May 2019

Sections 50, 72 and 74 – Brought-forward business loss and brought-forward long-term capital loss can be set off against deemed short-term capital gains u/s. 50 arising on sale of factory building

Jagdish T. Punjabi | Devendra Jain | Tejaswini Ghag
Chartered Accountants

6. [2019] 104 taxmann.com 129 (Mum) ITO vs. Smart Sensors & Transducers Ltd. ITA No.: 6443/Mum/2016 A.Y.: 2011-12 Dated: 6th March, 2019

 

Sections 50, 72 and 74 – Brought-forward business loss and brought-forward long-term capital loss can be set off against deemed short-term capital gains u/s. 50 arising on sale of factory building


FACTS


The assessee company in its original return of income declared long-term capital loss on the sale of its factory building. During the course of assessment proceedings, the Assessing Officer (AO) noted that the factory building was a depreciable asset and the gain on sale of such depreciable asset was to be treated as deemed short-term capital gains as per section 50 of the Act. Subsequently, the assessee revised its return of income and offered the gains from the sale of factory building as short-term capital gains after setting-off brought-forward business loss and brought-forward long-term capital loss.

 

The AO noted that in view of section 74 of the Act, long-term capital loss can be set off only against long-term capital gains and that as per section 72 of the Act, brought-forward business loss can be set off against business income and not against short-term capital gains. The AO, thus, disallowed the assessee’s claim for brought-forward business loss and brought-forward capital loss.

 

The aggrieved assessee preferred an appeal to the CIT(A) who, considering the decision of the Bombay High Court in CIT vs. Manali Investments [(2013) 219 Taxman 113 (Bom HC)] allowed the assessee’s appeal.

 

Aggrieved, the Revenue preferred an appeal to the Tribunal.

 

HELD


The Tribunal, fo

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