2013 (4) TMI 838 - AT - Income Tax

Entitled to set off the loss on account of forfeiture of license fee (business loss) against income assessed u/s 69 (income from undisclosed sources) - Held that - Set off is allowable as business loss. See Commissioner of Income-Tax Versus Chensing Ventures 2007 (4) TMI 204 - MADRAS High Court . No merit in the appeal of the Revenue.

Summary

Issues:
1. Allowability of set off of loss on account of forfeiture of license fee against income assessed u/s 69.
2. Applicability of sec. 70(1) of the I.T. Act.
3. Interpretation of judicial pronouncements - T.A. Quereshi case.
4. Comparison with the decision of Hon'ble Madras High Court in CIT vs. Chensing Ventures case.

Analysis:
1. The case involved a dispute regarding the allowability of set off of loss on account of forfeiture of license fee against income assessed under section 69 of the Income Tax Act. The Revenue contended that the assessee was not entitled to set off the loss as there was no commencement of business, invoking section 70(1) of the Act. The Revenue relied on the decision in T.A. Quereshi vs. CIT case. However, the Tribunal found that the loss could be set off against income from undisclosed sources, as supported by the decision of the Hon'ble Madras High Court in CIT vs. Chensing Ventures case.

2. The Tribunal examined the applicability of section 70(1) of the I.T. Act in the context of the case. The Revenue argued that the assessee's claim for business loss was not valid due to the absence of commencement of business. However, the Tribunal disagreed, stating that the loss could be set off against undisclosed income, considering the specific circumstances of the case and the provisions of the Act.

3. Regarding the interpretation of judicial pronouncements, the Tribunal noted a typographical error in citing the T.A. Quereshi case. The Tribunal clarified that the correct citation was 287 ITR 547 (SC) and not 287 ITR 584 as mentioned in the impugned order. The Tribunal distinguished the facts of the T.A. Quereshi case, emphasizing that the provision governing deduction of business expenditure did not apply to the deduction of business loss, making the decision inapplicable to the present appeal.

4. The Tribunal compared the facts of the case with the decision of the Hon'ble Madras High Court in the CIT vs. Chensing Ventures case. In that case, the High Court allowed the set off of loss against undisclosed income, emphasizing that once the loss was determined, it should be set off against income under any head. The Tribunal, following the decision of the Hon'ble Madras High Court, concluded that the set off of the loss as business loss was allowable in the present case. Consequently, the Tribunal dismissed the appeal of the Revenue, upholding the decision of the lower authorities.

In conclusion, the Tribunal upheld the allowability of the set off of the loss on account of forfeiture of license fee as business loss against income assessed under section 69, based on the specific circumstances of the case and the relevant legal provisions and judicial precedents cited during the proceedings.