S. 72: Gains arising from “business assets” not eligible for set-off against B/fd business loss

S. 72: Gains arising from “business assets” not eligible for set-off against B/fd business loss


The assessee sold land & building used for business purposes. Though the gain was offered as capital gains, the assessee claimed, relying on Cocanada Radhaswami Bank Ltd 57 ITR 306 (SC) and other judgements, that as the assets were “business assets”, the gains there from were eligible for set-off against the brought forward business loss u/s 72. The issue was referred to a Special Bench. HELD by the Special Bench against the assessee:

S. 72 (1) allows brought forward business loss to be set-off against the “profits & gains of any business or profession” of the subsequent year. The expression “profits & gains of business” means income earned out of business carried on by the assessee and not just income connected in some way to the business or profession carried on by the assessee. The land & building were fixed & capital assets used by the assessee for its business purposes. The gains arising there from were assessable as capital gains and were not eligible for set-off against the brought forward business loss u/s 72 (Express Newspapers 53 ITR 250 (SC) followed; Cocanada Radhaswami Bank 55 ITR 17(SC) distinguished; Steelcon Industries reversed)