M/S.BINDU AGRO PRODUCTS,BANGALORE vs. INCOME TAX OFFICER, BANGALORE

The assessee has raised the following grounds :

3. The only issue raised by the assessee in this appeal is regarding disallowance of business loss on the ground that the assessee has not set up its business.

The assessee is a partnership firm. During the scrutiny assessment, the Assessing Officer noted that in the profit and loss account the only income

Before the Tribunal the learned Authorised Representative of the assessee has submitted that the claim of business loss was denied by the authorities below on the ground that the only activity carried out by the assessee during the year was let out of the warehouse, income from which has been declared as income from house property. Thus the authorities below have concluded that the assessee has not carried out any business activity during the year and therefore the business loss claimed cannot be allowed. The learned Authorised Representative has contended that the business activity of the assessee includes acquiring immovable property, development of the same and sale, lease or mortgage the same. Therefore the development of the warehouse is part of the business activity of the assessee. Thus the learned Authorised Representative has contended that the authorities below are not right in concluding that the assessee has not set up the business. He has argued that the assessee has commenced business vide partnership deed dt.9.10.2009. He has further submitted that the entire activity of development of warehouse and loss of the same is part of the business activity and therefore the assessee has not only set up the business but also commence the business. The expenses which are claimed by the assessee as business loss on only in respect of the carrying out the business activity of the assessee which includes the bank interest, consulting charges, depreciation, electricity, property tax, interest on vehicle loan, professional charges, etc. All these expenses have been incurred by the assessee only with respect to the activity of development of property and leasing out of the property. Thus the learned Authorised Representative has submitted that the business loss is an allowable

On the other hand, the learned Departmental Representative has submitted that the assessee has not carried out any business activity or earned business income during the year under consideration therefore the expenses cannot be allowed against the rental income which has been offered under the income from house property. He has relied upon the orders of the authorities below.

Having considered the rival submissions as well as the relevant material on record it is noted that there is no dispute that the assessee has offered the rental income as income from house property after claiming the standard deduction under Section 24(a) of the Act as well as deduction on account of interest under Section 24(d) of the Act. The assessee in the computation of income has already claimed the expenditure which are claimed as business expenditure of the assessee and therefore offered the net income after the said expenditure of Rs.33,89,296. The Assessing Officer concluded that this expenditure is nothing but business loss but since the assessee has not carried out any business activity during the year the same cannot be set off against the rental income. Since the assessee has offered the rental income as income from house property and claimed deduction under Section24 of the Act then the expenses in question which are claimed to have been incurred for the purpose of business cannot be allowed against the income from house property. The assessee itself has decided to offer the rental income under the head income from house property and therefore double deduction cannot be allowed as per the provisions of the Act. As regards the set up of the business it is manifest from the record and particularly the Partnership Deed dt.9.10.2009 that the acquisition of the property, development of the same and leasing out of the property is part of the business activity of the assessee.

In the result, the appeal is partly allowed.