IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.N.RAMACHANDRAN NAIR & THE HONOURABLE MR. JUSTICE P.S.GOPINATHAN MONDAY, THE 8TH FEBRUARY 2010 / 19TH MAGHA 1931 ITA.No.1049 of 2009() ---------------------- ITA.251/COCH/2006 of I.T.A.TRIBUNAL,COCHIN BENCH .................... APPELLANT/RESPONDENT ---------------------------------------- THE COMMISSIONER OF INCOME TAX, KOTTAYAM. BY ADV. SRI.P.K.R.MENON,SR.COUNSEL, GOI(TAXES) SRI.JOSE JOSEPH, SC, FOR INCOME TAX RESPONDENT/APPELLANT ------------------------ SHRI.K.ABDUL GAFOOR,KALLIYATH IRON TRADERS,PANNIYANKARA,CALICUT. ADV. SRI.ANIL D. NAIR FOR R1 SMT.NIVEDITA A.KAMATH FOR R1 THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 08/02/2010, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: C.R. C .N. RAMACHANDRAN NAIR & P.S. GOPINATHAN, JJ. -------------------------------------------- I.T.A. No. 1049 OF 2009 -------------------------------------------- Dated this the 8th day of February, 2010 JUDGMENT Ramachandran Nair, J. The question raised in the appeal filed by the revenue is whether the Tribunal is justified in allowing deduction of loss claimed by the assessee by way of discount in bidding kuries against business income. We have heard standing counsel appearing for the appellant and counsel appearing for the respondent-assessee. 2. The assessee is engaged in business in iron and steel. During the previous year, the assessee bid various kuries to raise funds which led to loss to him. The loss arising in the bidding of kuries at discounted price was claimed as deduction in the computation of business income under Section 36(1)(iii) of the Act. The assessing officer held that loss not being interest on borrowed funds is not an allowable deduction under Section 36(1)(iii) of the I.T. Act. 2 3. Even though the first appellate authority rejected the claim, in second appeal, the Tribunal allowed it by holding that but for the amount raised from chitty, the assessee would have had borrowed funds leading to payment of interest. Therefore according to Tribunal, the loss suffered in chitty is equal to the interest which is eligible for deduction under Section 36(1)(iii) of the Act. 4. Standing counsel submitted that what is allowable under Section 36(1)(iii) is interest from funds borrowed for business and not kuri loss. The next contention raised is that loss in kuri cannot be set off against income from business. Counsel appearing for the assessee on the other hand contended that assessee utilised the funds for business and so much so loss sustained in the bidding of kuries is similar to interest payable on borrowed funds and so much so it is allowable. Alternatively he contended that loss is a business expenditure allowable under Section 37(1) of the Act. 5. After hearing both sides and after going through the Tribunal's order, we are of the view that the Tribunal's finding that claim is allowable under Section 36(1)(iii) is not sustainable because anything equivalent to interest is not allowable as a deduction under Section 36 3 (1)(iii) of the Act. This provision specifically provides for deduction of only interest paid for the funds borrowed for business purposes. Therefore, the order of the Tribunal allowing the claim under Section 36(1)(iii) of the Income Tax Act is not tenable and we, therefore, allow the appeal by reversing the order of the Tribunal and by restoring the disallowance. Even though counsel for the assessee alternately contended that the claim is allowable under Section 37(1) of the Act, we do not think there is any scope for us to consider the issue in this appeal because such a contention was not raised or decided before any of the authorities below and so much so, the issue does not arise from the order of the Tribunal. If the claim is tenable under Section 37(1) of the Act, it is for the assessee to make the claim in accordance with law. (C.N.RAMACHANDRAN NAIR) Judge. (P.S. GOPINATHAN) Judge. kk