Sri. Srikantadatta Narasimharaja Wadiyar, Mysore V. ACIT, Mysore

ITA 754/BANG/2011

• Counselvise Citation: 75421114 RSA 2011
• Duration Of Justice: 10 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-06-2012
• Appeal Filed By: Assessee
• Bench Allotted: A
• Next Hearing Date: 26-06-2012
• Assessment Year: 2003-2004
• Appeal Filed On: 08-08-2011
• Court: TRIBUNAL
• Department Lawyers: B SARAVANAN
• Keywords: Business income
• Section: 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE A BENCH, BANGALORE BEFORE SHRI N. BARATHVAJA SANKAR, VICE PRESIDENT AND SHRI N.V.VASUDEVAN, JUDICIAL MEMBER I.T.A.NO.754(B)/2011 (ASSESSMENT YEAR : 2003-04) SRI SRIKANTADATTA NARASIMHARAJA WADIYAR THE ACIT, CIRCLE-2(1), THE PALACE, MYSORE-570- 001 MYSORE-570 001 VS PAN NO.AABHM 4298F APPELLANT RESPONDENT ASSESSEE BY : SHRI NARENDRA SHARMA, ADVOCATE REVENUE BY : SHRI B.SARAVANAN, JCIT DATE OF HEARING : 26-06-2012 DATE OF PRONOUNCEMENT : 29-06-2012 O R D E R PER SHRI N.V.VASUDEVAN, JM THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDER DATED 06-06-2011 OF CIT(A), MYSORE RELATING TO ASSESSMENT YEAR 2003 -04. 2. THE ASSESSEE IS AN INDIVIDUAL. FOR THE ASSESSME NT YEAR 203-04, THE ASSESSEE FILED RETURN OF INCOME DECLARING TOTAL LOS S OF RS.4,39,835/-. IN COMPUTING THE AFORESAID TOTAL LOSS, THE ASSESSEE HA D CLAIMED THAT IT HAD ITA NO.754(B)/2011 2 SUFFERED A LOSS UNDER THE HEAD INCOME FROM BUSINES S DURING THE PREVIOUS YEAR VIZ., THE BUSINESS WAS OF THE HORSE BREEDING A ND STUD. THE LOSS AROSE OUT OF EXPENSES OF RS..5 LAKHS INCURRED IN MAINTAIN ING HORSES. THE ASSESSEE WAS IN RECEIPT ON INCOME IN THE FORM OF GA TE COLLECTIONS OF A MUSEUM. THIS WAS ASSESSED UNDER THE HEAD INCOME F ROM OTHER SOURCES. AGAINST THE AFORESAID INCOME FROM OTHER SOURCES, TH E ASSESSEE HAD CLAIMED SET OFF. THE AO COMPLETED THE ASSESSMENT U/S 144 O F THE ACT, HE DID NOT ALLOW THE SET OFF AS CLAIMED BY THE ASSESSEE AND DE TERMINED THE TOTAL INCOME AS FOLLOWS; ASSESSMENT IS CONCLUDED A UNDER ; REMUNERATION AS MP AS DECLARED RS. 24,000 RENTAL INCOME AS DECLARED RS.1,42,345 INCOME FROM BUSINESS AS DISCUSSED ABOVE RS. NIL OTHERS AS DECLARED RS.1,67,245 TOTAL INCOME RS.3,33,590 (RUPEES THREE LAKH THIRTY THREE THOUSAND FIVE HUNDRED NINETY ONLY) (NO SET OFF BROUGHT FORWARD LOSS IS ADMISSIBLE AS THERE IS NO INCOME BUSINESS) TAX THEREON RS. 74,077 SURCHARGE THEREON @5% RS. 3,703 TOTAL RS. 77,880 INTEREST U/S 234A & 234B(3894+26476) RS. 30,370. TOTAL DEMAND RS.1,08,250 3. ON APPEAL BY THE ASSESSEE IT WAS CONTENDED THAT NO PROPER OPPORTUNITY WAS GIVEN TO THE ASSESSEE BEFORE COMPLETING THE ASS ESSMENT