1991 (9) TMI 48 - HC - Income Tax

Summary

Issues:
1. Whether the Tribunal was justified in rejecting the claim for set off of business loss against capital gains.
2. Whether the Tribunal was correct in concluding that the assessee had not carried on any business during the relevant year.
3. Whether the Tribunal was justified in rejecting the claim for set off of the loss against capital gains.

Analysis:
The High Court of Kerala addressed a petition filed by an income-tax assessee under section 256(2) of the Income-tax Act, 1961, seeking the referral of three questions of law to the court by the Income-tax Appellate Tribunal. The court highlighted that the jurisdiction under section 256(2) is co-equal to that under section 256(1) and emphasized that only questions formulated in the application under section 256(1) can be referred. The court found that the petitioner's attempt to add two additional questions not in the original application was impermissible, leading to the dismissal of the petition on this ground.

However, the court proceeded to consider the first question from the original petition, which was also in the application before the Tribunal. The case involved an assessee who was a cashew dealer and claimed business loss against capital gains. The court examined the facts surrounding the assessment year 1974-75, where the assessee sold the factory and machinery in 1973. Despite claiming a loss, the assessee failed to provide evidence to support the claim during the assessment proceedings. The Income-tax Appellate Tribunal upheld the lower authorities' findings that the assessee did not carry on any business during the relevant year and did not substantiate the claimed loss with proper evidence.

The court emphasized that the question of whether the assessee conducted business and incurred a loss is primarily a factual inquiry. It noted that the assessee failed to provide material evidence to support the business activities and claimed loss. As a result, the court concluded that no referable question of law arose from the case, as the assessee did not establish the necessary facts to support the claim for set off of business loss against capital gains. Ultimately, the court found the original petition without merit and dismissed it.