No Prohibition in Set off of Loss against ‘Income from Other Sources’ prior to 2017 Amendment: ITAT [Read Order]

While deleting a revisional order, the Cochin bench of the Income Tax Appellate Tribunal (ITAT) has held that there is no prohibition under the Income Tax Act, 1961 to set off the loss against the income declared as “income from other sources” under the Act.

The assessee an individual is the proprietor of Sunmoon Hospitality. During the relevant assessment year, the Commissioner of Income Tax invoked his power to revise the return on the ground that in the earlier year, the assessing officer erroneously allowed set off loss against income declared under the head `income from other sources’.

The assessee contended that the Assessing Officer has rightly allowed set-off of income from other sources against other heads of income because up to the assessment year 2016-2017 there was no prohibition on set-off of losses.

After hearing both the sides, the Tribunal noticed the decision of the Kerala High Court in the case of Vijaya Hospitality and Resorts Ltd. Wherein the Court held that amendment which prohibits/restricts the set-off of losses against `income from other sources’ was inserted by the Finance Act, 2016 with effect from 01.04.2017 only i.e. the assessment year 2017-2018 onwards.

“In view of the judgment of the Hon’ble High Court, we hold that there is no prohibition of set-off of loss against income declared under the head income from `other sources’ for the relevant assessment year. Hence, the assessment order dated 30.03.2017 is not erroneous and prejudicial to the interest of revenue. Accordingly, we hold that the order passed by the CIT u/s 263 of the I.T.Act is invalid in view of the judgment of the Hon’ble Kerala High Court in the case of Vijaya Hospitality and Resorts Ltd. (supra). It is ordered accordingly,” the Tribunal said.