TaxTMI 
TaxTMI 
2019 (1) TMI 672
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.... 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 ....
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....re the same is eligible for deduction against the interest income. 4.7 The assessee also submitted that the professional charges were incurred by it in connection with the recovery of the principle amount from the parties to whom the advance was given on interest basis. 4.8 The assessee also submitted that there is no prohibition for setting off the business loss against the income from other sources for the year under consideration as per the provision of Section 71 of the Act. However, the AO disagreed with the submission of the assessee by observing that there was no operation carried out during the year. Therefore, in the absence of any business activity there cannot be any claim of expenses in the profit and loss account. Accordingly, the AO held that the assessee adopted a colorable device to escape from the income tax liability on the interest income. Accordingly, the AO disallowed the sum of Rs. 60,51,522/- and added to the total income of the assessee. 5. Aggrieved, assessee preferred an appeal to ld CIT(A). The assessee before the ld CIT(A) submitted that it was incorporated on 3rd July, 1995 for the purpose of stock broking activities as well as giving loa....
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....g trade in its balance sheet as on 31.03.2011. This activity of purchasing gold/silver bullion and showing as stocking trade was not disturbed by the AO in the assessment proceedings. 5.6 The assessee also claimed that if the mistake has been committed by it in the income tax return, then it was the duty of the assessing officer to set right the mistake committed by it. In this regard, the assessee relied on the Circular issued by CBDT No. 14(XL-35), dated 11-4-1955 and the judgment of Jurisdictional High Court in the case of S.R. Koshti vs. CIT reported in 276 ITR 165. 5.7 The assessee also claimed that merely classifying the interest income under the head income from other sources would not change the character of the interest income which is carried out in a systematic manner therefore the interest income should be treated as business and profession. There is direct nexus between the expenditure claimed by the assessee against such interest income therefore the same should be allowed deduction against such income. 5.8 Once, the income of the assessee has been treated as business income then the assessee is also eligible for deduction on account of bad debts amounting to....
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.... filed a Paper Book running from pages 1-83 and reiterated the submission as made before the ld CIT(A). 7. On the other hand, ld DR submitted that there was no business activity carried out by the assessee during the year under consideration. The ld DR also argued that the assessee itself has classified interest income under the head income from other sources. Therefore, the same cannot be treated as income under the head business and profession. The ld DR vehemently supported the order of authorities below. 8. We have heard the rival contentions and perused the materials available on record. The assessee in the instant case has shown interest income under the head income from other sources on the advice of the consultant. As such, it was advised to the assessee that it cannot carry out money lending business in a systematic manner without having approval from the RBI as NBFC. Therefore, the assessee classified interest income as income under the head from other sources. 8.1 It is undisputed fact that the assessee has claimed several expenses for running its money lending activity which were classified under the head business and profession. Consequently, there was income ....
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....nvincing reasons, none of which have been pointed out by the learned counsel for the Revenue." 8.3 Similarly, we are also of the view that principle of consistency should be applied in the given facts and circumstances as there were no change in comparison to the previous assessment year. In this connection, attention may please be invited to the decision given by the Hon'ble Supreme Court of India in the matter of Radhasoami Satsang v Commissioner of Income Tax reported in 193 ITR 321 (SC) wherein the Hon'ble Supreme Court has inter alia held as under: "We are aware of the fact that, strictly speaking, res judi cata does not apply to income tax proceedings. Again, each assessment year being a unit, what is decided in one year may not apply in the following year but where a fundamental aspect permeating through the different assessment years has been found as a fact one way or the other and parties have allowed that position to be sustained by not challenging the order, it would not be at all appropriate to allow the position to be changed in a subsequent year. On these reasonings, in the absence of any material change justifying the Revenue to take a different ....
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....ments in violation of the norms of National Housing Bank. The Company's application for registration as registered housing finance has been rejected by National Housing Bank. And hence the company has been prohibited to carry on the business activities and also prohibited from acceptance and renewal of Public Deposit. However, the company is still carrying on the business and has been accepting and renewing deposits in violation of section 29A of National housing Bank. In view of the above, the assessee company's claim regarding the business of housing finance does not hold good. The receipts need to be treated as "Income from other sources". This view is further supported by the fact that the Chartered Accountant himself has concluded that the interest earned on the loans granted in earlier years and the deployment of the same falls as "income from fund management". The company has also not prescribed to the norms laid down by National Housing Bank Act. The remark of the Chartered Accountants in this regard is reproduced below to highlight the same. The remarks of the Chartered Accountant and the facts narrated above clearly indicate that the assessee com....
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.... the business" in accordance with law." 8.5 We also note that if the assessee has made wrong claim in the income tax return that cannot be decided against the assessee. It was the duty of the revenue to set the right the mistakes committed by the assessee. In this regard, we rely on the judgment of Jurisdictional High Court in the case of S.R. Koshti vs. CIT(Supra) wherein, it was held as under: "The supreme court has observed in numerous decisions, including Ramlal V. Rewa Coalfields Ltd. AIR 1962 SC 361, State of West Bengal v. Administrator, Howrah Munisipality AIR 1972 SC 749 and Babutmal Raichand Oswal v. Laxmibai R. Tarte AIR 1975 SC 1297, that the state authorities should not raise technical pleas if the citizens have a lawful right and the lawful right is being denied to them merely on technical grounds. The state authorities cannot adopt the attitude which private litigates might adopt." 8.6 We also note that the genuineness of the expenses claimed by the assessee have not been doubted by the authorities below. Moreover, there is no issue regarding the genuineness/reasonableness of the expenses claimed by the assessee arising from the order of authorities be....
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....at the assessee has earned exempt income of Rs. 24,138, whereas the AO disallowed an amount of Rs Rs. 3,36,28,000. Therefore, considering the facts and circumstances of the case and also following the ratios of the case laws discussed above, we are of the view that disallowance u/s 14A cannot exceed the exempt income. Hence, we direct the AO to restrict disallowance u/s 14A to the extent of exempt income earned by the assessee." Accordingly we direct the AO to restrict the disallowance u/s 14A r.w.r. 8D of the Act to the extent of Dividend Income. In view of above the ground of appeal of the assessee is partly allowed. In the result the appeal of the assessee is partly allowed. Now coming to ITA No.2433/Ahd/2015 for Asst. Year 2011-12: 9. Revenue has raised following grounds of appeal: "1. On the facts and in the circumstances of the case, and in law, the Ld. C.I.T. (A) erred in holding that balance expenses of Rs. 44,29,921/-are to be allowed as a deduction u/s.57(iii) of the Act in the computation of income of the assessee under the head income from other sources, without appreciating that the assessee has not carried out any business activity and that ....