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Commissioner of Income-tax, Andhra Pradesh Vs. Kovur Textiles and Co. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtAndhra Pradesh High Court
Decided On
Case NumberCase Referred No. 64 of 1977
Judge
Reported in[1982]136ITR61(AP)
ActsIncome Tax Act, 1961 - Sections 263
AppellantCommissioner of Income-tax, Andhra Pradesh
RespondentKovur Textiles and Co.
Appellant AdvocateP. Rama Rao, Adv.
Respondent AdvocateS.R. Ashok, Adv.
Excerpt:
.....taxation - deduction - section 263 of income tax act, 1961 - assessee company incurred losses in chit fund business - claimed deduction on such losses as business loss of company - ito allowed deduction but same refused in appeal by commissioner - appellate tribunal observed that assessee entered chits only for purpose of finding finances of business and chit amounts bid had been utilized only for business - such losses of company must be pertaining to business and is subject matter of deduction - opinion sought through reference regarding such claim of deduction - losses incurred by assessee can be allowed as an admissible deduction in computing income for particular assessment year. - motor vehicles act (59 of 1988)section 149 (2): [v. gopala gowda & jawad rahim, jj] insurers..........for the assessment year 1971-72 ?' 2. the assessee is a limited company. it had contributed to a 'chit fund' known as rajarajeswari financiers for rs. 25,000 and by september, 1969, had paid eleven instalments. finally, the company did the chit for rs. 20,000 on june 20, 1970. the company by that date had paid eleven instalments and had executed a promissory note for rs. 14,000. in the further facts found, the company as per accounts of the chit fund had received rs. 1,437 as discount money in the bids made by other contributors. 3. the company contributed to another 'chit fund' for rs. 5,000 with monthly instalment of rs. 250 and paid ten instalments and bid for rs. 4,480. 4. the ito allowed the difference between 'the chit' amount and for which it had bid. the difference amount and.....
Judgment:

Raghuvir, J.

1. This reference is made at the instance of the Commissioner of Income-tax under s. 256(1) of the I.T. Act, 1961 (43 of 1961), for opinion of this court on the following questio :

'Whether, on the facts and in the circumstances of the case, the loss incurred by the assessee can be allowed as an admissible deduction in computing the income for the assessment year 1971-72 ?'

2. The assessee is a limited company. It had contributed to a 'chit fund' known as Rajarajeswari Financiers for Rs. 25,000 and by September, 1969, had paid eleven instalments. Finally, the company did the chit for Rs. 20,000 on June 20, 1970. The company by that date had paid eleven instalments and had executed a promissory note for Rs. 14,000. In the further facts found, the company as per accounts of the chit fund had received Rs. 1,437 as discount money in the bids made by other contributors.

3. The company contributed to another 'chit fund' for Rs. 5,000 with monthly instalment of Rs. 250 and paid ten instalments and bid for Rs. 4,480.

4. The ITO allowed the difference between 'the chit' amount and for which it had bid. The difference amount and discount received was allowed as a business loss of the company. The Commissioner, however, in exercise of his jurisdiction under s. 263 of the I.T. Act, 1961 (43 of 1961), held that such a loss of the company was not to be allowed. The I.T. Appellate Tribunal on appeal found as of fac : 'The assessee had entered the chits only for the purpose of finding finances for business... (and) the chit amounts bid had been utilised only for the business...'.

5. On the above facts, the question referred can be and is answered only in the affirmative, in favour of the assessee and against the revenue. No order as to costs.


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