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2019 (9) TMI 918 - AT - Income TaxDeduction as loss on Chit - Whether the Chit discount is capital in nature OR revenue expenditure? - Whether disallowance of Chit loss is sustained, then the income from Chit dividend be also reduced from the income? - Chit income be reduced from the income - net amount v/s gross amount - HELD THAT:- In CIT Vs. Kottayam Cooperative Bank Ltd. [1974 (4) TMI 2 - KERALA HIGH COURT] and also CIT Vs. Merchant Navy Club [1971 (9) TMI 59 - ANDHRA PRADESH HIGH COURT] and ITO Vs. Singh Radio Co. (India) (P.) Ltd. [1991 (7) TMI 144 - ITAT DELHI-D] it was held that the loss incurred in subscribing to chit fund is allowable if funds raised from such chit is utilized for the purpose of business. On this aspect, there is no finding of authorities below. Before us, the assessee has brought certain additional evidences on record in the form of ledger account of various chits as well as copy of bank statements and it is being claimed before us that the money raised through chit was used for the business purpose. Under these facts, we feel it proper to restore back the matter to the file of ld. CIT(A) for fresh decision after examining these additional evidences and if the assessee is able to establish that the money raised through chit was utilized for the purpose of business, then the loss incurred in the chits being net of chit discount (-) chit dividend should be allowed as revenue expenditure. Even if the assessee is not able to establish that the money raised through chit was used for business purpose then also, disallowance should be of net amount of chit discount (-) chit dividend and not of gross amount of chit discount. - Appeals filed by the assessee are allowed for statistical purposes.
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