Income Tax Appellate Tribunal - Chandigarh
Wingsfield Knitwear Pvt. Ltd., ... vs Acit, C-1, Ludhiana on 28 February, 2020
आयकर अपील य अ धकरण,च डीगढ़ यायपीठ, "बी " च डीगढ़
IN THE INCOME TAX APPELLATE TRIBUNAL
DIVISION BENCH, 'B', CHANDIGARH
ी एन. के. सैनी, उपा य एवं ी संजय गग , या यक सद य
BEFORE SHRI N.K. SAINI, VICE PRE SIDENT &
SHRI SANJAY GARG, JUDICIAL ME MBER
आयकरअपीलसं./ITA No. 1406/ C H D / 2 0 1 7
नधा रण वष / Assessment Year : 2013-14
Wingsfield Knitwear Pvt Ltd., Vs. The ACIT, Circle-1,
C-119, Phase V, Focal Point, बनाम Ludhiana
Ludhiana
थायीले खासं . / PAN NO: AAACW5076F
अपीलाथ$/ Appellant &'यथ$/ Respondent
नधा (रतीक*ओरसे/Assessee by : Shri Vibhor Garg, CA
राज वक*ओरसे/ Revenue by : Shri Rohit Mehra,Addl. CIT
सन
ु वाईक*तार.ख/Date of Hearing : 26.02.2020
उदघोषणाक*तार.ख/Date of Pronouncement : 28.02.2020
आदे श/ Order
Per Sanjay Garg, Judicial Member:
The present appeal has been preferred by the assessee against the order dated 16.08.2017 of the Commissioner of Income Tax (Appeals)-
1, Ludhiana [hereinafter referred to as 'CIT (A)'].
2. The assessee in this appeal has taken following grounds of appeal:-
1. That the impugned Appellate Order is bad both on facts and Law.
ITA No. 1406-Chd-2019- Wingsfiled Knitwear Private Ltd. Ludhiana 2
2. That the Ld. Appellate Authority wrongly and illegally held that the insertion of sub- section 2 of Section 115 BBE by Finance Act, 2016 w.e.f.
01.04.2017 has retrospective application from 01.04.2013 and consequently erred in confirming the action of the lid. A.O. in not allowing the set-off of business loss of Rs. 31,64,629/- against the surrendered income of Rs. 1,00,00,000/- .
3. That the Ld. Appellate Authority wrongly and illegally confirmed an assessed income of Rs. 99,93,000/- against the declared income of Rs. 68,28,370/-.
4. That the Appellant seeks permission to add, delete, amend, modify or elucidate any ground of appeal at the time of hearing.
5. It is prayed that the Appeal may kindly be accepted and the impugned order may kindly be set aside, additions be deleted, inter - alia holding that sub- section 2 of Section 115 BBE is applicable prospectively i.e. w.e.f. 01.04.2017 or any other relief to which the Appellant may be found entitled to.
3. The brief facts of the case are that the case of the assessee's business premises was surveyed under section 133A of the Income Tax Act, 1961 (in short 'the Act') on 31.8.2012, whereupon, it was noted that there were unaccounted receivable of Rs. 71 laks and unexplained investment in building at Rs. 20 lakhs besides excess cash of Rs. 9 lakh which were unrecorded in the book of account maintained. To make up such discrepancy, the assessee company came forward with the declaration of an additional income of Rs. 1 crore which was over and ITA No. 1406-Chd-2019- Wingsfiled Knitwear Private Ltd. Ludhiana 3 above the normal income of the assessee for assessment year 2013-14.
However, in the consolidated profit and loss account, though the surrendered income was credited, the same was set off against the business losses incurred during the year under consideration on the reasoning that the uncounted receivable, unexplained investment in building and excess cash found were income from business and profession. After the set off of business losses of Rs. 31,64,629/-
against the surrendered income, the net income was declared at Rs.
68,35,371/-. The Assessing Officer following the decision of the Hon'ble Punjab & Haryana High Court in the case of 'M/s Kim Pharma (P) Ltd. vs CIT', Panchkula & Others in ITA No. 106 of 2011 and 'Dulari Digital Photo Services Pvt Ltd vs CIT', ITA No. 189 of 2012 treated the additional income disclosed during the survey operation as "deemed income" under the provisions of section 69A & 69B of the Act separately and subjected the same to taxation without allowing the set off of such income with the assessed business loss of Rs. 31,64,629/-.