PROCEEDINGS. THE DETAILS OF THE LOSS WERE ALSO GIVEN. THE CIT(A ) CALLED FOR A REMAND ITA NO.754(B)/2011 3 REPORT FROM THE AO. IN THE REMAND REPORT, THE AO SUBMITTED THAT PRIOR TO ASSESSMENT YEAR 1986-87, THE ASSESSEE WAS INVOLVED IN HORSE RACING AND BREEDING AND INCOME THEREFROM WAS SHOWN AS BUSINESS INCOME. FROM 1986-87, HE GAVE UP THE BUSINESS OF HORSE RACING AN D WAS SHOWING LOSS UNDER THE HEAD BUSINESS OF HORSE BREEDING. THE A O ALSO POINTED OUT THAT EVEN THE HORSE BREEDING BUSINESS WAS GIVEN UP BY THE ASSESSEE, AS THERE WAS NO SALE OF STUDS IN THE RETURN OF INCOME FILED FOR THE PAST 20 YEARS. THE AO THEREFORE, SUBMITTED THAT THE ASSESS EE WAS MAINTAINING THE HORSES AS A PERSONAL ASSET. BESIDES THE ABOVE, THE AO ALSO POINTED OUT THAT THE PLEA OF THE SET OFF HORSE MAINTENANCE EXPE NSES AGAINST MUSEUM GATE COLLECTIONS CANNOT BE PERMITTED. THE AO SUBMIT TED THAT THERE WAS NO EVIDENCE TO SUBSTANTIATE THE LOSS OF RS.5.00 LAKHS FROM MAINTAINING HORSES. THE ASSESSEE HAD INCREASED THE LOSS TO RS. 6,59,000/- BEFORE THE CIT(A) AND EVEN IN RESPECT OF THE SAME, NO EVIDENCE HAD BEEN FILED. THE AO THUS, SUBMITTED THAT THE CLAIM OF THE ASSESSEE FOR SET OFF SHOULD NOT BE ACCEPTED. 4. AFTER CONSIDERING THE REMAND REPORT, THE CIT(A) HELD AS FOLLOWS; AFTER GOING THROUGH THE ASSESSMENT ORDER, GROUNDS OF APPEAL, STATEMENT OF FACTS, REMAND REPORT AND THE CLARIFICA TION OF THE APPELLANT , THE FOLLOWING FACTS EMERGED. THE APPE LLANT IN HIS RETURN CLAIMED ESTIMATED LOSS ON BUSINESS SALE OF S TUDS. THE SAME WAS DISALLOWED BY THE AO. DURING THE COURSE OF PR OCEEDINGS THE APPELLANT FILED AN ENHANCED LOSS CLAIM. THE AO RE JECTED THE CLAIM ON THE GROUND THAT IT IS A BELATED RETURN. THE LOSS IS ALSO DISALLOWED ON THE GROUND THAT THE BUSINESS IS DISCO NTINUED. THE BUSINESS OF HORSE RACES WAS DISCONTINUED I AY: 1986 -87 BUT APPELLANT CONTINUED THE BUSINESS OF HORSE BREEDING WHICH WAS ALSO DISCONTINUED. THE APPELLANT FOR THE AY:2003-04 HAS ESTIMATED THE EXPENDITURE ON HORSE BREEDING/MAINTENANCE AT RS .5.00 LAKHS (LATER REVISED TO RS.6,59,000/- AND SET OFF THE BUS INESS LOSS AGAINST THE MUSEUM COLLECTION. THE RETURN FILED I S ALSO A BELATED ITA NO.754(B)/2011 4 RETURN AND ON THIS COUNT ALSO THE APPELLANT IS NOT ELIGIBLE FOR BUSINESS LOSS REVISION. IT IS CLEAR THAT THE BREEDING/MAINTENANCE OF HORSES AND MAINTENANCE OF PRIVATE MUSEUM ARE TWO INDEPENDENT A CTIVITIES. SINCE THE BUSINESS ITSELF IS DISCONTINUED, THE ACTI ON OF THE AO IN DISALLOWING THE LOSS IS CONFIRMED AND THE APPEAL IS DISMISSED. 5. AGGRIEVED BY THE AFORESAID ORDER OF THE CIT(A), THE ASSESSEE HAD PREFERRED THE PRESENT APPEAL BEFORE THE TRIBUNAL. