Understanding Carry forward of losses with latest case laws : Part – II.

Every taxpayer is knowing the importance of carry forward of losses and in this respect, we had provided a detailed description in the part – I. the link of same is given below for your kind reference.

http://taxbymanish.blogspot.in/2011/12/understanding-carry-forward-of-losses.html

In respect of continuation of understanding the subject, given below more decision of various high courts and ITAT in  respect of carry forward of loss.

·         Sale of derivative : Following the judgment of Tribunal in Platinum Investment Management Ltd. v. Dy. DIT (IT) in [2013] 33 taxmann.com 298 (Mum(Trib.) the Tribunal held that loss incurred from transaction in derivatives by assessee, being sub-account FII, could not be treated as business loss rather it was to be considered as short-term capital loss which was eligible for adjustment against short-term capital gain arising from sale of shares and held that CIT(A) was not justified in holding that income from Index based or non-Index based derivatives be treated as “business income", whether speculative or nonspeculative.The impugned order is, therefore, set aside by holding that income from derivative transaction resulting into loss of Rs.11.27 crore is to be considered as short-term capital loss on the sale of securities which is eligible for adjustment against short-term capital gains arising from the sale of shares. Accordingly, the income arising from transaction in derivative by assessee(s), being subaccount FII cannot be treated as business profit or loss. 115AD(1)(b). Refer, Platinum Asset Management Ltd. .v. Dy. DIT(IT), 61 SOT 119.

·         Speculation loss: Gross total income mainly consists of income chargeable under head capital gains or income from other sources and Deeming fiction cannot be applicable so Loss cannot be treated as speculation loss. 

·         Earlier years : Carry forward and set off would depend upon finality of order for earlier years. Hence, the AO was directed to determine carried forward losses based on outcome for earlier years. Refer, GE India Industrial P. Ltd. .v. DCIT, 27 ITR 543.

·         Undisclosed income: Income declared in survey to be taxed, it has to fall under one of heads of income u/s 14 and cannot be taxed separately. Therefore current year loss can be set off against undisclosed income declared in survey. Refer, CIT .v. Shilpa Dyeing & Printing Mills (P.) Ltd., 219 Taxman 279.

·         Set off : The Tribunal held merely because two set of transactions are liable for different rate of tax, it cannot be said that income from these transactions does not arise from similar computation, particularly when computation in both cases has to be made in similar manner under same provisions and, therefore, short-term capital loss arising from STT paid transactions can be set off against short-term capital gain arising from non-STT transactions. Refer, Capital International Emerging Markets Fund .v. Dy. DIT. 145 ITD 491.

In the case of Ramshree Steels (P.) Ltd. v. ITO, 144 ITD 227/35 Taxman n .com  273 (Luck.)(Trib.) held that -Normal business loss is allowed to be set off against speculation business profit.

Similar decision found in the case of ITO v. Mittal Investments, where Mumbai ITAT bench held that  as both speculation business and regular business or profession falls under the head Chapter IVD, such adjustment is permissible except to the extent contained in section 73(1). The latter  provision ,in turn prohibits the setting off of loss from speculation business against income from no –speculation business. On the facts the case the assessee claimed set off of speculation income, against the loss from regular business .Such a course of set off is fully permissible as per the relevant provisions. (ITA no 4774 /Mum /2012 dt 30-08 -2013 Bench “B”)

Loss from windmill business, which fell under category of eligible business as per section 80-IA, could be set off against other heads of income of assessee. Refer, DCIT v. V.B. Koujalgi, 58 SOT 15.

 

·         Amalgamation: malgamation-Order of BIFR is binding on the Assessing Officer and loss was allowed to be carry forward and set off. Refer, Kirloskar Oil Engines Ltd. v.Dy. CIT, 54 SOT 201(Pune)(Trib.) . 

In case you have any further clarification, feel free to contact me at taxbymanish@yahoo.com or else you can view more articles & news related to Indian tax & finance at http://taxbymanish.blogspot.in/.