us | Terms and Conditions | Contact Us
Copyright 2023 CAinINDIA All Right Reserved.
Designed and Developed by Ritz Consulting