2024 (9) TMI 1337 - HC - Income Tax

Maintainability of appeal before High court - substantial question of law or fact - Tribunal setting aside the disallowance of short term loss claimed by assessee in P L A/c by holding that the shares have acquired by assessee under normal business transaction and can be taken as stock-in-trade - Whether the impugned order of the Tribunal requires interference at the hands of this Court? - HELD THAT - It is settled position of law that under Section 260-A of the Act, the High Court could entertain the appeal or appeals only if it involves substantial question/s of law. In the instant case, we are of the view that in the peculiar facts of the case, the question raised by the Revenue is not a substantial question of law and it is a question of fact. Moreover, the Revenue had not filed appeal before the Tribunal with regard to colorable device or the genuineness of transaction or on allowance of loss in a sum of Rs. 11,27,00,000/-. But, the Revenue s appeal was in respect of other disallowances allowed by the Assessing Authority. The substantial question of law raised by the Revenue would not emanate from the order of the Tribunal, but from the order of the Commissioner of Income Tax (Appeals). The Revenue had not raised the genuineness of transaction or colorable device before the Tribunal. Hence, in the peculiar facts and circumstances of the case, we are not inclined to interfere with the order of the Tribunal. Accordingly, the substantial question of law raised by the Revenue is answered against them and in favour of the assessee.

Summary

Issues involved:
1. Appeal under Section 260-A of the Income Tax Act, 1961 questioning the correctness and legality of an order passed by the Income Tax Appellate Tribunal for the assessment year 2009-10.
2. Whether the disallowance of short term loss claimed by the assessee as a business loss is justified.

Detailed Analysis:
Issue 1:
The High Court entertained an appeal under Section 260-A of the Income Tax Act, 1961, challenging the order passed by the Income Tax Appellate Tribunal for the assessment year 2009-10. The appeal raised substantial questions of law, with one surviving for consideration as other questions were decided in a previous case between the same parties. The substantial question of law pertained to the disallowance of a short term loss claimed by the assessee in the profit and loss account. The Tribunal had held the loss to be a business loss and not a capital loss, which was the crux of the appeal before the High Court.

Issue 2:
The case revolved around the disallowance of a sum claimed by the assessee as a business loss. The Assessing Authority had disallowed the claimed amount, leading to an appeal by the assessee before the Commissioner of Income Tax (Appeals). The Commissioner partly allowed the appeal, rejecting the contention that the disallowed amount was a business loss. Both the assessee and the Revenue appealed to the Appellate Tribunal, which ruled in favor of the assessee, considering the loss as a business loss and not a capital loss. The Revenue contended that the transaction was a colorable claim to show a loss and not a genuine business loss. However, the Tribunal did not find evidence to support this claim and held that the loss was indeed a business loss. The High Court, after considering the arguments from both sides, upheld the Tribunal's decision, stating that the Revenue did not raise the issue of colorable device or genuineness of the transaction before the Tribunal. Therefore, the High Court dismissed the appeal, ruling in favor of the assessee.