TaxTMI 
TaxTMI 
2016 (9) TMI 590
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....sessee is not running the business of Money lending during the year under consideration and applied the explanation 1 to section 37 (1) of the Act that the business of Money lending without license is illegal business. If the business done by the appellant is illegal business the amount of Rs. 8,00,000/- shall be allowed as trading loss since the income earned from illegal business is taxable income as established principle of law. The expenses of Rs. 3,61,489/- have been incurred for legitimate purpose to run the business. It is not the expenses incurred in respect of the payment of fine or penalty on account of offence committed as per the relevant provisions of the Money Lenders Act, 2011. It shall be allowed as either bad-debts....
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....if it assumed that assessee was carrying on illegal money landing business, no expenditure can be allowed qua alleged illegal business. Consequently, the business losses claimed by assessee were held to be not allowable. As a result the income from other sources was assessed at Rs. 14,90,974/-. 4. Aggrieved, the assessee preferred first appeal where the sole ground raised was as under:- The learned DCIT has erred in making disallowances/addition of business expenses of Rs. 11,61,489/-. Same may be deleted. 4.1 Ld. CIT(A) confirmed the order of ld. Assessing Officer by following observations:- "4. I have perused the order of the AO and the written submissions made in this regard. The appellant in his three pages written submissio....
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.... therefore not justified in making comprehensive scrutiny assessment as the case for scrutiny assessment was selected under CASS for AY 2012-13." 6.1 It is contended that the additional ground is purely legal in nature and should be admitted relying on Hon'ble Supreme Court judgment in the case of NTPC, 229 ITR 383 (SC). 6.2 The ld. DR, on the other hand, vehemently opposed the admission of additional ground on following points:- i) The internal instructions issued by CBDT are meant for the internal working of the Department and do not lay down any law. Therefore, internal instructions cannot be held as a legal proposition. Consequently the ground raised cannot be considered as a legal question. ii) Income Tax Act do not prescri....
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....ncome also and the corresponding expenditures are allowable under the Income-tax law. Reliance is placed on following judgments for corresponding propositions:- a) Andhra Pradesh High Court judgment in the case of Somnath Barman vs. Jagnnath Rao; b) Andhra Pradesh High Court judgment in the case of Raja Dhan Raj Girji vs. CIT, 79 ITR 0563; c) Gujarat High Court judgment in the case of Hemchand Hirachand Shah vs.CIT, 206 ITR 55. d) Decision of ITAT Ahmedabad in the case of DCIT vs. Deepaben Amitbhai Shah, 99 ITD 219 7.1 It is contended that in the State of Gujarat the private money lending activities are governed by the Gujarat Money-Lenders Act, 2011. Going by this definition, an individual assessee is eligible to carry out m....
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....urse of carrying out regular business activity; therefore the resultant loss is eligible to be allowed as business loss to be set off against other income. Further reliance is placed on Hon'ble Supreme Court's judgment in the case of Indian Molasses Co. Ltd. vs. CIT, (1959) 37 ITR 0066 (SC). 8. The ld. DR, on the other hand, contends that in the computation of income filed with the return of income which is placed at page No. 5 of the paper-book, the assessee has himself offered the interest on loans/ advances amounting to Rs. 12,02,750/- under the head income from other sources. Likewise, other interest income from bank FDRs & IT refund has also been shown as income from other sources. As assessee himself has returned the income from in....
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....e in respect of such expenditure. Therefore, under any circumstances, the expenditure is not allowable to the assessee. 9. I have heard the rival contentions, perused the material available on record and gone through the orders of the authorities below. I find merit in the contentions of the ld. DR. It is observed that:- (1) The assessee himself offered the interest from private loans under the head "income from other sources". The assessee having filed the return and not filed the revised returns, the Assessing Officer while accepting his income has acted perfectly in accordance with law; (2) The assessee's contention that it was into illegal money lending business apart from being unbelievable is highly deplorable as a US citi....