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I-T - Whether interest earned on money lending is to be taxed as profits of bussiness rather than income from other sources even if assessee is not NBFC - NO: HC

By TIOL News Service

MUMBAI, OCT 26, 2016: THE issue is - Whether interest earned on money lending is to be taxed as profits of bussiness rather than income from other sources even if assessee is not NBFC. NO is the verdict.

Facts of the case

The assessee is engaged in the business of investment and trading. During the subject assessment year, the respondent assessee had claimed that it had earned interest income from its business of money lending. This interest income was claimed as profits and gains of the business. However, the AO did not accept the same and held it to be chargeable under the head "income from other sources" in the assessment order dated 20th December, 2010. On appeal, before CIT(A), particularly after examining the object clause of assessee to carry out money lending business, the Resolutions passed by its Board of Directors authorizing it to borrow money and also advance loans and the analysis of the bank statement for the concerned period, CIT(A) had concluded that the assessee was engaged in the business of money lending in an organized and a systematic manner. It rendered a finding that the activity of money lending was a real and substantive activity on the part of assessee with a profit motive. On further appeal, Tribunal on the basis of the material available before it rendered a finding that was engaged in the business of money lending. Therefore, it held that the interest income earned on money lending was classifiable under the head "profits and gains" of business in profession. Therefore, the impugned order of the Tribunal upheld the order of the CIT(A).

On appeal, the HC held that,

++ we find that the two authorities have concurrently come to a finding of fact that the activity of money lending carried out by the respondent assessee is its business activity. This on account of its activity of money lending being in accordance with the object clause of the company, duly supported by the Resolution of its Board of Directors and on examination of entries made in the books of accounts as well as in the bank statement. This findings of fact by the CIT(A) and the Tribunal, are not shown to be perverse and / or arbitrary in any manner. The view taken is a possible view. Therefore, no substantial question of law arises for our consideration. Thus, not entertained. Accordingly, the appeal is dismissed.

(See 2016-TIOL-2608-HC-MUM-IT)


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