2008 (5) TMI 446 - AT - Income Tax

Summary

Issues Involved:
1. Recalling or modification of the Tribunal order.
2. Grounds of appeal related to the head under which income is assessable.
3. Non-consideration of judicial decisions and principles of natural justice.
4. Jurisdiction of the Tribunal in deciding issues not raised in the appeal.
5. Allowability of business expenditure under different heads of income.
6. Whether the assessee is engaged in the business of holding investments.
7. Pre-commencement or post-closure expenses and their allowability.

Detailed Analysis:

1. Recalling or Modification of the Tribunal Order:
The assessee sought recalling or modification of the Tribunal order dated 29-3-2008, arguing that the grounds of appeal did not specifically address whether the income from the assessee's activities should be assessed under 'capital gain' or 'income from other sources'. The assessee contended that the Tribunal did not consider this issue and cited various judicial decisions which were allegedly overlooked, constituting a mistake apparent from the record.

2. Grounds of Appeal Related to the Head Under Which Income is Assessable:
The revenue challenged the decision of the CIT(A) that the assessee was engaged in the business of investment, thus allowing professional fees as business expenditure. The Tribunal noted that if the head of income is disputed, the expenses should be claimed under the finally decided head. The Tribunal found that the grounds inherently involved the issue of allowance of expenditure under 'Business or profession' when the assessee is engaged in the business of investment.

3. Non-Consideration of Judicial Decisions and Principles of Natural Justice:
The assessee argued that the Tribunal's order was based on unverified statements and assumptions, violating the principles of natural justice. The Tribunal, however, recorded the contentions of both parties and found no material evidence from the assessee showing income chargeable under 'Income from business or profession' in any relevant year. The Tribunal held that its observations were contextually correct and did not require citing judicial decisions for every proposition of law.

4. Jurisdiction of the Tribunal in Deciding Issues Not Raised in the Appeal:
The Tribunal addressed the assessee's contention that it acted beyond its jurisdiction by deciding issues not raised in the appeal. The Tribunal clarified that its findings emanated from the inherent issues in the grounds of appeal and were within its jurisdiction. It emphasized that if the assessee believed the findings were beyond jurisdiction, the appropriate remedy would be under Article 226, not section 254(2) of the Act.

5. Allowability of Business Expenditure Under Different Heads of Income:
The Tribunal discussed the allowability of business expenditure, stating that expenses under 'Profits and gains of business' are allowable only when the assessee engages as a trader, not as an owner of an asset. The Tribunal found no evidence of the assessee earning income chargeable under 'Income from business or profession', thus disallowing the expenses under that head.

6. Whether the Assessee is Engaged in the Business of Holding Investments:
The Tribunal examined whether the assessee was engaged in the business of holding investments. It referred to the test laid down by the Apex Court, requiring a real, substantial, and systematic course of activity. The Tribunal found no material evidence proving the assessee's engagement in such business. It concluded that mere investment in shares does not constitute a business of holding investments.

7. Pre-Commencement or Post-Closure Expenses and Their Allowability:
The Tribunal elaborated on the allowability of pre-commencement or post-closure expenses, stating that such expenses are not allowable unless incurred in connection with one indivisible business with interlacing of funds, unity of control, and common management. The Tribunal emphasized the matching principle, which requires matching costs with revenue. It found no possibility of income under 'Income from business or profession' for the assessee, thus disallowing the expenses.

Conclusion:
The Tribunal dismissed the Miscellaneous Application, rejecting all contentions raised by the assessee. It upheld that the assessee was not entitled to the claimed deductions and found no merit in the plea for recalling or modifying the Tribunal order.