Monday, September 13, 2010

ITAT : AMENDMENT TO SEC 73 CLARRIFACTORY

Month-Year :                      Jul - 2010

Author/s :                          ITA No. 1009/Mum./2010 [BCAJ]

Title :                                   Virendra Kumar Jain v. ACIT

 

Details :

Per R. V. Easwar :

Facts :

In A.Y. 2001-02 the assessee suffered a speculation loss of Rs.4,55,30,494 which loss was allowed to be carried forward to subsequent years u/s.73(2) of the Act. In the return filed for A.Y. 2006-07 the assessee claimed that speculation loss brought forward from A.Y. 2001-02 should be set off against speculation profits for the A.Y. 2006-07. The Assessing Officer (AO) denied the claim of the assessee on the ground that u/s.73(4) no loss shall be carried forward for more than four assessment years immediately succeeding the assessment year for which it was first computed. He held that speculation loss for A.Y. 2001-02 cannot be carried forward beyond A.Y. 2005-06.

Aggrieved the assessee preferred an appeal to CIT(A) who upheld the action of the AO.

Aggrieved the assessee preferred an appeal to the Tribunal.

Held :

It is a settled rule of interpretation that a vested right can be taken away only by express language or by necessary implication. This is settled by the decision of the Privy Council in Delhi Cloth & General Mills Company Ltd. v. CIT, AIR 1927 (PC) 242 and the same has been cited with approval by the Supreme Court in the case of Jose Dacosta v. Bascora Sadashiv Sinai Narcomin, AIR (1975) SC 1843. The assessee had a vested right to carry forward the speculation loss for a period of eight assessment years as per S. 73(4) as it stood before the amendment made by the Finance Act, 2005. That such a right is a vested right cannot be doubted after the judgment of the Supreme Court in the case of CIT v. Shah Sadiq & Sons, 166 ITR 102 (SC). In S. 73(4) or in any other provision there is no express language or any implication to the effect that the right of the assessee to carry forward the speculation loss for a period of eight subsequent assessment years has been taken away.

Any speculation loss computed for the A.Y. 2006-07 and later assessment years alone would be hit by the amendment and such loss can be carried forward only for four subsequent assessment years. The vested right of the assessee has not been taken away.

The amendment made by The Finance Act, 2005 w.e.f. 1-4-2006 is merely to substitute the words 'four assessment years' for the words 'eight assessment years' in Ss.(4) of S. 73. Ss.(4) of S. 73 refers only to the loss to be carried forward to the subsequent years. It does not say anything about the set-off of the speculation loss brought forward from the earlier years. There is a distinction between a loss brought forward from the earlier years and a loss to be carried forward to the subsequent years. The sub-section deals only with the speculation loss to be carried forward to the subsequent years andin the very nature of the things, it cannot apply to speculation loss quantified in any assessment year before the A.Y. 2006-07.

The Tribunal made a reference to the Income-tax Rules prescribing form of return of income and noted that the form in ITR 4 makes a distinction between loss brought forward and loss to be carried forward. It held that since in the present case it was concerned with the assessee's right to set off the brought forward speculation losses against speculation profits for A.Y. 2006-07, Ss.(4) of S. 73 has no application.

The Tribunal allowed the appeal filed by the assessee.

 



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