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2016 (3) TMI 587 - ITAT KOLKATA

2016 (3) TMI 587 - ITAT KOLKATA - TMI - Income from profit in future and option transactions - whether assessable u/s.68? - business income v/s income from other sources - setting off the assessed business loss against the income denied - Held that:- The admitted facts are that the Assessee has shown the profit in transactions of futures and options of ₹ 5,51,362/- in his profit and loss account and the resultant income of ₹ 89,200/- was declared in the return of income. The aforesai .....

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t is clear if one reads the decision of the Hon’ble Supreme Court in the case of Nalinikant Ambalal Mody Vs. CIT (1966 (5) TMI 13 - SUPREME Court) wherein it was held that if income cannot be taxed under any of the heads mentioned in Sec.14 of the Act, then it cannot be taxed at all. The AO in coming to the conclusion that the sum of ₹ 5,51,362 had to be taxed separately had not made any reference to any provision of law in the Act under which he is resorting to such a course. Consequently .....

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ed interest income of the appellant - Held that:- The entire basis of addition made by the AO was erroneous. It is not the case of the AO that borrowed funds on which interest was paid were not used for the purpose of business and therefore the interest expenditure cannot be allowed u/s.36(1)(iii) of the Act. Therefore the non-payment of interest on loans borrowed has no relevance whatsoever. As far as interest received by the Assessee is concerned, so long as borrowed funds on which interest is .....

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2016 - Sri N.V.Vasudevan, JM For The Appellant : Miss Karishma Jaiswal, CA For The Respondent : David Z. Chawngthu, Addl.CIT ORDER This is an appeal by the Assessee against the order dated 2.8.2013 of CIT(A)- XX, Kolkata, relating to AY 2008-09. 2. Grounds No.1 and 2 raised by the Assessee read as follows: 1. a) FOR that the Ld. CIT(A) erred in law as well as on facts in holding that the income of ₹ 5,51,362/- from profit in future and option transactions was assessable u/s.68. The Ld. CIT .....

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'Business', it had to be assessed under the residuary head of "Other sources" and in case it cannot be assessed under any head then it will not form part of the taxable income of the assessee. 2. FOR that, in any case, the Ld. A.O was wrong and unjustified in not setting off the assessed business loss of Rs.l,65,617/- against the income of ₹ 5,51,362/- assessed by him. 3. The Assessee is a partnership firm. The Assessee filed return of income for AY 2008-09 declaring tot .....

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Commodity Exchange of India Ltd., and from their replies found that the Assessee was not registered as client either with Pushpakant Commodities (P) Ltd., or any other member of the exchange. The AO confronted the reply so received to the Assessee and called upon the Assessee to show cause as to why the income in question should not be treated as Income from other sources instead of the claim of the Assessee that the income in question was from business. The Assessee explained that the document .....

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f receipt of ₹ 5,51,362 the same cannot be considered as business income as claimed in the P & L A/C. nor under any other head of income as provided under chapter IV of the Act. He held that the sum of ₹ 5,51,362 had to be taxed separately and the Assessee will not be entitled to adjust this income with any other loss as the source of income remains un-established. 4. The computation of total income as done by the AO after the above conclusion is very important. As noticed earlie .....

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esulted in business loss being determined at ₹ 4,01,224 which was allowed to be carried forward. The income in the form of profit in futures and options of ₹ 5,51,362/- was taxed separately by the AO. 5. On appeal by the Assessee, the CIT(A) confirmed the order of the AO. 6. I have considered the submission of the learned counsel for the Assessee and the learned DR. They reiterated the stand of the Assessee before AO/CIT(A) and the stand of the AO and CIT(A) in their orders respectiv .....

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er doing so, the AO has no other option but to classify the income in question under any of the heads of income given in Sec.14 of the Act. Income which does not fall under any other head of income had to be necessary classified under the head Income from other sources , if the AO wants to bring the same to tax. This aspect is clear if one reads the decision of the Hon ble Supreme Court in the case of Nalinikant Ambalal Mody Vs. CIT 61 ITR 428 (SC) wherein it was held that if income cannot be ta .....

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without set off of loss from business u/s.71 of the Act. Thus the levy of tax on the sum of ₹ 5,51,362/- cannot be sustained. I am therefore of the view that the addition made by the AO cannot be sustained and the same is directed to be deleted. Ground No.1 and 2 are accordingly allowed. 8. Ground No.3 raised by the Assessee reads as follows: 3. FOR that the Ld. CIT(A) erred in upholding the addition of ₹ 60,938/- made for deemed interest income of the appellant. The appellant had s .....

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s, the A.R. of the appellant has submitted that the A.O. has made this addition on the ground that the Assessee had normally taken interest bearing loans @ 8% per annum and had also given interest bearing loans by charging interest @ 8% per annum. The A.O. has given details of the loans on which interest was not charged and similarly loans received on which interest was not paid at Pages-5, 6, & 7 of the assessment order which is set out here under. Loans given on which no interest was Charg .....

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.O. thereafter concluded that the Assessee did not pay interest to the extent of ₹ 8,469/- on loans taken and did not charge interest to the extent of ₹ 69,407/- on loans given and therefore interest income to the extent of ₹ 60,938/- (Rs.69,407/- minus ₹ 8,469/-) remains undisclosed which he added as undisclosed income of the Assessee. 9.1 The Assessee submitted before CIT(A) appellant respectfully submits that the very method adopted by the A.O. for determining the amou .....

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y the Assessee during the year was ₹ 7,19,115/- and the interest paid was ₹ 4,14,114/-, thus there was net income of ₹ 3,05,00l/- from interest during the year. ii) Interest free loan of ₹ 2 crores was received from M/s. Correo Marketing Pvt. Ltd. on 09.04.2007 which was repaid on 01.09.2007 and no interest was paid on this loan. The interest @ 8% on this amount alone works out to ₹ 6,35,616/- which is much higher than the interest not charged by the appellant on in .....

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;s theory, which is basically illogical, the A.O. should have given deduction of ₹ 6,35,616/- for interest not paid to Correo Marketting Pvt. Ltd. which would be equally not correct. The addition made by the A.O. is therefore basically misconceived and without authority of law. The addition is liable to be deleted. 10. The CIT(A) however did not accept the submission of the Assessee and he held as follows: 5.2. I have perused the assessment order and considered the submission of the appell .....

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