2015 (10) TMI 1740

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....i/2008, for the assessment year 2004-05, claiming following substantial questions of law:- "i) Whether the Hon'ble ITAT was right in facts and circumstances of the case in treating interest income as business income instead of income from other sources? ii) Whether the Hon'ble ITAT was right in law and facts in allowing the B/F loss to be set off against the income which was not allowed by the AO?" 2. A few facts relevant for the decision of the controversy involved as narrated in the appeal may be noticed. The assessee was an individual. She had filed her return of income on 10.10.2004 declaring income of Rs. 42,20,191/- i.e. Rs. 1,75,396/- from business of clothes as proprietor of M/s Reeta Industries and Rs. ....

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....the said activity was not recognized as a money lending by the Banking Regulation Act. Interest earned on deposits is assessable under the head 'Income from other sources' under Section 56 of the Act. The assessee had shown receipt of interest only from eight parties during the whole year which cannot be taken as the main business activity of the assessee. The activity carried on by the assessee can be termed as internal management of funds which is not the money lending business but spread over to the family members or other connected persons. 5. The CIT(A) while allowing the appeal filed by the assessee held that the assessee had been carrying on business of money lending for the last many years and there was continuous rotatio....

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....ce of money lending licence is not so crucial for the purposes of Income Tax Act, 1961 if nature of activity undertaken by the assessee can be decided on the face of other facts. In that case, the assessee was shown to be engaged in granting loans on regular basis and income has also been shown as business income, which also reflected the intention of the assessee. Therefore, in the facts and circumstances of that case, in the absence of licence for money lending business, interest earned by the assessee was held to be from business and profession. The principle laid down in this decision of the Hon'ble ITAT also goes in favour of the appellant's ground. Further, the AO has observed that the appellant had not debited any expenses on....

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....er sources". Where the assessee is regularly engaged in money lending business and is earning interest therefrom, interest income is to be taxable under the head "business income", regardless of the fact that the assessee has obtained any licence for such money lending business or not. For this proposition, we are fortified by the decision in the case of Smt. Gulab Sundari Bapana vs. DCIT (79 ITD 115) (Mum) and in the case of Loka Shikshana Trust vs. CIT (101 ITR 234) (SC), wherein the Hon'ble Apex Court held that the regular course of dealing in money lending could not be brushed aside merely for the reason that the assessee was not having any money lending licence. In that case, the assessee entered into number of transactions over th....