Clarification regarding non allowability of set off of losses against the deemed income under section 115BBE of the income tax act 1961 prior to assessment year 2017 18 reg.
Circular No. 11/2019 was issued by the Central Board of Direct Taxes on 19 June 2019. Its subject is Clarification regarding non allowability of set off of losses against the deemed income under section 115BBE of the income tax act 1961 prior to assessment year 2017 18 reg.
This is a clarification. The Board is stating how it reads a provision. That reading binds the department; it does not bind a court, and where the section says otherwise the section wins.
Settles how Assessing Officers are to treat set-off of losses against income assessed under section 115BBE for years before assessment year 2017-18. Section 115BBE(2), as it stands from 1 April 2017, bars any deduction for expenditure or allowance and any set-off of loss against income under sections 68, 69, 69A, 69B, 69C and 69D. Officers had taken opposite views for earlier years, some allowing set-off and some refusing it. The Board takes the view that because the words 'or set off of any loss' were put into section 115BBE(2) only by the Finance Act, 2016 with effect from 1 April 2017, an assessee is entitled to set off loss against income determined under section 115BBE up to assessment year 2016-17. It rests that on its own explanatory notes in Circular No. 3/2017 dated 20 January 2017, which at paragraph 46.2 recorded that there was uncertainty on the point and that the pre-amendment provision did not convey the intention that losses could not be set off, which is why the amendment was made. Pending assessments and litigation on the issue are to be handled accordingly.
The conflicting approaches of Assessing Officers in pre-2017-18 assessments were referred to the Board so that a consistent line would be taken.
| Under the 1961 Act | Now |
|---|---|
| s.115BBE | s.195 |
--.
Government of India
Ministry of Finance
Department of Revenue
Central Board of Direct Taxes
Circular No. 1.1 /2019
North-Block, New Delhi, dated the 19th of June, 2019
Subject: Clarification regarding non-allowability of set-off of losses against the
deemed income under section 115BBE of the Income-tax Act, 1961 prior to
assessment-year 2017-18-reg.
With effect from 01.04.2017, sub-section (2) of section 115BBE of the Income-tax
Act, 1961 (Act) provides that where total income of an assessee includes any income
referred to in section(s) 68/69j69A/69B/69Cj69D of the Act, no deduction in respect of any
expenditure or allowance or set off of any loss shall be allowed to the assessee under any
provisions of the Act in computing the income referred to in section 115BBE(1) of the Act.
2. In this regard, it has been brought to the notice of the Central Board of Direct Taxes
(the Board) that in assessments prior to assessment year 2017-18, while some of the
Assessing Officers have allowed set off of losses against the additions made by them under
Section(s) 68/69j69A/69B/69C/69D, in some cases, set off of losses against the additions
made under Section 115BBE(1) of the Act have not been allowed. As the amendment
inserting the words 'or set off of any loss' is applicable with effect from pt of April, 2017 and
applies from assessment year 2017-18 onwards, conflicting views have been taken by the
Assessing Officers in assessments for years prior to assessment year 2017-18. The matter
has been referred to the Board so that a consistent approach is adopted by the Assessing
Officers while applying provision of section 115BBE in assessments for period prior to the
assessment year 2017-18.
3. The Board has examined the matter. The Circular No. 3/2017 of the Board dated 20th
January, 2017 which contains Explanatory notes to the provisions of the Finance Act, 2016,
at para 46.2, regarding amendment made in section 115BBE(2) of the Act mentions that
currently there is uncertainty on the issue of set-off of losses against income referred to in
section 115BBE. It also further mentions that the pre-amended provision of section 115BBE
of the Act did not convey the intention that losses shall not be allowed to be set-off against
income referred to in section 115BBE of the Act and hence, the amendment was made vide
the Finance Act, 2016.Thus keeping the legislative intent behind amendment in section 115BBE(2) vide the Finance Act, 2016 to remove any ambiguity of interpretation, the Board is of the view that since the term 'or set off of any loss' was specifically inserted only vide the Finance Act 2016, w.e.f. 01.04.2017, an assessee is entitled to claim set-off of loss against income determined under section 115BBE of the Act till the assessment year 2016-17.
5. The contents of this Circular may be circulated widely for information of all stakeholders and departmental officers. The pending assessments and litigations on this issue may be handled accordingly.
6. Hindi version to follow.
ala raleswanJR. \3
Under Secretary (ITA.II), CBOT
(F.No.22S/4S/2019-ITA.II)Copy to:-
i. PS to FM/OSD to FM/PS to MoS(F)/OSD to MoS(F)
ii. PS to Secretary (Revenue)
iii. Chairman, CBDT & All Members, CBDT
iv. All Pr.CCsIT/ Pr.DsGIT
v. All Joint Secretaries/CsIT, CBDT
vi. C&AG
vii. CIT (M& TP), Official Spokesperson of CBDT
viii. % Pro DGIT(Systems) for uploading on official website
ix. Addl.CIT (Database Cell) for uploading on the departmental website-.sol-
(Rajarajeswari R.)
Under Secretary-ITA.II, CBOT
In an assessment or appeal for assessment year 2016-17 or earlier where an addition under section 68 or section 69 has been taxed under section 115BBE and the officer has refused to set off a loss against it.
It mentions. Circular No. 3/2017
Source: the Income Tax Department’s own published text — its page for this instrument.