2000 (12) TMI 45 - HC - Income Tax

Summary

Issues involved: Assessment of professional income, deduction of interest payment as business loss.

Assessment of professional income: The assessee, a music director and playback singer, entered into a business venture with a partnership firm, standing as a guarantor for a loan. The Revenue sought to add to the professional income based on diaries recovered during a search. However, the Tribunal found no evidence of suppression of receipts or unaccounted outgoings, leading to the deletion of the addition. The Tribunal's decision was upheld as there was no material to support the addition, in line with the principle that the reference court is not an appellate court.

Deduction of interest payment as business loss: The Revenue argued that the venture was not a business activity but a friendly gesture, thus disallowing the deduction of interest paid on the loan. However, the Tribunal established that the assessee had a profit motive in the film venture, sharing in potential profits and standing guarantee for finance. Despite the film's failure, the assessee derived income from it later. The Tribunal's factual findings supported the transaction being a business activity, distinguishing it from cases of non-business investments. Citing precedents, the court ruled in favor of the assessee, allowing the deduction of interest payment as a business loss.

This judgment clarifies the criteria for assessing professional income and determining the admissibility of deductions based on the nature of business activities undertaken by the assessee.