TMI Blog1997 (2) TMI 172X X X X Extracts X X X X X X X X Extracts X X X X ..... f the books of account, maintained by the assessee, the Assessing Officer, inter alia, observed that in the profit and loss account the assessee had debited a sum of Rs. 2,63,032 on account of interest loss on chits. The assessee's explanation before the Assessing Officer in this regard was that the assessee company was engaged in the business of operating chit groups and loss on chit was a normal business expenditure of every chit fund company and as such the loss on chit suffered by the assessee, who was engaged in chit fund business, was an admissible expenses. The Assessing Officer, however, observed that the nature of transaction as reflected by the assessee, show that loss had been sustained on account of participation in its own business. According to Assessing Officer, since the assessee had not parted with any amount utilised in transaction, the loss sustained from self-business did not apparently appear to be reasonable or incidential to business. Relying upon the decision of the Hon'ble Jurisdictional High Court in the case of Soda Silicate Chemical Works v. CIT [1989] 179 ITR 588/46 Taxman 33 (Punj. Har.), the Assessing Officer rejected the explanation of the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the prizing subscribers through a scheme of competitive bidding or by drawing lots, there would be no income derived either by way of interest or by way of amounts forgone by the bidders at the auction. It would mean that theHon'ble Courtmeant that in a case where the assessee partakes in any chit where drawing is by way of competitive bidding or by drawing lots, a loss is incurred into the process and the same would be an allowable expenditure. The assessee in the instant case has obtained the prized chits through a scheme of competitive bidding or draw of lots and in the process has incurred loss as the money prized by the chit fund to the assessee was less than the money paid by the assessee to those chit fund companies in instalments. The aforesaid fact was never taken into consideration by the authorities below. 5.1 The learned authorised representative further contended that the CBDT has issued a Circular dated25-3-1993against Instruction No. 1175 dated16-5-1978. In the instant case the assessee was running of his own chit fund and also he was the member of such chit fund companies run by other companies and this fact stands proved by the number of transactions entered i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of CIT v. Mothooram Premchand [1980] 121 ITR 59/[1979] 2 Taxman 331 (Punj. Har.), the Hon'ble Jurisdictional High Court has held that : "It is settled proposition of law that the Circular issued by the Central Board are binding on Officers and persons employed in the execution of the Income-tax Act." He further contended that it is settled law that benevolent circulars supplant the law and do not supplement it and even if the Circulars are relied on for the first time before the High Court during the course of hearing, the assessee would be entitled to the benefit of the Circular and the court is bound to take note of the Circular. In support of this proposition the learned authorised representative relied upon the decisions in the following cases. :-- (a) Jaikishan Gopikishan Sons v. CIT [1989] 178 ITR 481/44 Taxman 230 (MP) ; and (b) CWT v. GammonIndia(P.) Ltd. [1981] 130 ITR 471/[1980] 4 Taxman 246 (Bom.). 5.4 It is further contended that the chit fund companies in which the assessee had subscribed were all private limited companies and the principle of mutuality did not arise. In support of this contention the learned A.R. relied upon the decision of the Tribunal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oot M. George Chits (India) Ltd's case in paras 12 and 13 of its order dated 15-4-1991 has discussed the identical issue in great detail, as reproduced below : "12. The Tribunal's decision was mainly based on the ruling of thePunjaband Haryana High Court in the case of Soda Silicate Chemical Works 179 ITR 588. Therein, the High Court has field dealing with a chit subscriber, that a chit fund is a mutual society and neither the payment could be allowed as a deduction nor the receipt could be taxed. The decision given by the Tribunal was based on this authority. We are concerned in this case with a person, who runs chits as a business. From the decision of thePunjaband Haryana High Court it is not very clear whether the person who was running the chit was a mutual society or a limited company. In this case, we are concerned with a limited company. The principles governing mutuality are very well settled. We may, in this connection, refer to the decision of the Supreme Court in the case of CIT v. Kumbakonam Mutual Benefit Fund Ltd [1964] 53 ITR 241. At page 246, the Supreme Court has pointed out that companies limited by shares stand on a different footing for this purpose. They q ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the case of DLF Housing Constructions (P.) Lid. v. CIT [1982] 9 Taxman 207, at page 225, the High Court was discussing about a question whether a subsequent Bench of the Tribunal should follow the earlier Bench's decision : '31. Counsel for the parties did not address any argument on this question. Since Delhi Bench 'B' was concerned with a different, assessment year although it was subsequent to the assessment year dealt with by Delhi Bench 'C', we do not think that any legal obligation was cast on the former to follow the view expressed by the latter either as a precedent of otherwise. Of course, there can be no doubt that it had persuasive value in the sense that the Bench dealing with the subsequent year should not have ordinarily departed from the view taken earlier. We have already observed that Delhi Bench 'B' has given cogent and sound reasons for taking a different view of the matter. So, the question of want of any propriety of desirability does not arise'." 7.1 The case of the assessee is on all fours to the above case decided by 'C' Bench of the Tribunal in the case of Muthoot M. George Chits (India) Ltd. for assessment year 1983-84, which as observed by the T ..... X X X X Extracts X X X X X X X X Extracts X X X X
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