9911796707
TMI Blog2007 (3) TMI 407X X X X Extracts X X X X X X X X Extracts X X X X ..... ide order dated 21-11-1999 wherein, the returned income was accepted. Subsequently, case was re-opened under section 148. In the course of reassessment proceedings, the Assessing Officer noted that the assessee had shown Rs. 16,95,257 in the credit side of the P L Account on the sale of units of J.M. Mutual Fund and this Memorandum of Understanding was shown as Short Term Capital Gain (STCG) while computing taxable income. The Assessing Officer also noted that the assessee had claimed business expenditure on account of professional charges at Rs. 10,75,000, audit fees Rs. 10,000, bank charges of Rs. 79 and these business expenses were treated as business loss and had been set off against the STCG. The Assessing Officer asked the assessee to furnish the details of business transactions carried on by the assessee-company during the financial years relatable to assessment years 1997-98 and 1998-99. The assessee, in response to this requirement of the Assessing Officer, filed acknowledgement of return of income. The Assessing Officer again asked the assessee that why the professional charges should not be disallowed as the assessee did not carry out any business activity during the ye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d on commercial principles. For this purpose, he relied on the decision of the Hon ble Supreme Court in the case of CIT v. Cocanada Radhaswami Bank Ltd. [1965] 57 ITR 306 . The assessee also referred to the requirements of part two of Schedule VI to the Companies Act, 1956 requiring the companies to disclose income or loss in respect of investment in the profit and loss account which could be inferred as recognition of investment activity as a "business activity". The ld. CIT(A), accepted the contentions of the assessee and directed the Assessing Officer to allow professional fees incurred in connection with the business of investment as business expenditure. The relevant findings of the ld. CIT(A) are extracted as below : "I have considered the submissions of the appellant and also perused the impugned order of assessment. The Assessing Officer has disallowed the professional fees only on the ground that the appellant is holding the shares by way of investments and the same cannot be business of the appellant. The appellant has been in the business of investment activity and finance and the said activities are being carried out in organized manner with the said purpose of ea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,079, hence, the Assessing Officer had himself accepted the activity carried on by the assessee as one of business. It was also contended by him that the disallowance of professional fee was not made by the Assessing Officer on the ground that it was a capital expenditure, hence, this plea could not be taken at this stage. The ld. AR also contended that once it was held that assessee was engaged in the business of holding of investments, the other consequences were natural i.e. the expenditure incurred in connection with the business activity of the assessee was allowable as business expenditure. The ld. AR also contended that irrespective of taxability of income under specific head these expenses were allowable as business expenses. 7. We have considered the submissions made by both the sides, material on record and orders of authorities below. We have also considered all the decisions cited by respective parties though we have not referred these decisions in our order because decisions are mainly related to the aspect whether there could be a business of holding of investments or not. The reason for not referring to these decisions in this manner is that because in our opin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st carry on the business during the year. Thus, the existence of an income either in the present or in the future under that head is pre-supposed. In this background, now we have to look the scheme of computation of income under the head Profits and gains of business or profession . Section 28 applies only in respect of business or profession, profits or gains of which are assessable under that head under the Income-tax Act. Section 28 is a charging section which provides for income of various natures which can be treated as profits or gains of business or profession. Section 29 of the Act states that in computing the income referred to in section 28 deduction under sections 30 to 43D would be given. A bare perusal of the language employed in section 29 makes it clear that deduction under sections 30 to 43D are allowable only with respect to income which is chargeable under section 28. Hence, if an income is not so chargeable deductions under sections 30 to 43D shall not be given. Since, in the year under consideration, there exist receipts or gross income of the nature which is not chargeable under section 28, hence, no deduction under sections 30 to 43D can be allowed. To furthe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y also add that in the case of Cocanada Radhaswami Bank Ltd. ( supra ), the Hon ble Apex Court was seized with the question of set off of loss against interest on securities earned by the assessee on securities held as trading assets. In these circumstances, the Hon ble Court held that interest on such securities was in the nature of income from business on commercial principles, hence, loss was liable to be set off against such interest. There is no dispute about this proposition and we have also stated so hereinbefore, however, for the purpose of computation of income under a particular head, the ratio in this decision does not render any assistance to the cause of the assessee. Further, even at the cost of repetition, we may state again that even the commercial character of income in the present case is of capital gain and even the dividend income is of the nature of return on investment in capital asset. 9. In view of the above discussion, we are of the considered view that the assessee is not eligible for deduction of professional fees under the head Profit and gain of business or profession and consequently, it is also not eligible for set off of the same as business ..... X X X X Extracts X X X X X X X X Extracts X X X X
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