AI Drafter 
TaxTMI 
TaxTMI 
2016 (4) TMI 820
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....ispose of by this common order. First we take up ITA No.1796/Kol/08 A.Y. 01-02. 3. First of all, it is observed that there is a delay of 191 days on the part of the Revenue in fi ling the appeal before this Tribunal . In this regard, application has been filed by the Revenue seeking condonation of the said delay as mentioned in the Application. 4. Let us to deal with l imitation issue primarily before going to the merits of the case as the contours of the area of discretion of the Courts in the matter of condonation of delays in filing appeals are set out in a number of Apex Court and specially in case titled as Collector Land Acquisition, ... vs....... Mst. Katiji & Ors (1987 AIR 1353, 1987 SCR (2) 387) analyzed the situation while dealing with the delay on behalf of the Government and observed as enumerated below: "When substantial justice and technical considerations are pitted against each other, cause of substantial justice deserves to be preferred for the other side cannot claim to have vested right in injustice being done because of a non deliberate delay." "It must be grasped that judiciary is respected not on account of its power to legalise inju....
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.... the case in brief are that assessee in the present case is a Limited Company registered with Reserve Bank of India (RBI) as Non-Banking Finance Corporation (NBFC for short) engaged in the business of money lending, investment in share and dealing in share. During the year assessee has shown following income:- a) Share trading (-) Rs.7,30,88,822/- b) Interest (net) (+) Rs.6,68,25,887/- c) Dividend (+) Rs. 31,63,652/- d) Other income (+) Rs. 2,41,210/- e) Capital gains (-) Rs. 41,14,395/- f) Share dealing (speculation) (-) Rs.3,27,55,782/- g) Administrative expenses (-) Rs. 14,25,064/- h) Depreciation (-) Rs. 26,185/- The position of the availability of funds as stood on 31st March, 2001 is as under:- Sl.No Particulars Amount (Rs.) 1 Share capital 4,36,89,700.00 2 Unsecured loan 100,68,04,058.00 The deployment of fund as on 31-03-2001 stand as under:- Sl.No Particulars Amount (Rs.) % fund deployment 1 Investment in shares 35,37,98,204 36.5% 2 Investment in stock-in-trade 18,54,43,915 17.65....
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....gned order the AO and the Addl. Commissioner considered the applicability of Explanation to Sec. 73 only in the context of test laid down relating to composition of gross total income. The ratio laid down by the Calcutta high Court in the case of CIT Vs. park View Properties Pvt Ltd. (supra) was applied because they applied test of composition of Gross Total Income. In the decided case the assessee claimed exemption from the Explanation, on the ground that whole of its income consisted, income from other sources. No case was made out by that assessee that the Explanation was not applicable because its principal business was granting of loans. In this case however the assessee has claimed exemption with reference to the test of principal business. The assessee carried on business of non-banking financial company and was registered with RBI as NBFC. As an NBFC the assessee arrived on business of financing and derived substantial interest. It also carried on share trading business. However, when the assessee carried on more than one business; it was necessary to ascertain the principal business with reference to regularity of the activities and predominant deployment of funds in diffe....
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....tances of each case. the Memorandum and the Articles of Association of the company, past history of the assessee, current and past year's deployment of the capital of the assessee, breakup of the income earned during the relevant and past years and the nature of the activities of the assessee will all help in determining the principal business of the assessee. If in any particular year, the assessee has nominal business since and has substantial interest income, it does not imply that the assessee's principal business is of fiancé or granting of loans and advances. Similarly the assessee, the principal business of which is the granting of loans and advances, may earn a comparatively high income from other activities in any particular year and still the principal business of the assessee may remain granting of loans and advances. The Explanation to section 73 is in the nature of a deeming provision and as such has to be strictly construed. The decisive factor is the true nature of activities of the relevant period as well as in the past or succeeding periods.' 11. Applying ratio laid down in this decision I find that the assessee regularly carried on business of gran....
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.... which is at Rs.38.37 crores. Investment has been made upon share script of Adani Exports & Vikas WSP Ltd. Thus the total funds applied towards share stock and share investment are Rs. 58.87 crores as against loan and advance of Rs. 36.73 crores. Even the sundry debtors which are out of share trading business constitute further fund of Rs. 4.01 crorer. Thus assessee's statement that major fund is locked up in loans and advance is wrong and mischievously placed. Ld. DR submitted that the assessee's turnover of Rs.121 crores in share trading. Thus, assessee's main engagement was trading in shares and investment in shares and assessee is no more an NBFC company as RBI has cancelled its certificate. Therefore, exceptions to explanation to Sec. 73 of the Act do not apply and requested to treat the loss in share trading as speculative and relied on the order of AO. From the aforesaid discussion, we understand that the AO has invoked the provisions of explanation to Sec. 73 of the Act for treating the loss from shares trading business as speculation loss on the ground that loss from share trading business was greater than the income from other sources and capital gain. However the ld. ....
