TaxTMI 
TaxTMI 
TaxTMI 
2021 (10) TMI 107
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....rom Other source Income" and therefore the learned AO should be directed to treat the said income as Business income, while computing the total income and therefore expenses disallowed by the Ld. AO is to be allowed in full, while computing the total income of the company. 3. That Id.CIT(A) has erred in law and facts by confirming the disallowance of employee benefit expenses of Rs. 10,71,000 and therefore, the learned AO should be directed to allow the same in full, while computing the total income. 4. That Id. CIT(A) has erred in law and facts by confirming the disallowance of legal and professional fees of Rs. 5,84,745/- and therefore, the learned AO should be directed to allow the same in full, while computing the total income. 5. That the Id.AO be directed to calculate income tax and interest under section 234B and 234C of the Act. 6. That the appellant craves liberty to add, amend, alter and delete any grounds of appeal before the final hearing." 2. Briefly stated, the assessee company had e-filed its return of income for A.Y. 2013-14 on 30.09.2013, declaring a total income of Rs. 45,65,970/-. Subsequently, the case of the assessee was selected for scrutiny assessmen....
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.... was liable to be assessed under the head "Other sources‟. In order to fortify his aforesaid conviction the A.O had drawn support from the Bombay Money Lenders Act. It was observed by the A.O that as per the mandate of Sec. 5 of the Bombay Money Lenders Act no money lender could carry on the business of money lending without a license for the same. Also, it was noticed by the A.O that the assessee had not obtained any license from the Reserve Bank of India to act as a NBFC. It was further noticed by the A.O that no alteration was executed by the assessee in its Memorandum of Association i.e in the "main object clause‟ within the meaning of Sec. 17 of the Companies Act, 1956. On the basis of his aforesaid observations the A.O subjected the interest income of Rs. 97,48,764/- to tax under the residuary head of income i.e "Other sources‟. Thereafter, the A.O allowing a deduction of the interest expenditure of Rs. 30,86,647/- u/s 57(iii) of the Act, therein, subjected the balance amount of interest income of Rs. 66,62,117/- to tax under the head "Other sources‟. Apart from that, the A.O taking cognizance of the fact that the assessee in the course of the assessme....
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....er, we are of the considered view that as the assessee company was on a regular basis engaged in a systematic and organized activity of lending money, therefore, for the standalone reason that it did not have a license to conduct money lending business the interest income earned from its aforesaid activities could not have been declined from being assessed as its business income. Our aforesaid view is supported by the order of the ITAT, Mumbai in the case of B.N. Khandelwal Vs. ITO (2007) 16 SOT 343 (Mum). In its said order, it was, inter alia, observed by the Tribunal that as the assessee was engaged in granting of loans on a regular basis and was earning interest income, therefore, it could be said to be engaged in money-lending business even though it had no money-lending license. Reliance is also placed on the judgment of the Hon‟ble High Court of Bombay in the case of CIT Vs. Smt. Padma S. Bora (54 taxmann.com 319((Bom). In its said order, it was, inter alia, observed by the Hon‟ble High Court that merely because the assessee did not have a license to conduct money lending business it would not mean that its claim of bad debts should be denied. Also, a similar view....
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.... to assess the interest income of Rs. 97,48,764/- under the head "Profits and gains of business or profession‟. The Ground of appeal No. 2 is allowed. 7. We shall now take up the grievance of the assessee that the CIT(A) had erred in law and the facts of the case in upholding the disallowance of the "Employee Benefit Expenses" of Rs. 10,71,000/-. As is discernible from the assessment order, the A.O had called upon the assessee to furnish the details of the expenses booked under the aforesaid head. In reply, the assessee initially furnished with the A.O only the list of the employees. However, the A.O called upon the assessee to furnish further details as regards the employees i.e as to what work they have done, their designation, and as to how their expenses were related to its business. Observing, that there was a steep rise in the aforesaid expenses i.e from Rs. 1,80,000/- in the immediately preceding year to Rs. 10,71,000/- during the year under consideration, the A.O taking cognizance of the fact that the assessee had failed to furnish the complete details, therein, called upon it to explain that as to why its aforesaid claim for expenses may not be disallowed. Although,....
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....purpose of its business. On the other hand, we find that the CIT(A) had observed that the expenses in question pertained to the monthly salaries which were paid by the assessee to its employees, viz. marketing managers, managers and accountant. Observing, that the expenses in question were incurred in respect of the employees who were engaged in the finance and marketing activity, which as per the CIT(A) was not the business of the assessee company, the said expenses were disallowed by him. In our considered view both the lower authorities had failed to address the issue in hand in the right perspective. Insofar the A.O is concerned, we find that though the assessee had furnished complete details with respect to the employee benefit expenses, however, the same were rejected by him for the reason that the assessee had failed to prove that the said expenses were incurred wholly and exclusively for the purpose of its business. In our considered view, the A.O had neither sought any further details in respect of the aforesaid expenses nor carried out any independent inquiries before concluding as hereinabove. Neither is there anything discernible from the records which would reveal that....