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Income Tax Appellate Tribunal, ‘C’ BENCH : CHENNAI
Before: SHRI INTURI RAMA RAO & SHRI DUVVURU RL REDDY]
आदेश / O R D E R
PER INTURI RAMA RAO, ACCOUNTANT MEMBER
This is an appeal filed by the Assessee directed against the order of the Commissioner of Income Tax (Appeals)-10, Chennai (‘CIT(A)’ for short) dated 30.01.2018 for the Assessment Year (AY) 2011-2012.
ITA No1480/2018 :- 2 -:
2. The Assessee raised the following grounds of appeal:
‘’1. The Commissioner of Income Tax (Appeals) erred in confirming the action of the assessing officer treating the interest income earned by the appellant as “Income from Other Sources” instead of “Business”.
The Commissioner (Appeals) is not right in holding that advancing of monies to related parties and earning interest income therefrom does not constitute business activity and the income so earned is not business income but would be interest from “Other Sources”.
3. The Commissioner (Appeals) failed to appreciate that in the scrutiny assessments in the appellant’s case for the prior assessment year 2009-10 the “Nature of Business (income)” has been held by the assessing officer to be ‘investments and financial activities” and there being no difference/change in facts from that year there was no justification for the present incumbent assessing officer / Commissioner (Appeals) to take a contrary / inconsistent view in the impugned assessment year.
The Commissioner (Appeals) erred in incorrectly interpreting the provisions of section 56(2) (sic) and holding that interest income is to be charged primarily under the head “Income from Other Sources” and, alternately, under the head Business; the appellant is advised to respectfully submit that the Commissioner (Appeals) reasoning in this regard is against the scheme of the Act and is flawed.
The Commissioner (Appeals) erred in upholding the assessing officer’s action in denying the deduction claimed u/s 35(1)(ii) and 35AC of the Act for the reason that the appellant does not satisfy the requirement of having income under the head “Business”.
6. The appellant submits that consequent upon his contention that the interest income derived by him is assessable under the head “Business” he is eligible for the deduction u/s 35(1)(ii) and 35AC of the Act as claimed.
For these and other Grounds that may be urged at the time of hearing the appellant prays that the Hon’ble Tribunal be pleased to allow the appeal and render justice’’.
ITA No1480/2018 :- 3 -:
The brief facts of the case are as under:
The appellant is an individual deriving income under the heads ‘’income from house property’’ and income from other sources’’. The return of income for the AY 2011-12 was filed on 30.09.2011 disclosing total income of Rs. 65,25,970/-. Against the said return of income, the assessment was completed by the Joint Commissioner of Income Tax, Range-VII, Chennai vide order dated 31.03.2014 passed u/s. 143(3) of the Income Tax Act, 1961 (for short ‘the Act’) declaring total income of Rs.76,44,130/-. While doing so, interest income earned from lending money was assessed to tax under the head income from other sources as against claim of the assessee that it is business income.
Further, Assessing Officer also the disallowed the claim for deduction u/s.35AC of the Act in respect of contribution made to Singhvi Charitable Trust on the ground that assessee had not derived any income under the head business.
Being aggrieved by the above additions, an appeal was 4. preferred before ld. CIT(A), who vide impugned order confirmed the action of the Assessing Officer. However, directed the Assessing Officer to examine the eligibility of deduction u/s.80GGA of the Act against the claim of the assessee u/s.35AC of the Act.
Being aggrieved by the order of the CIT(A), the appellant is 5. in appeal before us in the present appeal. It is submitted that income
ITA No1480/2018 :- 4 -: had been assessed to tax in the earlier years under the head income from business and there is no change of facts from the earlier years and therefore following the principle of consistency, interest income earned should be assessed under the head income from business, he placed reliance on the decision of Co-ordinate Bench of the Tribunal in the case of ACIT vs. S. Vinodh Kumar in dated 05.04.2018 for assessment year 2011-2012 where identical facts were involved.
On the other hand, the ld. Sr. Departmental Representative placed reliance on the orders of lower authorities.
We heard the rival submissions and perused the material on 7. record. The grounds of appeal No.1 to 4 relates whether interest income earned should be assessed under the head ‘’income from business’’ or ‘’income from other sources’’. Admittedly, interest income was earned by the assessee from the following parties.
Sl. No Interest received from Amount (in �) 1 S. Prasanchand Jain 9,48,856/- 2 N.Sugalchand Jain 25,176/- 3 Siyat Holdings Pvt. Ltd 52,99,084/- 4 BOB SB A/c. 2,292/- 5 HDFC 1,177/- Total 62,76,585/- The question that arises for consideration is whether interest income earned should be assessed under the head ‘’income from business’’ or ITA No1480/2018 :- 5 -: under the head ‘’income from other sources’’. Admittedly, interest income was earned from the related parties except from the SB account. In order to constitute business there must be activity carried on continuously and systematically by a person by application of labour and skill with a view to earn income. Reliance can be placed on the decision of Hon'ble Supreme Court in the case of Barendra Prasad Ray and Others vs. ITO (1981) 129 ITR 295. In the present case, it is evident that there is no continuous activity of lending and in fact the money were advanced to related parties probably not with motive of earning interest income. Nothing was brought on record showing that assessee is granted license of money lending business. There is no organized activity carried on by the assessee. Ratio of the decision of the Co-ordinate in the case of S. Vindoh Kumar (supra) cannot be applied to the facts of the present case as the decision of the said case is based on prevail that in earlier years interest was assessed under the head ‘’income from business’’, following principle of consistency, the Co-ordinate Bench held that interest income should be assessed under the head ‘’business income’’. Whereas in the present case, principle of consistency has no application. There is nothing on record to demonstrate that in the earlier years interest income was assessed under the head from ‘’income from business’’. Thus, grounds of appeal No. 1 to 4 of the assessee stand dismissed.
ITA No1480/2018 :- 6 -:
Grounds 5 & 6 challenges disallowance of claim for deduction u/s.35AC of the Act. In the preceding para, we held that interest income is assessable under the head ‘’income from other sources’’ and in the absence of any income from business, claim for deduction u/s.35AC of the Act cannot be allowed. Thus, grounds of appeal No. 5 & 6 of the assessee also stand dismissed.
In the result, the appeal of the assessee stands dismissed. 9.
Order pronounced on 10th day of September, 2019, at Chennai.