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Income Tax Appellate Tribunal, MUMBAI BENCH “SMC”, MUMBAI
Before: SHRI VIKAS AWASTHYShri Bharat Jayantilal Patel,
आदेश/ ORDER
This appeal by the assessee is directed against the order of Commissioner of Income Tax (Appeals)-9, Mumbai (in short ‘the CIT(A)’) dated 20/12/2018 for the assessment year 2014-15.
The solitary ground raised in the appeal by assessee is against the findings of CIT(A) in upholding ‘Interest Income’ as ‘Income from Other Sourses’ as against ‘Business Income’ declared by the assessee.
Shri Vasudev Ginde, appearing on behalf of the assessee submitted that assessee is a share broker and investor. The assessee is also engaged in money lending business. The ld. Authorized Representative for the assessee submitted that during the period relevant to assessment year under appeal, the assessee earned interest income of Rs.12,19,55,557/- from money lending business. The assessee offered aforesaid interest income under the head ‘Income from Business’. The Assessing Officer in scrutiny assessment proceedings recharacterised the nature of interest income of the assessee as ‘Income from Other Sources’. The ld. Authorized Representative for the assessee submitted that in earlier assessment years, the assessee has been offering interest income from money lending business as ‘Business Income’. The Assessing Officer in assessment made under section 143(3) of the Act accepted the same in assessment year 2007-08, 2008-09 and 2010-11. However, in assessment year 2011-12 and 2012-13, the Assessing Officer changed the head of income and assessed interest income earned by the assessee under the head ‘Income from other sources’. In appeal the CIT(A) following the Rule of Consistency accepted assessee’s contention and reversed the findings of Assessing Officer. In assessment year 2011-12, the Department carried the issued in appeal before the Tribunal in ITA No.1578/Mum/2016. The Tribunal vide order dated 23/04/2018 upheld the finding of CIT(A) and dismissed the appeal of Revenue. The ld. Authorized Representative for the assessee further pointed that a perusal of P&L Account for the Financial Year ending on 31/03/2014 would show that interest income of the assessee is substantial as compared to the income from brokerage. This clearly shows that interest income of the assessee is not incidental to any other business.
Per contra, Ms. Smita Verma, representing the Department vehemently defended the impugned order and prayed for dismissing the appeal of assessee. The ld. Departmental Representative submitted that the assessee is not having licence to carry money lending business, therefore, the contention of the assessee that interest income is from money lending activities should not be accepted. The ld. Departmental Representative further contended that the principle of res-judicata does not apply on proceedings under the Income Tax Act, therefore, no reliance should be placed on the earlier decisions. The ld. Departmental Representative further contentioned that the facts in the impugned assessment year are distinguishable as has been pointed by the CIT(A) in Para 3.2.3 of the impugned order.
Rebutting the contentions raised on behalf of the Revenue, the ld. Authorized Representative for the assessee submitted that obtaining of licence from competent authority for money lending business is not a pre-condition. The ld. Authorized Representative for the assessee in support of his contention placed reliance on the decision of Hon'ble Bombay High Court in the case of CIT vs. Padma S. Vora, reported as 229 Taxman 627.
Both sides heard. Orders of authorities below and the decisions on which the ld. Authorized Representative for the assessee has placed reliance considered. I find that the issue of assessee declaring interest income from money lending business under the head ‘Business Income’ and Assessing Officer disputing the same holding the interest income under the head ‘Income from Other Sources’ is recurring in the past couple of assessment years. In assessment year 2011-12 identical issue had come up before the Tribunal in an appeal by the Revenue in (supra). The Tribunal decided the issue in favour of assessee by observing as under:-
“ 6. Coming to the Revenue’s appeal, the only issue is whether the interest income received by the assessee should be assessed as business income or income from other sources.
7. The assessee is an individual also a member of Mumbai stock exchange and doing business of investments and share broking. During the Assessment Year under consideration the assessee received interest on loans given and also paid interest on loans taken by him. In the course of the said business the assessee obtained loans and also given loans to various parties and received interest and also paid interest. The Assessing Officer treated interest received by the assessee as income under the head income from other sources. Whereas the assessee has shown the interest received as income from business.
8. On appeal the Ld.CIT(A) held that the interest received by the assessee is assessable under the head income from business and not under the head income from other sources. While holding so he observed that in the Assessment Years 2007- 08, 2008-09 and 2010-11 the interest received by the assessee was assessed as business income in the assessments completed u/s. 143(3) and therefore principle of consistence is required to be followed in tax matters when facts are identical. With these observations and also referring to the decision of the Hon'ble Jurisdictional High Court in the case of CIT v. Smt Padma S. Bora [54 taxmann.com 319] he concluded that money lending licence is not precondition for having business income from money lending activity and therefore the interest received by the assessee is assessable under the head income from business.” A perusal of the order by Tribunal in Revenue’s appeal for assessment year 2011- 12 shows that in assessment year 2007-08, 2008-09 and 2010-11 the Assessing Officer has accepted interest income of the assessee as ‘Business Income’. Further, the Tribunal has also answered the objections of Revenue that for conducting money lending business, licence is not a pre-condition in so far as Income Tax purpose.
The ld. Departmental Representative has raised objection that the principle of res-judicata does not apply under Income Tax Act. There is no dispute on this proposition. However, when the facts are identical, rule of consistency has to be followed. The Hon'ble Supreme Court of India in the case of Radhasoami Satsang, 193 ITR 321 (SC) has held that rule of consistency has to be followed where there is no change in the facts.
A perusal of the impugned orders shows that the CIT(A) has tried to distinguish the order of Tribunal for assessment year 2011-12(supra). However, no specific distinguishing feature onfacts has been brought out either by the First Appellate authority or the ld. Departmental Representative. I find no merit in this argument of the ld. Departmental Representative.
The ld. Authorized Representative for the assessee has pointed that in assessment year 2012-13 as well the Assessing Officer had changed the head of income in respect of interest income earned by the assessee from money lending business. The CIT(A) accepted the contentions of the assessee and held that interest income earned by the assessee is to be taxed under the head ‘Business Income’. The Revenue has accepted the same and has not filed any appeal before the Tribunal. This fact has not been controverted by the ld. Departmental Representative.
Thus, in the facts of the case and the decision of Tribunal in assessee’s own case for assessment year 2011-12, the appeal of assessee is accepted. The impugned order is set aside and the solitary ground raised by assessee is allowed.
In the result, appeal of the assessee is allowed.
Order pronounced on Monday the 2nd day of November, 2020.