Law:

Section:

Section 28(i) of the Income-tax Act, 1961 - Business loss - Allowable as - Assessment year 2002-03 - Assessee-company took a property on rent - Subsequently, it made improvements in said rented premises and retained same for more than five years - Assessee had shown said property as stock-in-trade in its balance-sheet - However, in relevant year in which assessee surrendered tenancy right of said property to owner for certain consideration, it showed property-in-question as capital asset - Thus, assessee claimed loss incurred on surrender of tenancy right as capital loss - Assessing Officer as well as Commissioner (Appeals) held that loss-in-question was business loss - On further appeal, Tribunal noticed that assessee was engaged in business of purchase and sale of property on ownership basis; and that there was no transaction involving purchase or sale of tenancy rights, except one in question - Tribunal further observed that treatment given by assessee in its books of account for earlier years was patently wrong and, thus, such wrong treatment could not be held against assessee when it was apparent that tenancy right was a capital asset in assessee's hand - Accordingly, Tribunal allowed assessee's claim - Whether transaction in dispute, i.e., acquisition/surrender of a tenancy right, could not, in law, acquire a different character because of wrong treatment accorded to it in books of account of assessee - Held, yes - Whether, therefore, impugned order of Tribunal did not require any interference - Held, yes FACTS A property was taken on rent by the assessee-company. Subsequently, it made improvements in the said rented premises and retained the same for more than five years. On 4-4-2001 the assessee surrendered the tenancy right in the said property to the owner for a consideration. In the year-in- question, the assessee showed the said property as a capital asset and the loss incurred on surrender of the tenancy right in the said property was claimed as capital loss after claiming the benefit of indexation. The Assessing Officer did not allow said claim. The Commissioner (Appeals) confirmed the stand taken by the Assessing Officer. On further appeal, the…

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