Income tax

1. Cases on Set Off and Carry Forward

2. Intra Head Set Off [Section 70]
Held that it was found that the ownership of shares was transferred on its net effective worth and book value,
consideration was paid and transaction was complete and loss was real and the assessee might end up saving taxes
but that was perfectly legitimate. The benefit of long-term capital loss could not be declined to the assessee, as long
as transaction had been actually effected and the Assessing Officer was to be directed to allow the set-off of this
long-term capital loss against the long-term capital gains.
The assessee, a NRI, sold a property and claimed the Long-Term Capital Gain (LTCG). He also reported a long-term
capital loss on sale of certain shares in company (VCAM) and claimed set-off of the long-term capital loss incurred on
sale of equity shares of VCAM against the long-term capital gains earned on sale of property. The Assessing Officer
noted that the long-term capital loss appeared to be prima facie fictitious and was not entitled to be adjusted against
any taxable income as purchase of shares was motivated for tax benefits to the assessee and rejected set-off of long-
term capital loss.
Michael E Desa v. ITO, IT [2021] 130 taxmann.com 314/191 ITD 691 (Mum. - Trib.)

3. Carry Forward and Set Off of Business Losses
[Section 72]
Shelf Drilling Ron Tappmeyer Ltd. v. Dy. CIT (IT) [2021] 123 taxmann.com 49
(Mum. - Trib.)
Where assessee claimed loss but Assessing Officer rejected books of account and
made additions of positive income and Tribunal remitted matter, set-off of said
loss returned by assessee in subsequent assessment years could not be declined
only for reason that assessment for assessment year in dispute was in progress
[Assessment years 2016-17 and 2017-18] [In favour of assessee]

4. Mistral Solutions
(P.) Ltd. v. Dy. CIT
[2021] 123
taxmann.com
125/186 ITD 399
(Bang. - Trib.)
The assessee company filed its
return and declared ‘Nil’
business income. Subsequently,
the assessee filed a rectification
application before the Assessing
Officer seeking set-off of
unabsorbed losses. The
Assessing Officer held that fresh
claim of deduction could not be
considered since the assessee
had omitted to file such with
original return.
Held that in view of provision of
section 72(1)(i) whether or not
assessee has set-off losses in
return of income, income tax
authorities are required to give
effect to section 72(1)(i) and
set-off such losses. Thus, the
Assessing Officer was to be
directed to consider assessee’s
claim of set-off of unabsorbed
losses/depreciation against
declared income.

5. Cargo Service Centre India (P.) Ltd. v. Dy. CIT [2021] 132 taxmann.com 237 (Mum. - Trib.)
The assessee-company filed its return for relevant year with a loss of Rs. 19.06 crores
which was subjected to scrutiny assessment whereby returned income was accepted.
Since assessment order did not specifically mention about eligibility for carry forward of
said loss, the assessee moved a rectification application which was decided by the
Assessing Officer in assessee’s favour. The Commissioner revised rectification order
under section 263 by holding that since Assessing Officer did not examine assessee’s
claim for carry forward of loss in sufficient detail, loss could not be carried forward.
Held that once a loss had been disclosed in income tax return, and such a loss had not
been disturbed in scrutiny assessment proceedings, such a loss was to be treated as
accepted, and quantification thereof could not have been disturbed. Therefore, revision
of rectification order was to be quashed.

6. Speculation Losses [Section 73]
Held that since the assessee was not engaged in business of purchase/sale of shares of other companies and
loss was incurred by the assessee on account of error trades in respect of dealings of clients fund and not on
own account and loss was in line with accepted market practices, Explanation to section 73 was not applicable.
The assessee was a share broker and had purchased and sold shares on behalf of its clients and loss had
occurred on account of dealing errors or some mistake in carrying out instructions of client such as specific
limit instructions of client were overlooked, orders cancelled by client were not entered into system or
overlooked by dealer, etc. The assessee claimed that loss was incidental to share broking business and
provisions of Explanation to section 73 were not applicable.
Dy. CIT v. UBS Securities India (P.) Ltd. [2021] 125 taxmann.com 254 (Mum. - Trib.)

7. Losses under Head Capital Gain [Section 74]
Shiv Kumar Jatia v. ITO [2021] 127 taxmann.com 179/190 ITD 181 (Delhi - Trib.)
Loss from sale of long-term capital share on which security transaction tax has been paid
should be allowed to be carried forward for set off even though income from such
transfer of long-term capital asset is exempt under section 10(38) [Assessment year 2011-
12] [In favour of assessee]
Loss from sale of long-term capital share on which security transaction tax has been paid
should be allowed to be carried forward for set off even though income from such
transfer of long-term capital asset is exempt under section 10(38).

8. Thank you