2018 (11) TMI 1238 - AT - Income Tax

Allowance of busniss loss - proof of enough sale/purchase of shares to justify that the assessee was in share trading business - Held that - A perusal of the order passed by the A.O. also shows that the income of the assessee was computed under the head profits and gains of business or profession by the A.O. himself which fully supports the claim of the assessee that the business of trading in shares was carried on by him during the year under consideration. Accept the contention of the learned counsel for the assessee that the business of trading in shares was carried on by the assessee during the year under consideration and allow ground no 1 of the assessee s appeal. Disallowance of interest - Held that - Paper book shows that the entire borrowed funds were utilised by the assessee for personal purposes and there is nothing to show that such borrowed funds were utilised even partly for the purpose of business of trading in shares. Even the learned counsel for the assessee has not raised any material contention in support of the assessee s case on this issue and has only contended that disallowance was made by the assessee suo moto in the computation of income on account of interest. In this regard, it is observed that the Ld. CIT(A) has already allowed a relief to the assessee on this issue to the extent of ₹ 53,910/- by observing that there was a double disallowance to that extent. We, therefore, find no merit in the case of the assessee. Claim for set of off brought forward business loss - Held that - CIT(A) by way of an additional ground has not been decided by the Ld. CIT(A) vide his impugned order. Since the claim of the assessee relating to the set of off brought forward business loss requires verification from the relevant record, direct the A.O. to consider and decide the same after necessary verification in accordance with law. Ground no 3 of the assessee s appeal is accordingly treated as allowed for statistical purpose.

Summary

Issues:
1. Claim of business loss on share trading activity.
2. Disallowance of interest expenditure.
3. Set off of brought forward business loss.

Analysis:
1. The appellant, an individual, claimed a business loss from share trading in the return of income. The Assessing Officer (A.O.) disallowed the claim citing insufficient transactions and absence of closing stock. However, the appellant contended that the profit and loss account showed substantial share transactions, indicating an active share trading business. The A.O. had previously accepted similar activities in earlier years. The Tribunal accepted the appellant's argument, ruling in favor of the claim for business loss on share trading activity.

2. The A.O. disallowed the entire interest expenditure claimed by the appellant, stating that borrowed funds were used for personal purposes, not for the share trading business. The Tribunal noted that the appellant had voluntarily disallowed a portion of the interest in the income computation. The Commissioner (Appeals) had already allowed relief on this issue. The Tribunal found no merit in the appellant's case and dismissed the appeal regarding the disallowance of interest expenditure.

3. The appellant raised an additional ground regarding the set off of brought forward business loss, which the Commissioner (Appeals) did not address in the previous order. The Tribunal directed the A.O. to verify and decide on the claim for set off of brought forward business loss in accordance with the law. The Tribunal treated this ground as allowed for statistical purposes. Ultimately, the Tribunal partly allowed the appeal of the appellant.