DEVE PAINTS LTD,MUMBAI vs. ITO 1(2)(1), MUMBAI

None appeared on behalf of the assessee even though the notice of hearing was sent by registered post on more than one occasion. Hence I proceed to dispose of the appeal ex-parte, without the presence of the assessee.

I heard Ld D.R and perused the record. The assessee is engaged in the business of manufacture of paints. It became a sick company and hence it was referred to BIFR. During the year under consideration, it earned rental income, interest income and Commission income on trading in paints. The assessee offered rental income under the head Income from House property, interest

The AO treated the commission income as Income from other sources. He also did not allow entire amount of expenses claimed by the assessee and also did not allow set off of loss against income declared under other heads. The Ld CIT(A) also confirmed the same and hence the assessee has filed this appeal.

I notice that the tax authorities have not given proper reason for assessing commission income under the head Income from other sources. I notice that the assessee has earned commission income in its business activities and hence the same should be assessed under the head Business only. Since the assessee is a corporate company, it is required to incur expenses incurred in maintaining corporate status. Such expenses as well as expenses incurred to earn commission income, in my view, should have been allowed. I notice that the tax authorities have not given proper reasons for disallowing the claim of expenses.

The provisions of sec. 71 of the Act governs the inter head set off of losses. I notice that the set off of loss claimed by the assessee has been disallowed without applying the provisions of sec. 71 of the Act.

Under these set of facts, I am of the view that all the issues require fresh examination at the end of Ld CIT(A). Accordingly I set aside the order passed by Ld CIT(A) and restore all the issues to his file with the direction to adjudicate all of them afresh after allowing adequate opportunity of being heard to the assessee.

In the result, the appeal of the assessee is treated as allowed for statistical purposes. Order has been pronounced in the Court on 14.9.2017.