TMI Blog2012 (5) TMI 602X X X X Extracts X X X X X X X X Extracts X X X X ..... ant craves leave to add, alter or amend any of the grounds of appeal before or during the course of the hearing of the appeal. 3. In this case assessee has claimed the following as business income: i) Misc. income : ₹ 31,50,000/- ii) Establishment charges : ₹ 4,20,000/- 3.1 Regarding establishment charges assessee has submitted that assessee has received ` 4.20 lacs from M/s Lamps and Shades Boutique for use of office premises, furniture and fixtures, electricity expenses, telephone and supply of man power for maintaining their records at Doctor Centre, 135, August Kranti Marg, Kemps Corner, Mumbai. The said premises was owned by M/s Litolier and the assessee has been receiving the similar income in A.Y. 1998-99 and 1999-2000 and the same has been assessed as business income . However, Assessing Officer was not satisfied. Assessing Officer observed that income received by way of compensation for the use of the office premises including furniture and fixtures. According to Assessing Officer this income requires to be treated as income from other sources u/s. 56(2)(iii) of the Act. Hence, Assessing Officer held that the plea of the assessee to treat the same ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the copies of the agreements entered into by the appellant with Far East Investment Corporation Ltd. and European Investment Ltd. were filed before the Assessing Officer vide letter dated 27.8.2010 which show that the appellant s proprietorship concern M/s Litolier was appointed as Investment Manager to invest and manage the funds and assets entrusted to him by these Mauritius based companies. The appellant has contended that the management fees were accounted for in the case of M/s Litolier because as per its consistently followed modus operandi, administrative expenses are incurred centrally through M/s Litolier and apportioned in the different proprietorship business concerns in proportion to the turnover. The appellant has not maintained separate record for expenses incurred for separate sources of income and has shown all expenses incurred under one consolidated account for his convenience. However, it cannot be denied that some expenditure has been incurred for earning of the management and advisory fees in terms of common expenses of office overheads, salaries rent etc. it is also seen that the Assessing Officer has not disallowed any portion of the expenditure is du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Investment Manager to invest and manage the funds and assets entrusted to him by these Mauritius based companies. Thus, Ld. Commissioner of Income Tax (Appeals) concluded that the income from investment management and advisory fee should be assessed as business income. We agree with the Ld. Commissioner of Income Tax (Appeals) that Assessing Officer has brought nothing on record to prove that the assessee did not carry out the stated activity of investment management. The alleged reason that the assessee could not identify the related expenses does not establish that the income was not derived from the business activity of investment manager. Further in preceding assessment years income under the same agreement was allowed as business income. Hence, in our considered opinion, there is no infirmity in the order of the Ld. Commissioner of Income Tax (Appeals). Accordingly, we uphold the same. 7. Apropos issue of ₹ 4.20 lacs 7.1 Ld. Commissioner of Income Tax (Appeals) held as under: Grounds of Appeal Nos. 4 5 relate to the treatment of the income of ₹ 4,20,000/- from 'establishment charges recovered' as Income from Other Sources as against Business I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and on the circumstances of the case, the Ld. Commissioner of Income Tax (Appeals) has erred in directing the Assessing Officer to recomputed the income by first setting off carry forward speculation losses of ` 1,01,39,840/- against the speculation profit and then setting off the business losses to the extent of the balance speculation profit and other income. ii) The appellant craves leave to add, alter or amend any of the grounds of appeal before or during the course of the hearing of the appeal. 11. In this case the appellant filed his return of income for the A.Y. 2000-01 on 31-10K2000, declaring a loss of ₹ 53,50,674/-. In the computation of total income, brought forward loss from speculation business of ₹ 45,43,625/- and ₹ 75,39,186/- of the A.Ys. 1999-2000, and 1998-99 respectively, were set off against current year's speculation profit of ₹ 1,46,56,512/-. In the order u/s 143(3) dtd. 31-03-2003, the assessing officer disallowed the set off of the brought forward speculation losses, on two grounds - that the assessment orders of the A.Y. 1999-2000 and 1998-99 were silent on the issue of carry forward of the losses from speculation business ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alary income (section 71(2A)). Section 73 of the Act decrees that any loss in respect of speculation business can be set off only against profits and gains of another speculation business. If, after set off of loss of all speculation business against profits, if any, of all other speculative businesses, a net loss remains, the same may only be carried forward to the next assessment year to be set off against profits, if any, from any speculation business of that year. It has to be noted that the distinction between speculation business and nonspeculation business is material only where the speculation business has resulted in a loss. Profit from speculation business is treated like other business profit and can be adjusted against any loss of non-speculation business. Thus, the question may arise, as in this case, of the priority of set off between brought forward speculative loss and of other losses of the year. The Board Circular no. 23D of 1960, dtd. 12-09-1960, clearly concedes that the speculation loss carried forward from previous years may be first set off before allowing any other current loss, if it is beneficial to the assessee. The Circular states that For the purpose o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e given effect to by the Court. 6.1 After considering the Board Circular, which though issued in the context of section 24 of the 1922 Act, has been held by the Courts to apply to the corresponding section 73 of the 1961 Act, and to still hold the field , it is evident that the assessing officer was not entitled to set off the current business loss before setting off the carried forward speculation losses. The appellant therefore succeeds in his appeal. The assessing officer is directed to recompute the income in the order giving appeal effect by first setting off the carried forward speculation losses against the speculation profit, and then setting off the business losses to the extent of the balance speculation profit, and other income. 13. Against the above order the Revenue is in appeal before us. 14. We have heard the rival contentions in light of the material produced and precedent relied upon. We find that Ld. Commissioner of Income Tax (Appeals) has adopted the correct approach. As per the Board Circular and decision of Hon ble Calcutta High Court referred by the Ld. Commissioner of Income Tax (Appeals), it is evident that carried forward speculation losses have ..... X X X X Extracts X X X X X X X X Extracts X X X X
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