Loss on Foreign Cars Sale used in Business is ‘Business Loss

Loss suffered by the assessee on the sale of foreign is quantified at a figure of Rs. 51,6,108/-. The only question that remains is to determine the nature of loss. In view of the categoric finding of the Commissioner of Income Tax (Appeals) that has attained finality, to the effect that the foreign cars were utilised in the business of the assessee, the loss arising out of their sale would be liable to be categorised as a business loss.

——————

1. The assessee is an individual carrying on business as a shipping agent. In the financial year relevant to assessment years 1999-00 and 2000-01, the assessee sold motor cars at a cumulative loss of Rs. 51,6,108/-. In the course of assessment, the assessing authority adopted the view that the loss would be ‘capital’ in nature liable to be set off only against capital gains. On the other hand, the stand of the assessee was to the effect that the loss was ‘business’ in nature, liable to be set off against business profits. While initially a stand was taken to the effect that the assessee was also engaged in the trading of cars, it was not pursued. The assessee sought the benefit of the provisions of section 32(1)(iii) of the Income Tax Act (Act), that read as follows:

32. (1) In respect of depreciation of

(i) Buildings, machinery, plant of furniture, being tangible assets;

Please become a Premium member. If you are already a Premium member, login here to access the full content.