TaxTMI 
TaxTMI 
2013 (3) TMI 194
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....r, the AO had observed that on perusal of the accounts for the year, it is seen that out of the total receipts of Rs. 1,72,18,396/-, credited to the P&L A/c, Rs. 1,47,80,978/- pertains to dividend, Rs. 20,93,076/- pertains to profit on sale of investments, Rs. 3,44,038/- pertains to interest and Rs. 303/- pertains to miscellaneous income. On being asked by the AO to offer explanation in respect of interest amount received of Rs. 3,44,038/- and as to why the same be not taxed under the head 'income from other sources' considering the fact that the assessee was not in the business of lending/financing. The explanation of the assessee is that it is an investment company and having an object of carrying on business of investment company, to finance industrial enterprises and to manage investment pools, mutual funds, and syndicate in shares, stocks, securities, finance and real estate. It was further explained that the main source of income derived from the investment activity would be dividend income, interest income and capital gain on sale of investments. It was also explained that interest income is the amount received on inter corporate deposits placed with other body corporate. As....
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....,73,510 Total Loans & Advances 6,74,79,595 iii. Other net current assets (-)15,58,506 Iv Preliminary expenses 1,12,000 Total 34,84,38,145 5. The AO noted that it can be seen from above that only Rs. 1.25 cr. out of the net funds available with the assessee of Rs. 34.84 crore was given as interest bearing loan during the accounting year. Thus, only a tiny fraction i.e. 3.59% of the net funds available with the assessee had been given on interest as the major portion of funds granted as loans/advances/deposits, etc. i.e. 32.55% of the net funds, as shown above, are interest free. The AO, therefore, of the view that the above facts do not in nay way convey the picture that the assessee is involved in the business of lending/financing. If that were the case more of its funds, would have been granted or parked in interest bearing avenues. The AO placed reliance on the decision of the Hon'ble Supreme Court in the case of Lokshikshnan Trust Vs. CIT, 101 ITR 234(SC) wherein it was held as under:- "In a taxing statute, business is used in the sense of an occupation or profession which occupies the time, attention and labour of a person,....
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....sessee had invested by purchasing the shares and therefore interest income was the income earned in the normal course of business. After considering the submissions of the assessee, the CIT(A) observed that the AO had discussed the issue in great detail in the assessment order and the AO had clearly mentioned that neither is there volume as compared to total funds nor is there frequency, continuity or regularity in the lending activity. He further observed that even the transaction in respect of which the assessee earned interest could not be classified as adventure in the nature of trade. The CIT(A), therefore, held that inter corporate deposits is income from other sources and confirmed the action of the AO. Still aggrieved, the assessee is in appeal before the Tribunal. 8. The learned counsel for the assessee submitted that the main business of the assessee is money lending and the assessee also gives various loans to sister concern in connection with the business, therefore, the interest income received by the assessee has to be assessed as income from business. It is submitted that the assessee is Non Banking Finance Company registered with RBI and the main activity of the as....
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....en to the sister concern and no interest was charged on the same. We are of the view that unless the assessee fulfils the object for which the company was established, simply because it has been registered as NBFC with RBI it cannot be said that the assessee is in the business of money lending. In fact, in the present case, we find from the facts that only fraction of the funds were given as inter-corporate deposits and, therefore, it cannot be said that the assessee is in the business of money lending. In so far as the case laws relied upon by the assessee is concerned, in the case of Radhasoami Satsang Vs. CIT (supra), the Hon'ble Supreme Court held that one group held to be entitled to exemption, exemption claimed by other group on same fundamental facts also entitled to exemption, therefore, Res-judicata applicable where fundamental aspects found as a fact earlier. The Apex court further observed that in the absence of any material change justifying the Department to take a different view from that taken in earlier proceedings the question of the exemption of the assessee appellant should not have been reopened. In the case of CIT Vs. Girish Mohan Ganeriwala, (supra), the Hon'b....
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....es. This expenditure is required to be incurred whether the assessee chooses to transfer shares or not. In such circumstances, we are unable to appreciate the argument of the assessee that this expenditure is necessarily to be incurred in connection with the transfer. Thus this contention of the assessee is dismissed.". Respectfully following the decision of the Tribunal in AY 2004-05, this ground of appeal of the assessee is dismissed. 14. As regards disallowance u/s 14A of the Act, we remit this issue to the file of the AO with a direction decide the issue afresh in the light of the Hon'ble Jurisdictional High court in the case of Godrej & Boyce Mfg. Co. Ltd. [2010] 328 ITR 81 (Bom.) after providing reasonable opportunity of being heard to the assessee. 15. As regards the ground regarding denial to set-off of unabsorbed business loss of Rs. 3,06,781/-, the Tribunal in AY 2004-05 had already decided that the income of the assessee received on inter corporate deposits is the income from other sources. Therefore, in view of the above discussion, this ground raised by the assessee is dismissed. 16. As regards addition of interest u/s 115JB, in AY 2004-05, the Tribunal held as und....