ITAT Upholds Disallowance of LTCL for Sun Pharma Labs Due to Non-Claim in Returns [Read Order]

The Ahmedabad Bench of Income Tax Appellate Tribunal ( ITAT ) upheld the disallowance of the long-term capital loss ( LTCL ) for Sun Pharma Laboratories Ltd. due to failure to claim the loss in both the original and revised returns.

Sun Pharma Laboratories Ltd.,the appellant-assessee,had acquired leasehold rights for a plot of land through a Lease Agreement dated September 16, 2010, at a consideration of Rs. 1,07,06,320.

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During the relevant assessment year, the land was surrendered for Rs. 1,04,38,662, resulting in a LTCL of Rs. 49,80,848 after applying indexation. However, this loss was not claimed in either the original return of income or the revised return submitted by the appellant-assessee.

During the assessment proceedings, the appellant-assessee requested the Assessing Officer ( AO ) to consider this inadvertent omission and allow the LTCL. Instead, the AO added the amount of the loss back to the income of the appellant-assessee.

The -assessee subsequently appealed this decision, and the Commissioner of Income Tax (Appeals) (CIT[A] ) denied the LTCL, noting that it had not been claimed in the return filed under section 139(5) of the Income Tax Act. However, the CIT[A] deleted the AO's addition, observing that the appellant-assessee had already accounted for Long-Term Capital Gains ( LTCG ) of Rs. 3,69,461 while calculating book profit under section 115JB.

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The CIT[A] pointed out that the LTCL had not been recorded in the income tax return ( ITR ) as required under the normal provisions of the Act. The ITR was filed on November 28, 2015, and revised on March 30, 2016, but the LTCL was absent in both filings, preventing it from being carried forward.

While acknowledging the grievance regarding the AO’s addition to total income, the CIT[A] agreed that the loss should not have been added back and should only be restricted from offsetting against the business loss for the current year.

The Senior Counsel for the assessee cited judgments from the jurisdictional High Court in support of the LTCL claim, while the Departmental Representative ( DR ) defended the order of the CIT[A].

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The two member bench comprising T.R.Senthil Kumar ( Judicial Member ) and Annapurna Gupta ( Accountant Member ) ruled that the cited judgments ( CIT vs. Mitesh Impex and Pruthvi Brokers ) were inapplicable, as LTCL was not claimed in the original or revised return.They noted that section 139(3) required such losses to be claimed in the return filed under section 139(1).

In conclusion, the ITAT upheld the CIT(A)’s order and dismissed the appeal filed by the assessee.

To Read the full text of the Order CLICK HERE

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