The Delhi bench of the Income Tax Appellate Tribunal (ITAT) has held that the loss incurred on the sale of the shares of the subsidiary companies would amount to business loss under the provisions of the Income Tax Act, 1961.
The assessee was aggrieved with the order of the Assessing Officer who treated the loss incurred on the sale of shares of a subsidiary company as a long-term capital loss as against business loss treated by the assessee.
On appeal, the First appellate authority sustained the order and refused relief to the assessee. The assessee, therefore, approached the Tribunal.
The division bench of the Tribunal found that the Assessing Officer disallowed the amount of Rs.71,69,290/- claimed by the assessee on account of loss on sale of investments by holding that such loss is a long-term capital loss and, therefore, is not eligible for setting off against the business income declared by the assessee.
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“Treating the said loss as a long-term capital loss, the Assessing Officer has allowed the carry forward of the same as per the provisions of the Income-tax Act. We find the ld.CIT(A) upheld the action of the Assessing Officer, the reasons of which have already been reproduced in the preceding paragraphs. It is the submission of the ld. counsel for the assessee that loss on sale of shares held as an investment in subsidiary companies is a revenue loss. It is also his argument that when the holding company invests amounts for the business of its subsidiary, it must be held for business expediency,” the Tribunal said.
Relying on various judicial decisions, the Tribunal overruled the orders of the lower authorities and held that both the Assessing Officer and the CIT(A) was not justified in holding that the loss incurred on the sale of shares of subsidiary companies is a capital loss and not a business loss.
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