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| DATE: | February 20, 2011 (Date of publication) |
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| Click here to download the judgement (gagan_trading_set_off.pdf) |
B/fd Business Loss can be set-off against dividends assessed as “income from other sources” if shares held for business
The assessee, engaged in the business of purchase and sale of shares, earned dividend income of Rs. 43.48 lakhs which it offered to tax as “income from other sources”. The assessee set-off the dividend income against its brought forward business loss. The AO & CIT (A) rejected the set-off on the ground that u/s 72 business losses can only be set-off against business income and not “income from other sources”. On appeal by the assessee, HELD allowing the appeal:
U/s 72(1)(i), the brought forward business loss can be set-off against “the profits and gains of any business or profession carried on” by the assessee. S. 72 (1)(i) does not use the word “assessable under the ‘head‘ profits & gains of business”. So, the question is whether the securities formed part of the trading assets of the business and the income there from was income from the business. The answer to this question has to be decided on commercial principles and not on the basis of the classification of ‘heads of income’ in s. 14. Though for the purpose of computation of the income, dividends are assessable under the head “Other Sources”, it does not cease to be part of the income from business if the securities are part of the trading assets. Accordingly, the assessee is eligible for set-off as claimed (Cocanada Radhaswmi Bank 57 ITR 306 (SC) & New India Investment 130 ITR 778 (Cal) followed).
indeed it is very good decesion helpfull to lot of tax payer
this decision lays down the correct legal position. However, it would not apply to a case where dividend income is exempt from tax u/s 10 itself, or where dividend does not arise from business activity.