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TMI Blog2005 (12) TMI 450X X X X Extracts X X X X X X X X Extracts X X X X ..... counts from two activities, i.e., business of horse breeding and horse racing and shown loss in horse racing activity at Rs. 57,289 which is claimed to be carried forward under section 74A of I.T. Act and shown net business loss from horse breeding and trading in electric goods at Rs. 5,58,701. On further scrutiny of the details it was noticed by the Assessing Officer that the assessee has claimed expenses of Rs. 11,35,930 relating to horse breeding and maintenance as separate business and loss related to such activity according to the assessee is a normal business loss and is not covered by section 74A of the I.T. Act. The Assessing Officer rejected this claim of the assessee and held that horse breeding activity is directly connected with the horse racing activities and accordingly recomputed horse racing loss at Rs. 8,48,404 and allowed to carry forward under section 74A of the Act and also recomputed business income from electrical goods of Rs. 2,79,690. Assessee carried the matter before the CIT(A) with the contentions that there are two activities, one is breeding of horses and another of racing horses. In the category of breeding horses, breeding activities take place at v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tself has used some horses which are trained and used in horse racing and earned stake money, i.e. , price money received from racing centre. Thus in my opinion Assessing Officer is justified in treating activity of horse breeding and horse racing as one activity connected with horse racing and rightly recomputed horse racing business loss of Rs. 8,48,404 which is allowed to be carried forward under section 74A of the I.T. Act. Reliance is also placed on the decision CIT v. Mrs. Sunita Kumar [1994] 208 ITR 807 (Cal.). As a result, I decline to interfere in Assessing Officer s finding in this regard." 6. Now the assessee has preferred an appeal before the Tribunal and reiterated its contentions. The learned departmental representative, on the other hand, has submitted that since there is sole judgment on the issue of the Calcutta High Court, the Tribunal is supposed to follow the same. 7. I have carefully examined the order of lower authorities and the judgment of the Calcutta High Court in the case of Mrs. Sunita Kumar ( supra ) in the light of rival submissions and find that the facts involved in the case of Mrs. Sunita Kumar ( supra ) are that the assessee was an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Lordships are extracted hereunder, for the sake of reference : "6. The Finance Act, 1972, in the first instance, inserted a new item of the enumeration of income in section 2( 24 ) by inserting clause ( ix ) therein. It has made any winnings from lotteries, crossword puzzles, races including horse races, card games and other games of any sort or from gambling or betting of any form or nature whatsoever includible as income. So, from the assessment year 1972-73, it cannot be said that the winnings from lotteries, etc., are income of a casual and non-recurring nature exempt from tax. While bringing such income to tax, a provision for the carry forward and set off of losses from such sources has also been made by the Finance Act, 1972, by inserting a new section 74A with effect from 1st April, 1972. Section 74A, as it stood at the material time, is set out below : 74A. Losses from certain specified sources falling under the head "Income from other sources". (1) Where the net result of the computation made for any assessment year in respect of any source falling under the head Income from other sources and being a source specified in sub-section (2), is a loss, such loss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not falling under any of the foregoing items. In view of this provision, loss incurred by an owner of race horses in the activity of owning and maintaining such horses is not allowed to be set off in the year in which it is incurred against any source of income except his winnings from races nor is it allowed to be carried forward to be set off against income from any source in any subsequent year. The Finance Act, 1974, has amended section 74A so as to provide that the losses incurred by owners of race horses in the activity of owning and maintaining such horses, to the extent these cannot be set off against other income from the source races, including horse races , will be carried forward and set off against income from the aforesaid source in subsequent years up to a period four assessment years following the assessment year for which the loss is first computed. In a case where the taxpayer has no income by way of stake money in the relevant year, the whole of the revenue expenditure laid out or expended by him wholly and exclusively for the purposes of maintaining race horses will be regarded as the loss incurred by him in the activity of owning and maintaining such horse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... take income and at the same time if he suffers loss from the activity of owning and maintaining race horses, the loss will be allowed to be set off against income by way of stake money and the balance not so absorbed will be carried forward and can be set off against similar income from the activity of owning and maintaining race horses as well as income by way of stake money on horse races mentioned in clause ( c ) of section 74A(2). This reading of the provisions of section 74A(2)( c ) read with section 74A(3) is the correct reading of the law. 9. Section 56(2)( ib ) provides that all winnings covered by section 2( 24 ) shall be assessed as Income from other sources . Therefore, in no case can such winnings be assessed under section 28 even where the gambling activity amounts to a business. If instead of winnings there is a loss in such activities, section 74A prohibits the set off of such loss against income from any other source. Accordingly, income from races including horse races is chargeable under the head Income from other sources . The income arising from winnings by or stake money or from maintenance of race horses both fall under the head Income from other sou ..... X X X X Extracts X X X X X X X X Extracts X X X X
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