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2020 (12) TMI 869 - AT - Income TaxTrading Loss - Loss in share business stated to be carried out in proprietorship concern namely M/s B.K. Sheth Trading Co. - The loss stem from decrease in market value of two stocks i.e. M/s Great Eastern Shipping Co. Ltd M/s Prime Securities Ltd. held by the assessee on the Balance Sheet date - scrips were converted into stock-in-trade of the proprietorship concern in earlier AYs 1994-95 1995-96 - HELD THAT - Inactivity or lull in the business of the assessee for some years cannot conclusively dislodge the claim of the assessee that it was carrying on the business of trading in shares - the valuation of stock-in-trade was in conformity with the method of valuation of stock in trade that was consistently followed by the assessee. Therefore the claim on account of fall in value of scrips was well in order. We find that similar are the facts in this year. There being nothing contrary on record respectfully following the earlier view of Tribunal we hold that the trading loss on account of fall in value of scrips was an allowable trading loss Income from House Property- ALV determination - estimation of ALV on the basis of notional interest - CIT(A) agreeing that notional interest could not be adopted as ALV of the property - HELD THAT - CIT(A) has rightly concluded that estimation of ALV on the basis of notional interest could not be upheld in the eyes of law. However the same time the findings that the property would not be subjected to Rent Control Legislation is bereft of any evidence on record. The income so earned notwithstanding the nomenclature of rental / lease rental or license fees all are assessable under the head Income from House Property and subjected to similar computations. No difference has been carved out in law in all these different streams of income. The assessee nowhere denied the applicability of Rent Control Act to the stated stream of income. Therefore the facts of the case are squarely covered by the earlier decision of the Tribunal in assessee s own case for AYs 1996-97 1997-98. There is no change in material facts. No contrary decision is on record. Nothing has been shown that the aforesaid decision of the Tribunal has ever been reversed or not applicable in any manner. Therefore respectfully following the consistent stand of the Tribunal we are inclined to quash the directions given by Ld. CIT(A). The additions thus made by Ld.AO stand deleted. Levy of interest u/s 234A 234B 234C - HELD THAT - As Counsel submitted that the return of income was filed within time and therefore there would be no question of levy of interest u/s 234A. Errors have also been pointed out in the computation of interest u/s 234B 234C. In this regard it would suffice on our part to direct Ld. AO to recompute the income of the assessee in terms of our above order and levy interest only in accordance with law. This ground stand allowed for statistical purposes.
Issues Involved:
1. Trading Loss of ?17.01 Lacs 2. Income from House Property 3. Levy of Interest under Sections 234A, 234B, and 234C Issue-wise Detailed Analysis: Issue No.1: Trading Loss of ?17.01 Lacs The assessee reported a trading loss of ?17.01 Lacs from share business conducted through a proprietorship concern. The loss arose due to the decrease in the market value of shares held as stock-in-trade. The Assessing Officer (AO) disallowed the loss, noting the lack of organized or frequent trading activity. The assessee had not engaged in any trading during the year, leading to the conclusion that there was no intention to deal in the shares. This disallowance was upheld by the Commissioner of Income Tax (Appeals) [CIT(A)], who found the loss to be non-genuine. However, the Tribunal referenced its earlier decision for AYs 1996-97 and 1997-98, where it was held that inactivity in trading does not disqualify the claim of trading loss if the valuation method is consistently followed. Consequently, the Tribunal allowed the trading loss of ?17.01 Lacs. Issue No.2: Income from House Property The assessee purchased a residential property and leased it back to the seller on the same day, receiving a monthly license fee of ?5,000 and an interest-free security deposit of ?3 Crores. The AO re-determined the rental income, estimating it as 12% of the deposit, resulting in an addition of ?36 Lacs. The CIT(A) agreed that notional interest could not be adopted as the Annual Letting Value (ALV) but differed from earlier years by considering the leave and license agreement as not governed by the Rent Control Act. The CIT(A) directed the AO to re-fix the quantum of rental value considering various factors like the property's area, location, and cost. The Tribunal, referencing its earlier decision, held that the ALV should be based on municipal valuation unless lower than the actual rent received. The Tribunal found no evidence that the property was not subject to Rent Control Legislation and deleted the additions made by the AO. Issue No.3: Levy of Interest The assessee contested the levy of interest under Sections 234A, 234B, and 234C. The Tribunal directed the AO to recompute the income and levy interest only in accordance with the law, noting errors in the computation of interest. Cross-Appeals for AY 1999-2000 For AY 1999-2000, the facts were similar to AY 1998-99. The AO disallowed a trading loss of ?0.92 Lacs and determined rental income at 12% of the interest-free deposit. The CIT(A) confirmed the disallowance and gave similar directions regarding rental income. The Tribunal dismissed the revenue's appeal due to the low tax effect and allowed the assessee's appeal, applying the same reasoning as for AY 1998-99. Assessee’s Appeal for AY 2001-02 For AY 2001-02, the AO disallowed a trading loss of ?20.33 Lacs and determined rental income at 8% of the interest-free deposit. The CIT(A) followed the appellate orders for previous years. The Tribunal directed the AO to recompute the interest and allowed the appeal, applying the findings from AY 1998-99. Assessee’s Other Appeals For subsequent years (AYs 2002-03 to 2013-14), the AO estimated rental income based on comparative rents and confirmed similar additions. The CIT(A) upheld the AO's stand. The Tribunal found no change in material facts and applied its earlier adjudication, allowing the appeals. Conclusion The revenue’s appeal was dismissed. The assessee’s appeals for AYs 1998-99, 1999-2000, and 2001-02 were allowed to the extent indicated, and all remaining appeals were allowed in line with the Tribunal's earlier decisions.
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