Soham Securities Ltd. Vs ITO (ITAT Ahmedabad)
Conclusion: Interest income earned by assessee engaged in money lending in a systematic manner had to be taxed as business income in spite of the fact that assessee was not having registration with RBI as NBFC.
Held: Assessee in the instant case had shown interest income under the head income from other sources on the advice of the consultant. As such, it was advised to assessee that it could not carry out money lending business in a systematic manner without having approval from the RBI as NBFC. Therefore, assessee classified interest income as income under the head from other sources. Assessee had claimed several expenses for running its money lending activity which were classified under the head business and profession. Consequently, there was income under the head income from other sources but there was loss under the head business and profession. Accordingly, AO held that assessee was not entitled to claim the set off of the loss shown under the head business and profession against the income from other sources on the ground that there was no business activity. It was held assessee has been carrying on the business of money lending in a systematic manner without having the registration with RBI as NBFC. Merely, the fact that assessee was not registered with RBI as NBFC, could not lead to draw an inference that assessee was not carrying out business activity. The registration with RBI as NBFC and business activity of the assessee, both were different aspects and could not be applied for holding that the assessee was not engaged in the business activity. Thus, the interest income of assessee should have been treated as income from business and profession.
FULL TEXT OF THE ITAT JUDGEMENT
These are cross appeals against each other have been filed at the instance of the Assessee and revenue against the appellate order of the Learned Commissioner of Income-Tax (Appeals)-2, Vadodara [“CIT(A)” in short] dated 22.05.2015 relevant to Assessment Year 2011-12.
2. First we take up assessee’s appeal in ITA No. 2208/Ahd/2015 for Asst. Year 2011-12. Assessee has raised the following grounds of appeal:-
1. The Ld. CIT (A) erred on facts and in law in confirming action of Assessing Officer in holding that the appellant has not carried out any business operations during the year.
2. The Ld. CIT (A) erred on facts and in law in not granting set off of business loss against incomes assessed under the head ‘income from other sources.
3. The Ld. CIT (A) erred on facts and in law in not granting deduction of bad debts written off of Rs. 3,87,793/-; professional fees of Rs. 8,94,140/-and depreciation of Rs. 3,39,668/- either under the head ‘income from business’ or under the head ‘income from other sources’.
4. The Ld. CIT (A) erred on facts and in law in making disallowance u/s 4A at Rs. 1,08,559/- and not restricting the same at Rs. 133/-
Your appellant craves leave to add, alter and/or amend all or any of grounds before the final hearing of appeal.”
3. The issue raised by assessee in this appeal is that ld. CIT(A) erred in holding that the assessee has not carried out any business operations during the year.
4. Briefly stated facts are that the assessee in the present case is a limited company and engaged in the business of trading in shares, stocks, debentures, bonds, fixed and other deposits including finance of short and long term deposits etc.
4.1 The assessee in the year under consideration has shown income from other sources amounting to Rs. 70,42,709/- as detailed under:
