2002 (10) TMI 254

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....ratio laid down by the Hon'ble High Court of Punjab & Haryana in the case of Soda Cilicate & Chemical Works Ltd. v. CIT [1989] 179 ITR 588. 3. Both parties were heard regarding the issue raised by the Revenue in this appeal and its legal implications in extenso. 4. The admitted facts of the case that are necessary for adjudicating the issue raised by the Revenue are that the assessee, a registered firm, has filed its return for the assessment year 1990-91 declaring a total income of Rs. 2,97,230. After hearing the assessee the Assessing Officer has passed the assessment order under section 143(3) of the Income-tax Act determining the total income of the assessee as Rs. 3,47,638 adding the amount of Rs. 50,408 being chit-loss claimed b....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....Contrary to this, the learned representative of the assessee has contended that the books of account maintained by the assessee consisting of bank account and other related accounts, copies of which were placed before the departmental authorities, clearly showed that the amount received by the assessee from the chit-fund concern was used by it for its business and it has paid the instalments from out of the earnings from its business. Besides that he relied on the instructions issued by the Central Board of Direct Taxes in its Instruction No. 1175 dated 16-5-1978, which has categorically said that the contributors to a chit who receive more than the amount contributed by them must offer the same as income derived from business whereas those....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

.... earned or expenses incurred by a person in the course of his regular business which is integral part of the same is to be taken as business income or expense as the case may be. Relying on this observation, the Hon'ble High Court of Kerala has held in the case of CIT v. Kottyam Cooperative Bank Ltd., that the dominant motive in a chit fund is primarily intended to operate as a scheme for advancing loans from the common fund to the subscribers, their turns for getting loans being determined either by auction or by drawing lots, and thus the loss or income in the same is to be treated as business income or expenditure only. But the Hon'ble High Court of Punjab & Haryana has held in the case of Soda Cilicate & Chemicals Ltd. that the surplus ....