2010 (5) TMI 662 - AT - Income Tax

Tribunal rejects rectification applications in horse race business case emphasizing lack of evidence

Equest India (P.) Ltd. Versus Deputy Commissioner of Income-tax, Circle 6(2), Mumbai

The Tribunal dismissed three miscellaneous applications seeking rectification of mistakes in a consolidated order for assessment years 1998-99, 1999-2000, ... Appellate Tribunal Issues:Rectification of mistakes apparent on record in a consolidated order for assessment years 1998-99, 1999-2000, and 2000-01 regarding the nature of business activity of owning and maintaining racehorses.Analysis:The judgment deals with three miscellaneous applications seeking rectification of mistakes in a consolidated order passed by the Tribunal for assessment years 1998-99, 1999-2000, and 2000-01. The mistake highlighted in all applications pertains to the Tribunal's observations regarding the nature of the business activity of the assessee owning and maintaining racehorses. The applicant contests the Tribunal's conclusion, arguing that the sale of foals and fillies, which were under training for races, does not align with the characterization of selling racing discards. The applicant relies on the Supreme Court judgment in Honda Siel Power Products Ltd. v. CIT [2007] 295 ITR 466 to support their claim.The Tribunal notes that the primary finding was that the assessee's business activity is owning and maintaining racehorses, with other activities being incidental. The Tribunal inferred the predominant activity based on the lack of evidence showing the sale of horses with good race potential. Despite the applicant's argument that the sold foals and fillies were race-ready, the Tribunal emphasizes that the absence of evidence indicating their success on the racecourse is crucial. The Tribunal clarifies that selling foals and fillies of racing age does not automatically imply they have good potential for racing, reinforcing the initial finding that the business revolves around owning and maintaining racehorses.The Tribunal underscores that the powers for rectification are limited to correcting glaring mistakes apparent on record with no room for differing interpretations. It highlights that the absence of irrefutable evidence supporting the sale of horses with significant racing potential upholds the original finding. The Tribunal concludes that the sale of foals and fillies does not alter the established nature of the business activity as owning and maintaining racehorses. Consequently, the Tribunal rejects the miscellaneous applications, finding no legal basis for rectification.In conclusion, the Tribunal dismisses the applications seeking rectification, maintaining the original order's findings regarding the nature of the assessee's business activity centered on owning and maintaining racehorses.