1984 (7) TMI 153 - AT - Income Tax

Summary

Issues:
1. Nature of relationship between the assessee and the company.
2. Assessment of income as 'business income' or 'income from other sources'.
3. Allowability of set off of losses for assessment years 1979-80 and 1980-81 against income for assessment year 1981-82.

Analysis:

Issue 1: Nature of relationship between the assessee and the company
- The assessee, a director in a company, had an agreement to oversee production and receive commission.
- Previous Tribunal decisions confirmed no employer-employee relationship.
- Losses incurred by the company led to the assessee's claim of loss for the assessment year 1979-80.
- The Tribunal determined that the assessee's activity with the company was in the nature of business.

Issue 2: Assessment of income as 'business income' or 'income from other sources'
- The assessee claimed losses for assessment years 1980-81 and 1981-82 based on the agreement.
- The first appellate authority categorized the losses as 'salary loss' and 'other sources', respectively.
- The department contested the categorization, arguing that the income should be assessed as 'Income from other sources'.
- The Tribunal clarified that the income should be treated as business income due to the systematic activity and profit motive involved.

Issue 3: Allowability of set off of losses for assessment years 1979-80 and 1980-81 against income for assessment year 1981-82
- The assessee sought to set off previous losses against the income for the assessment year 1981-82.
- The ITO initially declined the set off, citing the assessee's salary income.
- The Tribunal ruled in favor of the assessee, allowing the set off of losses against the income for the assessment year 1981-82.
- The Tribunal directed the ITO to compute the income for the assessment year 1980-81 as business income and allow the set off of previous losses.

Conclusion:
- The Tribunal allowed the appeals, confirming the assessee's income as business income and permitting the set off of previous losses against the income for the assessment year 1981-82. The ITO was instructed to compute the income for the assessment year 1980-81 as business income in accordance with the law.