COMMISSIONER OF INCOME TAX Vs. SUNITA KUMAR

JUDGEMENT

(1.) This reference under Section 256(1) of the Income-tax Act, 1961, arises out of the income-tax assessment of the assessee for the assessment year 1980-81 for which the previous year ended on March 31, 1980.

(2.) The material facts involved in the reference are that the assessee is an individual deriving income from salary, dividend, interest on debentures, bank interest, insurance commission and horse racing. During the year under consideration, the assessee earned profit of Rs. 99,528 on the sale of race horses. The assessee was engaged in owning and maintaining as well as breeding race horses. She earned some income from winnings at races. The winnings were set off by the Income-tax Officer himself against the losses in horse racing carried forward from earlier years. However, the Income-tax Officer declined to set off the profit of Rs. 99,328 earned by the assessee on the sale of race horses against the losses from activities relating to horse racing as determined in the earlier years. The Income-tax Officer held that the profit earned on the sale of horses could be set off only against the losses suffered on the sale of horses. According to him, winnings from races in the shape of stake money otherwise constituted a distinctly separate source of income other than the income earned on the sale of race horses and so Section 74A(3) did not permit such set off against the losses of the earlier years. The Income-tax Officer disallowed the claim of the assessee to set off the current year's profit of Rs. 99,328 earned on the sale of race horses against the determined losses of the earlier years from horse racing.

(3.) The assessee appealed to the Commissioner of Income-tax (Appeals) and contended that the action of the Income-tax Officer was not justified. The Commissioner of Income-tax (Appeals) held that the claim of the assessee is admissible. According to him, the income earned by the assessee on the sale of horses was business income and so the same should have been set off against the brought forward losses from the activity of dealing in race horses. He directed the Income-tax Officer accordingly.