2010 (7) TMI 1162 - HC - Income Tax

High Court upholds Tribunal's decision on income source and interest expenditure

The High Court dismissed the appeal filed by the revenue as it found no legal error in the Tribunal's decision. The Tribunal's findings that the income ... - Issues involved:The issues involved in this case are:1. Whether the Appellate Tribunal was correct in reversing the order of the CIT(A) and deleting the addition of Rs. 2,15,80,800 credited as labour income treated as deemed income of the assessee earned from undisclosed sourcesRs.2. Whether the Appellate Tribunal was correct in reversing the order of the CIT(A) and directing to allow interest expenditure of Rs. 2,11,99,383 claimed as business expenditure without establishing that the funds borrowed and interest expenditure incurred were for earning taxable income of the yearRs.3. Whether the Appellate Tribunal erred in not following the jurisdictional High Court's decision in the case of Fakir Mohmad Haji Hasan [247 ITR 290] in letter and spiritRs.Details of the Judgment:Issue 1:The appellant-revenue filed an appeal under section 260-A of the Income Tax Act, 1961 challenging the deletion of Rs. 2,15,80,800 credited as labour income by the Appellate Tribunal. The Assessing Officer had treated this amount as deemed income of the assessee earned from undisclosed sources. The Tribunal found that the assessee, engaged in stone crushing business, had exploited his land and machinery for making chips from boulders, indicating commercial exploitation of assets. The Tribunal concluded that the income derived from labour was business income, not from undisclosed sources. The Tribunal's decision was based on factual findings and did not raise any legal error.Issue 2:Regarding the second issue, the Tribunal had disallowed interest expenditure claimed as business expenditure by the assessee. However, upon determining that the income of the assessee was to be taxed as business income and not from undisclosed sources, the Tribunal deleted the addition related to interest expenditure. The Tribunal's decision on this matter was a necessary corollary to its conclusion on the first issue and did not give rise to any legal question.Issue 3:The Tribunal did not follow the jurisdictional High Court's decision in the case of Fakir Mohmad Haji Hasan [247 ITR 290] as contended by the appellant-revenue. However, the Tribunal's decision was based on factual evidence and did not indicate any legal error warranting interference.In conclusion, the High Court dismissed the appeal as it found no legal infirmity in the Tribunal's order, stating that in the absence of any substantial question of law, the appeal was not upheld.