TaxTMI 
TaxTMI 
TaxTMI 
2018 (7) TMI 1735
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the facts and circumstances of the case, the Tribunal was right in holding that the carry forward business losses can be set off against dividend income? (iii) Whether, in the facts and circumstances of the case and in view of the decision of the Supreme Court in the case of Sriram Chits & Investments P. Ltd. vs. Union of India (AIR 1993 SC 2063) that Chit fund is not a money lending business, the Tribunal was right in treating moneys not paid by the prize chit winners as bad debts ? (iv) Whether there is a relationship of creditor and debtor between the assessee and the subscribers to the chit to warrant the treatment of default in payment by them as bad debt ? 2.Mr.R.Sivaraman, learned counsel appearing for the assessee submitted that thought the above four substantial questions of law have been framed for consideration, all the questions do not arise in all the appeals and he has given an index to issues, which arise in respect of the appeals before us. This is not disputed by the Revenue. For better appreciation, the same is quoted hereunder:- Question of Law ITA Nos. Assessment Year TC(A) Nos. Remarks 1.Lease Portfolio Management System 1173/1999 1713/2000 480/....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... regulate the chit, control the activity of the foreman and protect the interests of the subscribers. The Apex Court further pointed out that the pith and substance of the Act was to deal with special contract and consequently, it fell within Entry 7 of List III of the Third Schedule to the Constitution. In paragraph 13 of the judgment of the Apex Court, it pointed out that Section 6 of the Act specifically refers to chit agreement to be entered into between the subscribers and the foreman. The Act provided for, how the contract has to be implemented and acted upon between the parties to the contract and that it could not be treated as a money lending business. The agreement entered into as per Section 6 provides for distribution of the chit amount. The foreman brings the subscribers together. The Act provides for payment of commission for the services rendered by the foreman and the foreman does not lend any money belonging to him. The foreman is responsible for regular collection of subscriptions from a widely scattered body of members. He has to conduct the draws or the auction and maintain accounts. He is under obligation to pay the prize amount on the due date whether or not a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....respect of such instalment. The Section also provides that the foreman may appropriate to himself the interest accruing on the amount deposited under the second proviso to sub-section (1), for which he is entitled. 12. As far as the balance sheet of the company is concerned, Section 24 enumerates what is required to be stated in the balance sheet. The Rules therein provide for the format of the balance sheet. A reading of the schedule, as against the assets side, shows loans and advances to subscribers as well as the liabilities as relatable to non-prized subscribers. The assets side also contains receipt of interest and such other amount which can be transferred to fall under the caption of assets. In terms of the provisions thus prescribed in Section 24, the balance sheet and profit and loss account clearly showed the amount intimated by the company as against the default committed by the chit holders and the balance sheet was also audited by the Chartered Accountant qualified to act as Auditor under the Companies Act. In the context of the payment thus made, the question that arises herein is as to whether the activity of the assessee could be termed as falling under the statu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the order of the Tribunal relating to the assessment years 1990-91 and 1991-92, merits to be extracted hereunder:- Government of India Ministry of Finance Department of Revenue Central Board of Direct Taxes 25th March 1992 The Chief Commissioner of Income tax II New Delhi. Sir, Subject : CBDT Instruction No.1175 dated May 16, 1973 Liability to assessment Profits made by subscriber of chit funds Question regarding 1.I am directed to refer to your Letter F.No.66(II)/HO/Proposal under section 263/91-92/4101, dated November 15, 1991 on the above mentioned subject. 2. The issues raised by you have been carefully examined by the Board. In this regard, I am directed to say, that Board are of the view that Instruction No.1175 issued in consultation with M.O.L. cannot be withdrawn on the basis of decision of Punjab & Haryana High Court in case of soda Silicate & Chemical Works (supra). The Board's Instruction stands. 3. Regarding proceedings under Section 263 pending before the Commissioner of Income-tax Delhi-II, New Delhi,Board cannot issue any directions. Thanking you, Yours faithfully sd/- Under Secretary of the Government of India 16. Having reg....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ss expenditure resulting in a loss. As already pointed out, when the Revenue went on appeal as against the view of the Commissioner of Income Tax (Appeals) challenging that it would amount to a bad debt, apparently, no claim was made on the side of the Revenue to dispute the view of the Commissioner of Income Tax (Appeals) that the claim might also fall under the head of business loss under Section 28. thus, when the Tribunal rejected the Revenue's appeal, it clearly pointed out that it confirmed the view of the Commissioner of Income Tax (Appeals) as stated above that the claim is allowable not only as a bad debt, but could also be considered as a case of business loss under Section 28. The question raised before this Court thus is relatable to one part of the Tribunal's order as to whether the defaulted amount paid by the assessee could be treated as a bad debt. 19. It is not denied by the Revenue that the payment made in the course of the business had resulted in a loss of the chit amount which is also allowable under Section 28. Given the above-said fact, we have no hesitation in rejecting the Revenue's appeal on this question. 20. Learned counsel appearing for ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Tax Case Appeals stand dismissed. No costs. 6.Accordingly, 3rd and 4th substantial questions of law, which arise in all the cases, are answered against the Revenue and in favour of the assessee. 7.The next substantial question of law, which is taken up for consideration is whether in the facts and circumstances, the Tribunal was right in holding that carry forward business losses can be set off against dividend income? 8.As mentioned above, this issue arises only in one of the assessment years, viz., 1997-98, which is subject matter of appeal in T.C.(A) No.1080 of 2007. 9.We have perused the order passed by the Tribunal and in paragraph 7 in page 9 of the order passed by the Income Tax Appellate Tribunal (ITAT), this issue has been considered. The Tribunal pointed out that this issue has been considered by the Tribunal in the assessee's own case for the earlier years and quoted that portion of the order. However, we find that this is not the assessee's own case, but the assessee's sister concern, viz., Shriram Investments (firm). The appeals being I.T.A.Nos.550 to 552/Mds/1997 for the assessment years 1992-93 to 1994-95. 10.It is not in dispute that the transaction....
X X X X Extracts X X X X
X X X X Extracts X X X X
....cles. Further, the Registration Certificate not only shows the existence of the vehicles, but their leasing also. Thus, the Tribunal concluded that the RC books, which were issued by the State Government, establish the existence of the vehicles and that the vehicles are registered in various States and therefore, held that it is wrong on the part of the Assessing Officer as well as the Commissioner of Income Tax (Appeals) to hold that no assets are involved in the lease transaction. Thus, on appreciation of the factual position, the Tribunal observed that the assets are purchased from various companies and the clients are not taking the assets on lease whereas, various individual persons or organizations have undertaken the sub-lease from the assessee company. After analyzing the factual position, the Tribunal allowed the depreciation on Lease Port Folio Management System and accordingly, the assessee succeeded. 15.The learned counsel appearing for the assessee submitted that first substantial question of law, which has been framed for consideration may be answered in favour of the assessee, as the factual position has been clearly spelt out by the Tribunal. Apart from the said fa....