TaxTMI 
TaxTMI 
2018 (7) TMI 1735
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....it is the owner of such trucks? (ii) Whether, in 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....
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....eported in AIR 1993 SC 2063 (Shriram Chits & Investments (P) Ltd. Vs. Union of India & others), the Apex Court pointed out that the dominant purpose of the Act is to 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 scatter....
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....t the prize amount in respect of any instalment of a chit within a period of two months from the date of the draw, it shall be open to the foreman to hold another draw in 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 th....
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....rpose of allowance according to the provisions of the Act depending upon how the money was utilised by the subscriber. 15. The subsequent clarification issued on 25.03.1992, which had been extracted in 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....
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....the said claim, the Commissioner of Income Tax (Appeals) pointed out that having regard to the nature of payment made, the claim has to be considered as intimately connected with the business, resulting as a case of a bad debt. Hence, apart from Section 36, the same merited to be considered as falling under Sections 28 and 37 in the business 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 ....
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....usiness of the assessee herein on the admitted position that when the Department had not agitated the issue further in respect of assessment years 1990-91 and 1991-92 and the situation herein is no different from that of the earlier orders, we have no hesitation in confirming the order of the Tribunal, thereby dismissing the Revenue's appeal. In the result, the 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....
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....ven its findings in paragraph 11 of the impugned order wherein, it has been pointed out that the Tribunal has gone through the copies of the sub-lease agreement, the relevant purchase bills for the vehicles and other connected papers from which, it can be seen that the dealers of the vehicles have sold the vehicles to the Bank of Madura Ltd. only and thus, they are the absolute owners of the vehicles. 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 po....
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....ssessee on both the counts. The High Court held that in view of the fact that the vehicles were not registered in the name of the assessee, and that the assessee had only financed the transaction, it could not be held to be the owner of the vehicles, and thus, was not entitled to claim depreciation in respect of these vehicles. 17.On appeal before the Hon'ble Supreme Court, it was held that Revenue argued that since the lessees were actually using the vehicles, they were the ones entitled to claim depreciation, and not the assessee. We are not persuaded to agree with the argument. The Section requires that the assessee must use the asset for the purposes of business . It does not mandate usage of the asset by the assessee itself. As long as the asset is utilized for the purpose of business of the assessee, the requirement of Section 32 will stand satisfied, notwithstanding non-usage of the asset itself by the assessee. In the present case before us, the assessee is a leasing company which leases out trucks that it purchases. Therefore, on a combined reading of Section 2(13) and Section 2(24) of the Act, the income derived from leasing of the trucks would be business income, ....