2009 (12) TMI 732 - AT - Income Tax

Summary

Issues Involved:

1. Classification of income from money lending as business income.
2. Allowance of miscellaneous expenditure.
3. Determination of income from IFCI Bonds.
4. Disallowance of long-term capital loss on shares.

Detailed Analysis:

1. Classification of Income from Money Lending as Business Income:

The Department challenged the Commissioner of Income-tax (Appeals) [CIT(A)]'s decision to classify the assessee's income from money lending as business income. The CIT(A) had noted that in preceding and succeeding years, such income was consistently treated as business income. The Tribunal upheld the CIT(A)'s decision, stating that the Department failed to provide any material evidence to contradict the CIT(A)'s findings. Thus, the Tribunal dismissed the Department's grounds on this issue.

2. Allowance of Miscellaneous Expenditure:

The Department contested the CIT(A)'s allowance of Rs. 5,71,091 as miscellaneous expenditure, arguing that these expenses were claimed against exempt income, income from house property, and income from other sources. The CIT(A) had allowed Rs. 5,33,028 after disallowing certain personal expenses. The Tribunal agreed with the CIT(A), noting that the expenses were incurred for earning income and should be allowed under section 57(iii). The Tribunal dismissed the Department's grounds on this issue.

3. Determination of Income from IFCI Bonds:

The Department disputed the CIT(A)'s direction to assess the income from IFCI Bonds at Rs. 11,02,439 instead of Rs. 72,76,930. The CIT(A) relied on Circular No. 2 of 2002 by the Central Board of Direct Taxes, which states that for intermediate purchasers, the difference between the redemption price and the cost of the bond is taxable. The Tribunal upheld the CIT(A)'s decision, finding it in line with the circular and dismissed the Department's ground on this issue.

4. Disallowance of Long-term Capital Loss on Shares:

The assessee appealed against the disallowance of a long-term capital loss of Rs. 45,69,287 on the purchase and sale of shares of R. B. Credits P. Ltd. The CIT(A) and the Assessing Officer (AO) had questioned the valuation of the shares, with the AO using the intrinsic value method to determine the share value. The Tribunal noted the lack of material evidence to justify the purchase and sale prices of the shares. Therefore, the Tribunal remanded the matter back to the AO to provide appropriate findings after giving a reasonable opportunity of hearing to the assessee.

Conclusion:

The Tribunal dismissed the Department's appeal and allowed the assessee's appeal for statistical purposes, directing the AO to re-examine the issue of long-term capital loss on shares. The order was pronounced in the open court on December 30, 2009.