2013 (1) TMI 832 - AT - Income Tax

Summary

Issues involved: The judgment involves issues related to the disallowance of loss from the cement segment, setting off of losses from cement manufacturing business against the profit from finance business, and the clubbing and apportioning of expenses of the two businesses of the assessee.

Disallowed Loss from Cement Segment:
The appeal was filed by the revenue against the order of the Commissioner of Income Tax(A)-X, New Delhi for AY 2007-08. The Assessing Officer noted that the assessee had claimed a loss from the cement manufacturing segment and adjusted it against the income of the finance business. The AO finalized the assessment stating that losses from cement manufacturing business cannot be set off against the profit from finance business. However, the CIT(A) partly allowed the appeal, considering the cement manufacturing business as a legitimate activity. The ARs objected to the clubbing of expenses of both businesses without any defect in the audited books of accounts. The CIT(A) directed not to club and apportion the combined expenses of the two businesses.

Setting off Losses and Clubbing of Expenses:
The revenue contended that the CIT(A) erred in deleting the disallowance of loss from the cement segment and directing the AO to rework the business profit from the finance segment. The revenue argued that losses from cement manufacturing business cannot be set off against the profit from finance business. However, the counsel for the assessee argued that the Assessing Officer had no authority to question the legitimacy of the cement manufacturing business. The ITAT observed that the cement manufacturing business was authorized and legitimate, allowing for the set-off of losses against finance business profit. The ITAT dismissed the revenue's grounds related to this issue.

Cross Objection of the Assessee:
The assessee filed a Cross Objection regarding the advance of funds to a company, contending that it was part of the finance activity. The AR argued that the Commissioner erred in upholding the view that the advance of funds was not part of the finance activity. The ITAT, having dismissed the revenue's appeal, found this issue academic and dismissed the Cross Objection of the assessee.

General Ground and Conclusion:
A general ground raised by the revenue was dismissed as it required no adjudication. The ITAT ultimately dismissed the appeal of the revenue and the Cross Objection of the assessee, upholding the findings of the Commissioner of Income Tax(A).