Samir Networks LLP Vs ACIT (ITAT Ahmedabad)
ITAT Ahmedabad held that interest income earned from business activity is classifiable as business income and accordingly, relevant expenses allowed as deduction. Hence, appeal of the assessee allowed.
Facts- The issue involved herein is that the assessee had returned interest income of Rs.9,96,855/- under the heard “income from business and profession” and has claimed expenses to the tune of Rs.1,05,20,522/-against the same. Thus, the assessee has returned net loss under the head “business and profession”. The AO treated this interest income as taxable under the head “income from other sources” and further denied any claim of expenses against the same, resulting in the entire interest income of Rs.9,96,855/- being subjected to tax. CIT(A) confirmed the same.
Conclusion- Held that the Department has not made out any case to controvert the stand of the assessee of having earned interest income from business activity. The Revenue does not dispute the fact of the objects of the assessee-company being financing activity, it does not dispute the assessee having consistently returned the interest income in the past several years as “business income”. Neither it does controvert nor point out any infirmity in the explanation of the assessee of having earned losses in the impugned business during the year nor is there any finding of the Department on the contention of the assessee that he had made all efforts to obtain licence as a NBFC with the RBI. The only basis we find by the Revenue for rejecting the assessee’s contention is that the assessee’s explanation for incurring such huge losses is not plausible and that it does not have a NBFC licence. Both these reasons, we do not find impinge in any way on the character of income earned by the assessee and we find that the reasoning that the assessee has no plausible reasons for incurring loss is incorrect. As noted above, the assessee did give an explanation for the same. As for the fact that he did not have any NBFC license, mere absence of licence does not affect the character of income earned by the assessee. The licence only makes the activity carried out by the assessee to be legal activity. In the absence of the licence, may be the activity is illegally carried out but that does not take away the fact that the assessee carried out the activity as its business. The absence of license has no effect on the character of the income.
