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Facts
The assessee challenged an order that disallowed a claim for business loss. The Assessing Officer completed the assessment u/s 144 and taxed rental and interest income. The CIT(A) disallowed the business loss claim, holding there was no business activity.
Held
The Tribunal held that the assessee was involved in business activity, as evidenced by substantial purchases of artwork and the movement of stock. The CIT(A) failed to consider the entire profit and loss account and balance sheet.
Key Issues
Whether the assessee's activities constituted 'business activity' for the purpose of claiming business loss, and if the CIT(A) erred in disregarding the profit and loss account and balance sheet.
Sections Cited
144, 24, 250
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “SMC” BENCH MUMBAI
Before: HON’BLE SHRI SANDEEP GOSAIN
Date of Hearing 07.05.2025 Date of Pronouncement 27.05.2025 आदेश / ORDER
PER SANDEEP GOSAIN, JM:
The present appeal has been filed by the assessee challenging the impugned order 11.02.2025 passed u/s 250 of the Income Tax Act, 1961 (‘the Act’), by the National Faceless Appeal Centre, Delhi (NFAC) for the assessment year 2015-16.
The only ground raised by the assessee relates to challenging the order of Ld. CIT(A) in disregaring the claim relating to business expenditure of the assessee.
I have heard the counsels for both the parties, perused the material placed on record and also the orders passed by the revenue authorities.
From the records, I noticed that as per the facts of the present case, AO completed the assessment u/s 144 of the Act and thus while completing the assessment brought to tax rental income and interest income as per 26AS to tax. And while assessing the rental income no standard deduction were allowed u/s 24 of the Act.
However, on appeal, Ld. CIT(A) while giving relief under income from house property has disregarded the claim of the assessee relating to business loss of Rs. 30,38,711/- holding that there was no ‘business activity’ in the assessee’s company during the year under consideration.
After having gone through the facts as well as documents placed on records of the present case, I found that the assessee company had made purchases of artwork worth of Rs. 7,45,66,780/- during the year under consideration and was thus involved into the ‘business activity’ as the word “business” activity involves either “purchase” or “sales” and it is not essential to earn revenue every year. In this regard assessee has placed on file copy of balance sheet for the year ended 31.03.2015. The movement of goods was establish from the fact that there was opening stock and new stock is added by way of purchase, which is carried over at the year end as closing stock.
Ld.CIT(A) has not considered the movement in goods as well as computation of income filed before him, as he has referred only to the revenue from operations instead of looking into the whole of the profit and loss account as well as balance sheet.
Since as per record, the assessee was into high end sales and purchase of expensive artworks. Therefore, practically sometimes it becomes eminent to hold the stock till the time it does not fetch good value, as the expensive artworks are the fancy collections of elite people, which get value based on the artist who created it, the theme and other factors including its antique value and therefore, under the circumstances, the old work may be sold in the same year of purchase or remains as stock in trade depending upon the demand and supply situation for the product dealt by the business entity and who establish its business operations. Even assessee has also placed on record the annual accounts for the subsequent year i.e. FY 2016–17, Wherein the revenue generation of Rs. 1,41,32,467/- is recorded.
Therefore, considering the entire facts and circumstances of the present case, it is established that the assessee company is into ‘business operations’ during the year under consideration and is thus entitled to get the claim of business loss set off against house property income. It is ordered accordingly.
In the result, the appeal filed by the assessee stands allowed.
Order pronounced in the open court on 27.05.2025.