Court allows deduction of business loss for assessment year 1971-72

The court held in favor of the assessee, allowing the loss incurred to be deducted in computing income for the assessment year 1971-72. The court found that the chits were entered into for business purposes, and the bid amounts were utilized for the business, supporting the allowance of the loss as a business deduction.

---

---

Issues Involved:
The judgment involves the issue of whether the loss incurred by the assessee can be allowed as an admissible deduction in computing the income for the assessment year 1971-72.

Details of the Judgment:
The judgment of the court, delivered by RAGHUVIR J., pertains to a reference made by the Commissioner of Income-tax under s. 256(1) of the I.T. Act, 1961. The assessee, a limited company, had contributed to a "chit fund" known as Rajarajeswari Financiers and another "chit fund." The company bid on these chits and received discount money in the bids made by other contributors. The ITO allowed the difference between the chit amount and the bid amount as a business loss. However, the Commissioner, u/s 263 of the I.T. Act, held that such a loss was not allowable. The I.T. Appellate Tribunal found that the chits were entered into for finding finances for business purposes, and the chit amounts bid were utilized for the business.

Based on the above facts, the court answered the question referred in the affirmative, in favor of the assessee and against the revenue. The court did not pass any order as to costs.

---