MANBHUM COAL SYNDICATE (P) LTD. v. INCOME TAX OFFICER
[Citation -1985-LL-0528-3]

Citation 1985-LL-0528-3
Appellant Name MANBHUM COAL SYNDICATE (P) LTD.
Respondent Name INCOME TAX OFFICER
Court ITAT
Relevant Act Income-tax
Date of Order 28/05/1985
Assessment Year 1979-80
Judgment View Judgment
Keyword Tags business loss • net loss
Bot Summary: During the year under consideration, the assessee was receiving interest on the compensation amount receivable by it. During the year under consideration, the assessee had a net loss of Rs. 17,593 under the head other sources. At the same time, it had an income of Rs. 37,505 under s. 41 of the IT Act 1961. The ITO set off of the income of Rs. 37,505 assessable under s. 41(1) under the head business against loss of Rs. 17,593 arrived at under the head other sources and thus assessed the assessee on a net income of Rs. 19,910. Subsequently, the CIT scrutinised the records and come to hold the view that the profit under s. 41(1) could be set off only against the loss under s. 41(5). The assessee contended that there was no mistake prejudicial to the interest of the Revenue in the order passed by the ITO and so the action under s. 263 of the Act proposed by the CIT was not justified. After such a set off, if still income under s. 41(1) remains then s. 70 comes into play an the assessee is further entitled to set off that balance income under s. 41(1) against the loss, if any, under the other heads except capital gains or speculation business.


S. N. ROTHO, A. M.: This appeal has been filed by assessee against order dt. 12th Nov. 1982 of CIT relating to asst. yr. 1979-80 assessee is company which was formerly doing business in coal mining. This business was stopped as it was nationalised w.e.f. 1st May 1972. During year under consideration, assessee was receiving interest on compensation amount receivable by it. On other hand, it was paying interest on overdraft amount. resultant figure was being shown as income or loss from other sources . During year under consideration, assessee had net loss of Rs. 17,593 under head other sources . At same time, it had income of Rs. 37,505 under s. 41 (1) of IT Act 1961. ITO set off of income of Rs. 37,505 assessable under s. 41(1) under head business against loss of Rs. 17,593 arrived at under head other sources and thus assessed assessee on net income of Rs. 19,910. In other words, ITO set off loss under head other sources against income under head business; under s. 90(1) of Act. It may be stated that loss did not relate to speculation business. Evidently, said loss was not under head capital gains. Subsequently, CIT scrutinised records and come to hold view that profit under s. 41(1) could be set off only against loss under s. 41(5). As ITO had not applied his mind to this aspect of question he propose to set aside assessment under s. 263 . assessee contended that there was no mistake prejudicial to interest of Revenue in order passed by ITO and so action under s. 263 of Act proposed by CIT was not justified. CIT overruled these contentions of assessee and passed impugned order setting aside assessment and directing ITO to make assessment afresh after proper enquiries. assessee was not represented before us at time of hearing of this appeal even thought notice of hearing was served on assessee on 22nd April 1985 as per acknowledgement on file. Shri P.C. Banerjee ld. Representative for Department urged before us that CIT was justified in passing his order. He took us through order of CIT and contended that arguments therein have been will taken and so order deserved to be upheld. We have considered contentions of both parties as well as facts on record. We find that s. 70(1) entitles assessee to set off loss under one head against income under any other head of same year so long as loss did not relate to capital gains or speculation business. In instant case, assessee was clearly entitled to such set off and ITO was quite justified in making assessment in way that he had done. Sec. 41(5) of Act is additional advantage available to assessee. It says that in case there is any business loss which has remained without being set off against business which has ceased to exist, then such loss can be set off against any figure income under s. 41(1) of Act. After such set off, if still income under s. 41(1) remains then s. 70 comes into play the assessee is further entitled to set off that balance income under s. 41(1) against loss, if any, under other heads except capital gains or speculation business. If ITO has not looked into this aspect of matter, it is because assessee did not claim this additional advantage available to it under s. 41(5). Had assessee any business loss in year in which it stopped its business then same would have gone to reduce income assessed by ITO still further. Due to alleged absence of enquiry by ITO on this point, mistake, if any, has resulted in benefit to Revenue and not in any prejudice to Revenue. Hence, we hold that CIT did not acquire valid jurisdiction to proceed under s. 263 of IT Act, 1961 and so impugned order passed by him is bad in law. We, therefore, cancel same. In result, appeal is allowed. *** MANBHUM COAL SYNDICATE (P) LTD. v. INCOME TAX OFFICER
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