TaxTMI 
TaxTMI 
2020 (3) TMI 1177
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....terest Tax Act issued on 4.5.2001, the appellant assessee filed return of chargeable interest on 29.1.2002 declaring chargeable interest at 'Nil'. In the statement attached to the return of chargeable interest, the assessee inter alia claimed that it is not chargeable to interest tax under the Interest Tax Act, 1974 as it is not a credit institution as defined in section 2(5A) read with section 2(5B) of the said Act; that the assessee company is not an investment company; that in the case of the assessee, income is chargeable under the head of business and its income from dealing in shares and securities is and has been assessed as business income; and that the assessee company is not an investment company and it is holding investments worth Rs. 55,99,366/- which is 3.76% of the total assets and the income derived from investments is 1.42% of the total income. The Assessing Officer issued notice under section 8(1) of the Interest Tax Act. After considering the submissions advanced on behalf of the assessee company as well as considering the main objects of the assessee company, the Assessing Officer was of the view that the nature of interest income clearly indicates that the compa....
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....e of the Interest Tax Act despite the fact that the Memorandum and Articles of Association clearly demonstrate that the main objects of the appellant company was to render consultancy and services in the field of projects, technologies, finance, capital market instruments to earn business income which as such was taxed as income from business for the purpose of income tax, and hence, the question of treating the appellant company as a finance company so as to tax interest earned by it under the Interest Tax Act would not arise at all. 4.1 The attention of the court was invited to certain provisions of the Interest Tax Act, 1974. Reference was made to section 2(5A) of the said Act which defines "credit institution" as well as section 2(5B) which defines "financial company". It was submitted that the Assessing Officer is required to record a finding that the appellant falls within any of the categories contemplated under the said provisions. Reference was made to the assessment order, to submit that no such finding as to under which sub-clause of clause (5B) of section 2 of the Interest Tax Act, the appellant assessee falls. It was submitted that merely because the appellant has rec....
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.... interest bearing securities is clearly negated. It was reiterated that the Assessing Officer has not shown as to in which of the seven categories the assessee company falls and there is nothing to show that the assessee company can be classified as a finance company and that this said issue is required to be decided by this court. 5. Opposing the appeal, Mr. M.R. Bhatt, Senior Advocate, learned counsel for the respondents invited the attention of the court to the findings recorded by the Tribunal in paragraph 27 of the impugned order wherein it has been recorded thus:- "27. So far as issues involved in ground No.2(a), (b) & (c), the facts and circumstances in this case being same and similar to the facts and circumstances of the case in Interest Tax Appeal No.5/Ahd/2003 (supra) and the parties having advanced the same arguments and vehemently relied upon the same decisions, we are, for the reasons given while deciding this ground in Interest Tax Appeal No.55/Ahd/2003, reject the assessee's ground and upheld the order of the CIT (Appeals) on this point." 5.1 It was submitted that conscious arguments were made by the learned advocates for the respective parties that the facts a....
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.... a credit institution as defined in section 2(5A) read with section 2(5B) of the Interest Tax Act;. that the company would be an investment company if its gross total income consists mainly of income which is chargeable under the heads "Interest on Securities", "Income from House Property", "Capital Gains" and "Income from other sources"; that the assessee is not an investment company as its income is chargeable under the head 'business" and being income from dealing in shares and securities is and has been assessed as business income; the assessee is not an investment company as it is holding investments worth Rs. 55,99,366/- which is 3.76% of the total assets and the income not derived from investments is 1.42% of the total income; and that the assessee is trading in shares and securities and has been assessed under the head business income even in the income tax assessment. By an assessment order dated 28.11.2002 made under section 10 of the Interest Tax Act, the Assessing Officer, after referring to the objects of the company, has held that the nature of interest income clearly indicates that the company falls within the parameters laid down in section 2(5A) of the Interest Tax....
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....ave;-vis the main object as well as business carried on in the past by the company. It was also contended that the assessee is not an investment company as mentioned in section 73 of the Income Tax Act, 1961. It may be noted that the same grounds were also raised in the appeal arising from the order passed by the Commissioner (Appeals) in the case of Pinnacle Project & Infrastructure Pvt. Ltd. 10. A perusal of the impugned order reveals that the same grounds were also raised in the appeal arising from the order passed by the Commissioner (Appeals) in the case of Pinnacle Project & Infrastructure Private Limited. In the case of Pinnacle Project and Infrastructure Private Limited, the objects of the company were:- (i) That the first main object of the assessee was to render consultancy and services in the field of projects, technologies, finance, capital market instruments; (ii) To undertake activities relating to finance industrial projects and business activities, and also (iii) To undertake all types of financing, finance/securities related activities. The contention of the assessee was that the main object is not finance and that the main object of the company was of m....
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....mited (erstwhile Pankti Polytex Pvt. Ltd.) is concerned, the Tribunal observed thus: "26. Interest Tax Appeal No.56/Ahd/2003 26.1 So far as ground Nos. 1(a) & (b) are concerned, the learned counsel for the assessee having not pressed the same, are therefore, rejected as not pressed. 27. So far as issues involved in ground No.2(a) (b) & (c), the facts and circumstances in this case being same and similar to the facts and circumstances of the case in Interest Tax Appeal No.5/Ahd/2003 (supra) and the parties having advanced the same arguments and vehemently relied upon the same decisions, we are, for the reasons given while deciding this ground in Interest Tax Appeal No.55/Ahd/2003, reject the assessee's ground and upheld the order of the CIT (Appeals) on this point. 28. Similarly, ground Nos.4(a) & (b) are rejected for the reasons stated against ground Nos.3(a) & 3(b) of Interest Tax Appeal No.55/Ahd/2003 (supra)." 13. Thus, the Tribunal, upon perusal of the record of the case, has found as a matter of fact that the facts and circumstances in Interest Tax Appeal No.55/Ahd/2003 and the facts and circumstances of this case are similar and the parties had advanced the same ....
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....contention of the assessee before the Commissioner of Income Tax (Appeals), recorded by the Commissioner of Income Tax (Appeals). It was argued that the year under consideration was an initial year of the company. No good project was coming forth and therefore in order to avoid keeping the funds idle, the assessee had advanced money and earned interest income and also carried out activities in trading in shares and securities. Thus, clearly even according to the assessee, the interest was earned by advancing its funds. The case now put up before us that such investment was in the nature of a deposit and not by way of advance was never raised earlier. We do not dispute that the term "interest" defined under section 2(7) of the Act would mean interest on loans and advances and if therefore in a given case it is established that the interest earned by the assessee was not out of either loan or advance but through some other source, the interest tax would not apply to such interest. However, when no such factual dispute was raised, no material on record to hold contrary to what the assessee itself had contended before the Commissioner of Income Tax (Appeals), the contention of the coun....