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....sists in the purchase and sale of shares of other companies, such company shall, for the purposes of this section, be deemed to be carrying on a speculation business to the extent to which the business consists of the purchase and sale of such shares. From the above, it is very clear that the provisions of Explanation to Sec. 73 of the Act will not be applied where the principal business of the assessee is that of granting loans and advances and such company is also in the business of purchase and sale of shares, then the activity of purchase and sale of shares would not attract the provisions of Explanation to Sec. 73 of the Act. We have already held that the fund deployed in lending activity exceeds the fund deployed in share trading activity on a consistent basis over a period of time. Hence the principal business of assessee is that of granting loans and advances and thereby outside the ambit of Explanation to Sec. 73 of the Act. Hence, the share trading loss of claimed by the assessee cannot be construed as speculation loss and accordingly we have no hesitation in upholding the order of the Learned CIT(A). Accordingly, the ground raised by the Revenue is dismissed. 10. C....
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.... by observing as under:- "15. The present assessee regularly followed mercantile system of accounting. In mercantile system of accounting assessment of income is made on accrual basis. Accrued income is required to be assessed irrespective of the difficulties; in realization of the accrued income. The concept of real income cannot therefore be brought into play in every case of non realization of income to postpone assessment of accrued income. This proposition is laid down by the Supreme Court in CIT Vs. Shiv Prakash Janak Raj & Co Pvt. Ltd. (222 ITR 583). In that case assessee followed mercantile system of accounting. It had advanced loans to a firm whose partners were shareholders/directors. After the expiry of the relevant year interest on loan was given up. The Tribunal found that such waiver was not based on commercial consideration & therefore the Supreme Court upheld the assessment of accrued interest rejecting assessee's plea that on the principle of real income; taxation of interest accrued cannot be postponed. In it's decision in the case of Godhra Electricity Co. Ltd Vs. CIT (225 ITR 746) however the Supreme Court held that income tax is levy on income. No doub....
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.... 2001-02. The AO is accordingly directed to exclude interest of Rs. 3,04,18,767/- from assessee's total income. Ground Nos. 3 to 6 are allowed." Being aggrieved by this order of Ld. CIT(A) Revenue is in appeal before us. 12. We have heard rival contentions and perused the materials available on record. Before us Ld. DR submitted that assessee is not a charitable organization to provide the interest free loans to the parties. There is no substance in the argument of the assessee that there is no clause in writing in the agreement between the two parties regarding charging of interest. The business of the assessee is of a money lender and each loan was given to earn interest. Hence it was the correct procedure which the assessee has done by showing interest income in its books of account as maintained on mercantile basis. Even if the assessee thought that interest was unrecoverable then it should write it off in the books of account. If the theory of real income is applied so liberally then assessee would claim for every unrealized income in the first instance that it is not a real income. Ld. DR relied on the order of AO. 13. On the other hand Ld AR relied on the order of L....
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....ested to exclude the income from assessment on the ground that it was never realized by assessee. From the submission of Ld. AR we find that assessee was able to recover the principal amount during financial year in which loan was given to above parties concerned. But AO did not agree with the plea taken by assessee and AO added it to the total income of assessee. In our considered view there has to be real income before charging the tax. In the present case the ld. DR has not brought anything on record to controvert the findings of the ld. CIT(A). The AO has not taken the confirmation by exercising his power under section 133(6) of the Act from the loan parties. We are also putting our reliance in the similar case where the Hon''ble Supreme Court has held in the case of CIT v. Shoorji Vallabhadas and Co. (1962) 46 ITR 144 (SC) as under:- "Income-tax is a levy on income. Though the Income-tax Act takes into account two points of time at which the liability to tad is attracted, viz., the accrual of the income or its receipt, yet the substance of the matter is the income. If income does not result at all, there cannot be a tax, even though in book-keeping, an entry is made a....
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....ground No. 3 and 4 in this appeal by Revenue is that Ld. CIT(A) erred in deleting the addition made by AO for Rs. 8.40 lacs on account of interest receivable from Shaw Wallace & Co. Ltd. 18.1 The assessee has claimed TDS on receipt of interest from Shaw Wallace & Co. during the AY 2003-04. On question by the AO, assessee submitted that this interest income relates to the AYs 1999-00 to 2002-03 and the suit for recovery of loan was pending in the court of law that is why assessee did not account for any interest income in its books of account in earlier years. So, the AO opined that the income of Rs. 8.40 lacs for the AY 2001-02 has escaped assessment and accordingly framed assessment under section 147 of the Act. 19. Aggrieved assessee preferred an appeal before Ld. CIT(A) who deleted the addition by observing as under:- "5. In Ground No.s 4 to 10 the assessee has objected to the assessment of Rs. 8,40,000 being accrued interest on ICDs granted to Shaw Wallace & co. Ltd. the reasons given by the AO for the said addition are same as discussed in the assessment for A.Y 1999-2000. In my appellate order of the even date in appeal No. 144/CIT(A)-IV/05- 06 for the AY 1999-....