2012 (6) TMI 508 - HC - Income Tax

Claim of loss of stock in trade - allowed by Tribunal - Held that - Following the view taken in T.A. Quereshi (Dr.) v. Commissioner of Income Tax 2006 (12) TMI 91 (SC) that if the stock in trade was seized and confiscated, it has to be allowed as a business loss the Tribunal held that the confiscation of the pharmaceutical drugs exported by the assessee must be treated as a loss of stock in trade - no substantial question of law arises for consideration

Summary

Issues:
1. Grievance of the Revenue regarding an order passed by the Income Tax Appellate Tribunal.
2. Claim of business loss by the assessee due to the confiscation of goods during transit.
3. Interpretation of legal precedents by the Tribunal and the High Court.
4. Consideration of conflicting decisions by the Tribunal and the High Court.
5. Determination of whether the confiscation of goods qualifies as a business loss.

Analysis:
The High Court of Andhra Pradesh addressed the grievance of the Revenue concerning an order passed by the Income Tax Appellate Tribunal regarding the assessment year 2005-2006. The assessee, a proprietor of a Pharmaceutical Company, exported bulk drugs to Mexico, which were seized by the Customs and Border Protection Force of the USA during transit from California to Mexico. The assessee claimed business loss before the authorities, which was initially rejected by the Assessing Officer and the Commissioner of Income Tax (Appeals), leading to an appeal before the Tribunal.

The Tribunal, after examining the facts, determined that the confiscated goods were indeed the stock in trade of the assessee. Relying on Supreme Court decisions, specifically the case of T.A. Quereshi, the Tribunal concluded that the confiscation of the pharmaceutical drugs should be treated as a loss of stock in trade. The High Court highlighted the relevance of the Supreme Court judgments in Piara Singh and T.A. Quereshi, where losses arising from confiscation were considered as business losses.

However, the High Court also noted a decision of a Division Bench of the same Court in Commissioner of Income Tax v. Subba Raju K., which did not provide detailed discussion on the subject of confiscation and loss. The High Court clarified that the earlier decision of the Division Bench was overruled by the subsequent judgment of the Supreme Court in T.A. Quereshi. Consequently, the High Court held that no substantial question of law arose for consideration and dismissed the appeal.

In conclusion, the judgment emphasized the application of legal precedents, the interpretation of relevant case laws by the Tribunal and the High Court, and the determination of whether the confiscation of goods during transit could be considered as a business loss, ultimately leading to the dismissal of the appeal.