2012 (5) TMI 710 - AT - Income Tax

Appeal allowed for interest income as business income despite disallowance of business loss.

The Tribunal partly allowed the assessee's appeal, disallowing the claimed business loss due to lack of business activity, but allowing interest income ... - Issues involved: Disallowance of business loss, Nature of interest income, Disallowance of claim of setting off business loss, Disallowance of expenses, Levy of interest under section 234B.Dispute 1 - Disallowance of Business Loss:The assessee claimed a business loss of Rs. 37,494 from shares/securities due to valuation. The AO disallowed the loss stating it was not genuine. CIT(A) upheld the disallowance as the assessee was not engaged in any business activity post-2001 securities scam. Tribunal confirmed the disallowance based on the previous year's decision. The loss was disallowed as it was not considered a business loss.Dispute 2 - Nature of Interest Income:Interest income of Rs. 19,31,399 from FDRs was treated as income from other sources by the AO. CIT(A) confirmed this, stating lack of nexus between FD and the assessee's business. Tribunal, based on a previous decision, held that interest from FDRs pledged in connection with business should be treated as business income. The claim was allowed as the business was only suspended, not closed.Dispute 3 - Disallowance of Setting off Business Loss:The claim of setting off business loss against income from other sources became infructuous as interest income was allowed as business income. The ground was dismissed as not pressed.Dispute 4 - Disallowance of Expenses:Expenses of Rs. 30,65,040 claimed by the assessee were disallowed by the AO, stating the business had closed. CIT(A) confirmed the disallowance, mentioning lack of proof regarding certain expenses. Tribunal held that the business was under suspension, not closed, and expenses should be allowed. Professional expenses related to tax matters were to be verified for this year. The issue was restored to the AO for further examination.Dispute 5 - Levy of Interest under section 234B:The levy of interest under section 234B was considered consequential, to be recomputed by the AO at the time of implementing the order.In conclusion, the appeal of the assessee was partly allowed by the Tribunal on various grounds.