BHARAT JAYANTILAL PATEL,MUMBAI vs. DCIT RG 4(1)(1), MUMBAI

PER C.N. PRASAD (JM) 1. The cross appeals are filed by the assessee and Revenue for the Assessment Year 2011-12 and appeal by the assessee is for the Assessment Year 2012-13.

4 ITA.No. 1513, 1514 & 1578/MUM/2016 Shri Bharat Jayantilal Patel 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.

“7.3 I have carefully considered the facts of the case, the AO'& stand and the appellant's submissions. 1 find that in A.Y. 2007-08, A.Y.2008-09 and AY. 2010-11 the interest received was assessed as business income in assessment orders u/s 143(3). The principle of consistency is required to be followed in tax matters when facts are identical. The AO has observed that in the earlier years there was no substantial interest income as compared to the year under consideration. But quantum of income cannot be the test to decide under which head it should be assessed. Facts cannot be distinguished on the basis of quantum of income. If at all only quantum of income is to be seen, then manifold increase in the interest income would support the appellant's case for business income rather than AO's Case. In Smt. Padma Bora's case (supra), the Hon'ble Bombay High Court held that when the assessee is engaged in the business of money lending, her claim for deduction of bad debt could not be denied merely because she did not have licence to conduct that business- The relevant part of the decision of Hon'ble jurisdictional High Court of Mumbai in the case of Smt Padma Bora v. CIT-II, Pune as reported in 54 taxmann.com 319 (Bom) (2015) is reproduced here as under: - “5. Having perused this paragraph carefully, we find that the Tribunal may have committed a mistake in erroneous reproduction of the Commissioner’s findings, but that does not mean that the Appeal would raise any substantial question of law. The allowability of bad debts was a claim considered in depth by the Commissioner and eventually granted in favour of the Assessee. the assessee is engaged in the business of money lending. Merely because the assessee does not have license to conduct this business, does not mean that the claim of bad debts should be denied. The Commissioner has in relation this claim held in his order at Paragraph 4.2 that the Tribunal’s order in the case of B.N. Khandelwal v. ITO [2007] 16 SOT 343 (Mum). Would assist the assessee inasmuch as the amount is lent in ordinary course of money lending business. It was written off after making efforts to recover. The effort was unsuccessful. In such circumstances, the Tribunal did of the Act commit any error in reaffirming the conclusion of the commissioner of Income Tax (appeals) and which is to be found in paragraph o. 4.2 of the Commissioner’s order. The present appeal also is continuation of the attempt by the Revenue to question such findings. The findings being purely of fact, the same do not raise any substantial question of law. The appeal is therefore dismissed. Thus, it follows that having money lending licence is not a precondition for having business income from money lending activity. Respectfully following this decision, I hold that merely because there is no money lending licence, interest income cannot be treated as income from other sources. Nothing much would turn on that fact in deciding this issue. Following the principle of consistency, 1 hold that interest of Rs.25,26,58,443/ received by the appellant on loans and advances given to various persons is business income. The fact that there was no mention of money lending activity as business in Form 3CD also cannot be a ground to hold otherwise when interest income was assessed as business income in the past. Ground No.5 is allowed.”

6 ITA.No. 1513, 1514 & 1578/MUM/2016 Shri Bharat Jayantilal Patel 11. On a careful perusal of the observations of the Ld.CIT(A), we do not find any valid reason to interfere with the decision of the Ld.CIT(A). Hence the same is sustained. Grounds raised by the Revenue are dismissed.

Order pronounced in the open court on the 23rd April, 2018.