Non-Speculative Business Loss can be set off against Business Income of Assessee: Allahabad HC [Read Judgment]

The Allahabad High Court recently ruled that Non-Speculative business loss can be set off against business income of the assessee under the provisions of the Income Tax Act, 1961.

The division bench comprising Justices Abhinava Upadhya and Ashok Kumar held so while dismissing a departmental appeal against M/S Ramshree Steels Pvt. Ltd.

The assessee runs a business of Iron Alloys Steel, MS Ingots as in the past. The assessee company has also shown the interest of income and profit from sale of shares during the year of consideration.

During the assessment year under consideration, the assessee company had filed a return of income as nil after setting off earlier year business losses to the extent of profit available in that year. The assessing officer completed the assessment under Section 143(3) of the Income Tax Act and found the total income of Rs.2,17,46,490/­ and treating the share trading business as speculative  profit to the tune of Rs.3,84,09,932/­.

The   assessee approached the first appellate authority, who while, dismissing the plea of the assessee, enhanced the income from Rs.2,17,46,489/­ to Rs. 3,84,09,932/­.

Aggrieved by the orders, the assessee knocked the doors of the Income Tax Appellate Tribunal wherein the appeal was allowed by relying on the findings of the Apex Court in CIT vs. Jagannath Mahadeo Prasad.

Before the High Court, the Revenue contended that Section 72(1) of the Act provides that the non-speculative business loss can be set off against profit and gains, if any, of any business or profession carried on by assessee and assessable in that AY and when it can be so set off, it shall be carried forward to the following assessment year.

Upholding the findings of the Tribunal, the bench noted that speculative business and non-speculative business are treated as distinct business but what clearly missed out was that the purpose and impact of this distinction reflects only set off loss in speculation business against the profit of non-speculation business.