Law:

Section:

Section 36(1)(vi) of the Income-tax Act, 1961 - Cost of dead/useless animals - Whether where certificate of running horse in races was revoked by race club authorities, it was sufficient evidence that horse had becomes permanently useless for participating in business of races and, therefore, loss incurred by assessee on sale of such horse was deductible under section 36(1)(vi) - Held, yes - Whether for claiming such a loss, discontinuance of business was not necessary - Held, yes FACTS The assessee was the owner of race horses using them for the purpose of earning income from the races. He sold three horses and incurred a total loss of Rs. 38,000 and claimed the said amount as deduction under section 36(1)(vi), on the ground that horses had to be withdrawn from the races since the certificates granted to them had been revoked by the race club authorities and that they had become permanently useless for the purpose of the racing business. This claim of the assessee was negatived by the ITO on the ground that the horses were not dead or permanently useless for the purpose of the racing business. On appeal, the AAC affirmed the order of the ITO. The Tribunal, also confirmed the disallowance. On reference: HELD The Tribunal was wrong in its view that the assessee must discontinue his business in order to get the deduction. Section 28 contemplates the carrying on of the business by the assessee, and it is only in the course of the carrying on of the business that the assessee will be able to avail himself of the other allowances described in sections 30 to 43A including section 36(1)(vi). This section will apply only with reference to the business carried on by the assessee. The Tribunal also did not appear to be correct in saying that the material on record was not sufficient to establish that the race horse had become permanently useless, as the certificate finally came to be revoked and the same fact was intimated to the other race clubs also. When the certificate was revoked, the horse would be useless for participating in races, and there could be no doubt about its having become permanently useless, for the purpose of the business of "racing". Therefore, the…

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