2018 (4) TMI 1926 - AT - Income Tax

Deduction of business loss - For A.Y.rs. 2009-10 to 2010-11 held that the assessee was in the business trading of shares and cannot be said there was no business due to the fact that there was lull in the share market and the income of the assessee is to be treated as business - HELD THAT - AO on examination of record in the profit and loss account of the assessee was of the opinion that the assessee has no business during the year and the major income as earned by the assessee was from house property and service charges connected thereto. AO held that the major revenue @ 83% as earned by the assessee from service charges and computed the income of the assessee from house property and short term capital gain and denied the business loss as claimed by the assessee vide his order dated 20.02.2014 u/s 143(3) - Before the CIT(A) it was contended that the AO allowed expenditure that has been incurred by the assessee in A.Y.2009-10 and 2010-11 as deduction. AO without following the consistency that has been followed in the earlier years arbitrarily computed the income of the assessee on different heads as against the claim of the assessee. CIT(A) considering the submissions of the assessee along with the assessment orders and by following the earlier orders of first appellate authority for A.Y.2009-10 and 2010-11 allowed the business loss and computed the income of the assessee from business. We note that the order of CIT(A) for A.Y.2009-10 was challenged before the Tribunal and the Tribunal considered the treatment of stocks as held by the assessee as stock-in-trade and upheld the order of CIT(A) in computing the income of the assessee from business. - Decided against revenue.

Summary

Issues Involved:
1. Allowance of deduction of business loss as against the finding of the AO.
2. Treatment of stocks as stock-in-trade for computing income from business.

Analysis:

Issue 1: Allowance of deduction of business loss
The appeal by the revenue contested the order passed by C.I.T-(A)-4, Kolkata for A.Y.2011-12, specifically questioning the action of CIT(A) in allowing the deduction of business loss. The AO initially denied the business loss claimed by the assessee, asserting that the major income was from house property and service charges. However, the CIT(A) considered the submissions of the assessee, along with the assessment orders and upheld the business loss deduction. The Tribunal noted that the issue was identical to A.Y.2009-10 and supported the order of CIT(A) based on consistency in treatment across previous years.

Issue 2: Treatment of stocks as stock-in-trade
During the assessment proceedings, the AO disputed the treatment of stocks as stock-in-trade by the assessee, contending that the opening stock in trade should be treated as investment. However, the Tribunal referred to the earlier assessment year where the AO had accepted the stocks as stock-in-trade. The Tribunal emphasized the CBDT Circular No. 6 of 2016, which directed that income from trading in listed shares treated as stock-in-trade should be considered as business income. Since the assessee had consistently treated the shares as stock-in-trade, the Tribunal upheld the order of CIT(A) in treating the income from shares as business income. The Tribunal dismissed the appeal by the revenue, finding no infirmity in the order of CIT(A) regarding the treatment of stocks.

In conclusion, the Tribunal dismissed the appeal of the revenue, affirming the allowance of business loss deduction and the treatment of stocks as stock-in-trade for computing income from business. The judgment highlighted the importance of consistency in treatment and adherence to CBDT directives in determining the nature of income from share transactions.