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT MAINTAINING OF HORSES A ND ELEPHANTS IS INTRICABLY CONNECTED WITH THE GATE COLLECTIONS FROM THE MUSEUM AND THEREFORE, THE EXPENSES OF MAINTENANCE OF HORSES SH OULD BE ALLOWED TO BE SET OFF. IN THIS REGARD, IT WAS SUBMITTED THAT TH E PROVISION OF SEC.139(4) OF THE ACT, WILL NOT BE APPLICABLE BECAUSE THERE WAS N O CLAIM MADE FOR SET OFF OF ANY CARRY FORWARD LOSS. ON A QUERY FROM THE BENC H AS TO THE FACTS, REGARDING THE ESTIMATE OF EXPENSES AND THE BASIS FO R THE SAME BASED ON WHICH THE BUSINESS LOSS WAS CLAIMED BY THE ASSESSE, THE LEARNED COUNSEL SUBMITTED THAT NECESSARY EVIDENCE WILL BE FILED IF THE MATTER CAN BE REMANDED TO THE AO. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE A RE OF THE VIEW THAT IN THE FIRST PLACE THERE WAS NO EVIDENCE TO SHOW THAT THE ASSESSEE HAD INCURRED EXPENSES OF RS.5.00 LAKHS ON MAINTAINING O F HORSES. EVEN BEFORE THE CIT(A) THE ASSESSEE HAS NOT LET IN ANY EVIDENC E. IN THE ABSENCE OF EVIDENCE WITH REGARD TO THE ACTUAL LOSS, WE ARE OF THE VIEW THAT THE VERY BASIS OF THE CLAIM MADE BY THE ASSESSEEE REMAINS UN SUBSTANTIATED. EVEN ASSUMING THAT THERE WAS IN FACT EXPENSES TO THE TUN E OF RS.5.00 LAKHS, THE SAME WAS NOT INCURRED IN CONNECTION WITH ANY BUSINE SS THAT THE ASSESSEE WAS CARRYING ON. IT IS NOT THE CASE OF THE ASSESSE E THAT THE AFORESAID EXPENSES WERE INCURRED FOR THE PURPOSE OF EARNING I NCOME UNDER THE HEAD ITA NO.754(B)/2011 5 INCOME FROM OTHER SOURCES. IT MAY BE THAT IT IS AS AN ATTRACTION TO THE PERSONS VISITING THE PALACE MUSEUM. THE ASSESSEE WAS NOT IN THE BUSINESS OF MAINTAINING HORSES. IN SUCH CIRCUMSTA NCES, WHATEVER WAS THE EXPENSES INCURRED FOR THE MAINTENANCE OF HORSES IS THE EXPENSES INCURRED FOR MAINTAINING THE PERSONAL ASSET WHICH C ANNOT BE ALLOWED TO BE SET OFF AGAINST INCOME UNDER THE HEAD INCOME FROM OTHER SOURCES. THE REMAND REPORT OF THE AO IN THIS REGARD ABOUT THE NO N-EXISTENCE OF BUSINESS OF HORSE RACING OR HORSE BREEDING REMAINS UNCONTROV ERTED. IN THE ABOVE CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE SET OFF CLAIMED BY THE ASSESSEE WAS RIGHTLY REJECTED BY THE REVENUE AUTHORITIES. W E DO NOT FIND ANY GROUND TO INTERFERE WITH THE ORDER OF THE CIT(A), CONSEQUE NTLY, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THE 29 TH JUNE, 2012. SD/- SD/- (N. BARATHVAJA SANKAR) (N.V.VASUDEVAN) VICE PRESIDENT JUDICIAL MEMBER PLACE: BANGALORE DATED: 29-06-2012 AM* COPY TO : 1. THE ASSESSEE 2. THE REVENUE 3. CIT(A) 4. CIT 5. DR 6. GF(BLORE) 7. GF(DELHI) BY ORDER SR. PRIVATE SECRETARY, ITAT, BANGALORE