4. The Ld. CIT(A) confirmed the action of the Assessing Officer in not allowing the set off of current year business loss from the additional income holding that the amendment brought to section 115BBE of the Income Tax Act, 1961 (in short 'the Act') w.e.f. 1.4.2017 was clarificatory in nature and, hence, applicable retrospectively.
ITA No. 1406-Chd-2019- Wingsfiled Knitwear Private Ltd. Ludhiana 4
5. However, before us, Ld. Counsel for the assessee relied upon the Circular No. 11 of 2019 of the CBDT, which reads as under:-
"Circular No. 11/2019Government of India Ministry of Finance Department of Revenue Central Board of Direct Taxes North-Block, New Delhi, dated the 19th of June, 2019 Subject: Clarification regarding non-allowability of set-off of losses against the deemed income under section 115BBE of the Income-tax Act, 1961 prior to assessment-year 2017-18-reg.
With effect from 01.04.2017, sub-section (2) of section 115BBE of the Income-tax Act, 1961 (Act) provides that where total income of an assessee includes any income referred to in section(s) 68/69/69A/69B/69C/69D of the Act, no deduction in respect of any expenditure or allowance or set off of any loss shall be allowed to the assessee under any provisions of the Act in computing the income referred to in section 115BBE(1) of the Act.
2. In this regard, it has been brought to the notice of the Central Board of Direct Taxes(the Board) that in assessments prior to assessment year 2017-18, while some of the Assessing Officers have allowed set off of losses against the additions made by them under Section(s) 68/69/69A/69B/69C/69D, in some cases, set off of losses against the additions made under Section 115BBE(1) of the Act have not been allowed.
As the amendment inserting the words 'or set off of any loss' is applicable with effect from 1st of April, 2017 and applies from assessment year 2017-18 onwards, conflicting views have been taken by the Assessing Officers in assessments for years prior to assessment year 2017-18. The matter has been referred to the Board so that a consistent approach is adopted by the Assessing Officers while applying provision of section 115BBE in assessments for period prior to the assessment year 2017-18.
3. The Board has examined the matter. The Circular No. 3/2017 of the Board dated 20th January, 2017 which contains Explanatory notes to the provisions of the Finance Act, 2016, at para 46.2, regarding amendment made in section 115BBE(2) of the Act mentions that currently there is uncertainty on the issue of set-off of losses against income referred to in section 115BBE. It also further mentions that the pre-amended provision of section 115BBE of the Act did not convey the intention that losses shall not be allowed to be set-off against income referred to in section 115BBE of the ITA No. 1406-Chd-2019- Wingsfiled Knitwear Private Ltd. Ludhiana 5 Act and hence, the amendment was made vide the Finance Act, 2016.
4. Thus keeping the legislative intent behind amendment in section 115BBE(2) vide the Finance Act, 2016 to remove any ambiguity of interpretation, the Board is of the view that since the term 'or set off of any loss' was specifically inserted only vide the Finance Act 2016, w.e.f. 01.04.2017, an assessee is entitled to claim set-off of loss against income determined under section 115BBE of the Act till the assessment year 2016-17.
5. The contents of this Circular may be circulated widely for information of all stakeholders and departmental officers. The pending assessments and litigations on this issue may be handled accordingly.
6. Hindi version to follow. Sd/-
RajarajeswawR.) Under Secretary (ITA.II), CBDT"
6. A perusal of the above circular reveals that the CBDT now has clarified the matter that the assessee will be entitled to set off of loss against income determined u/s 115BBE of the Act till assessment year 2016-17. The assessment year under consideration being assessment year 2013-14, the assessee is accordingly entitled to the set off of the current year losses against the deemed income.
The appeal of the assessee stands partly allowed.
Order pronounced in the Open Court on 23.02.2020.
Sd/- Sd/-
(एन. के. सैनी / N.K. SAINI) (संजय गग / SANJAY GARG)
उपा"य# /Vice President या$यकसद%य/ Judicial Member
Dated : 28.02.2020
"आर.के."
ITA No. 1406-Chd-2019-
Wingsfiled Knitwear Private Ltd. Ludhiana 6 आदे शक*& त3ल4पअ5े4षत/ Copy of the order forwarded to :
1. अपीलाथ$/ The Appellant
2. &'यथ$/ The Respondent
3. आयकरआयु6त/ CIT
4. आयकरआयु6त (अपील)/ The CIT(A)
5. 4वभागीय& त न8ध, आयकरअपील.यआ8धकरण, च:डीगढ़/ DR, ITAT, CHANDIGARH
6. गाड फाईल/ Guard File आदे शानस ु ार/ By order, सहायकपंजीकार/ Assistant Registrar