1994 (3) TMI 162

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....sing finance with the intention of buying a plot. The dividends received from the said chit funds were disclosed as income from 'other sources'. The statement of computation of total income filed for assessment year 1989-90 was furnished to me. Under the head 'income from other sources', the assessee disclosed dividend income from two companies amounting to Rs. 70. He also showed under the head 'income from other sources', the bonus which he derived on the bid of chit conducted by Sree Ganapaneni Chits. He showed the bonus amount at Rs. 3,665. He also showed loss of Rs. 22,500 from Sree Ganapaneni Chits. The overall result under the head 'chit income' was a loss of Rs. 18,835. Deducting Rs. 70 which he derived as dividend income from the lo....

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....ppeals). 3. Before the Deputy Commissioner (Appeals), it is claimed on behalf of the assessee that the dividends received from chit funds were disclosed as income from other sources in the earlier years. Therefore, when the assessee bid for the chit in the auction, the loss resulting therefrom was entitled to be claimed as deduction under 'other sources'. The Income-tax Officer disallowed the claim on the ground that the amount realised was not utilised for any income deriving purpose. The Deputy Commissioner (Appeals) agreed with the contentions of the assessee's authorised representative and held that having assessed the dividends received in the earlier years, it is quite fair that the assessee is allowed loss resulting from bidding f....

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.... Officer was correct in subjecting the amount to tax. We accordingly answer the question No. 2 in the affirmative, that is to say in favour of the revenue and against the assessee." The second question which was referred to the Hon'ble High Court of A.P. was as follows : "Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is justified in holding that the dividend received by the assessee in the present case could not be considered as income or profit in the hands of the assessee even under the head 'other sources?" In CIT v. Kovur Textiles & Co. [1982] 136 ITR 61 (AP), the headnote of the decision is the following : "The assessee-company subscribed to a chit fund by joining in a chit group. After ....

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....t contributions to the chit fund could not be treated as revenue expenditure and, similarly, the lump sum received from the chit fund would not be income and, therefore, the dividends too were neither income nor a revenue loss. On a reference : Held, that there was clearly mutuality amongst the contributors and participators of a chit fund with their identity being known and well established. Hence, contributions made to the chit fund could not be treated as revenue expenditure, nor could the payment and receipt of any amount to and from the chit fund be treated as the business activity of the assessee. The transactions involved did not give rise to any income assessable to income-tax nor any revenue loss in respect of which any deductio....