SUNIL KOLIYOT Vs. INCOME TAX OFFICER

JUDGEMENT

(1.) JUDGMENT OF THE COURT WAS DELIVERED BY K. RAVIRAJA PANDIAN,j the appeal is filed by the assessee against the order of the Income Tax Appellate Tribunal Madras 'c' Bench made in I. T. A. No. 1664/2004 dated 16. 3. 2007. The relevant assessment year is 1997-98. The substantial question of law formulated for entertainment of the appeal is as follows:-"whether on the facts and circumstances of the case, the Tribunal was right in law in holding that the loss incurred by subscribing to a chit is not allowable as a business loss ?

(2.) THE facts of the case proceed as follows:- The appellant is engaged in the business of interior decoration. For the assessment year 1997-98, the appellant filed the return of income on 17. 12. 1997 admitting income of Rs. 5,23,017/ -. The return was processed under section 143 (1) (a) on 30. 12. 1998. Notice under Section 148 was issued on 4. 12. 2001 and assessment under Section 143 (3) read with 147 was completed on 28. 3. 2003 determining the total income at Rs. 9,59,074/ -. While completing the assessment, the assessing officer had disallowed the claim of deduction in respect chit loss amounting to Rs. 3,23,949/- on the ground that running a chit fund or being a member of such fund was not the business of the appellant that the lumpsum amount received did not give rise to any income assessable to income tax by rejecting the contention of the appellant that he had been financing his business by subscribing to chits and the bid amount was deposited with the bank, that the amount foregone on chits after adjustment of dividend earned is treated as interest payments and hence the interest payments is allowable as deduction. As against the assessment order, the appellant preferred appeal before the Commissioner of Income Tax Appeals. The Commissioner of Income Tax Appeals accepted the contention of the appellant and deleted the disallowance. The Revenue in its turn preferred appeal to the Income Tax Appellate Tribunal against the order of the Commissioner of Income Tax Appeals. The Tribunal allowed the appeal filed by the Revenue. The correctness of the said order is now put in issue before this Court.

(3.) LEARNED counsel appearing for the petitioner contended that the amount received from the chit fund has been invested in the business and hence the loss sustained in bidding the chit has to be treated as a business loss.