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2021 (1) TMI 155 - AT - Income TaxCharacterization of income - Interest Income - Income from Other Sources or Business Income declared by the assessee - assessee is a share broker and investor - Assessing Officer in scrutiny assessment proceedings recharacterised the nature of interest income of the assessee as Income from Other Sources - HELD THAT - This 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 2011-12I 2018 (5) TMI 40 - ITAT MUMBAI identical issue had come up before the Tribunal in an appeal by the Revenue and Tribunal decided the issue in favour of assessee - 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.
Issues:
Appeal against recharacterization of interest income from money lending business as 'Income from Other Sources' instead of 'Business Income'. Analysis: 1. Nature of Income: The appeal revolves around the recharacterization of interest income earned by the assessee from money lending business. The assessee, a share broker and investor, declared the interest income under 'Income from Business,' but the Assessing Officer reclassified it as 'Income from Other Sources.' The assessee argued that interest income was substantial compared to brokerage income, indicating it was not incidental to other business activities. 2. Legal Arguments: The Authorized Representative for the assessee contended that in previous assessment years, interest income was consistently declared as 'Business Income.' The CIT(A) had accepted this in earlier assessments and, in a similar case for the assessment year 2011-12, the Tribunal had ruled in favor of the assessee. The Department argued against applying the principle of res judicata, emphasizing distinctions in the current assessment year. 3. Precedent and Consistency: The Tribunal's decision in the previous year's appeal supported the assessee's position that interest income from money lending could be treated as 'Business Income' even without a specific money lending license. The principle of consistency in tax matters, as established by the Supreme Court, was highlighted to support the assessee's case. 4. Decision and Ruling: Considering the past decisions and the lack of distinguishing features in the current assessment, the Tribunal accepted the appeal of the assessee. The impugned order recharacterizing the interest income was set aside, and the solitary ground raised by the assessee was allowed. The Tribunal's ruling was based on the facts of the case and the precedent set in the assessee's previous assessments. 5. Conclusion: Ultimately, the Tribunal's decision favored the assessee, emphasizing the importance of consistency in tax matters when facts remain unchanged. The ruling highlighted that interest income from money lending activities could be treated as 'Business Income' without a specific money lending license, based on past decisions and legal precedents. This detailed analysis of the judgment provides a comprehensive overview of the issues involved, the legal arguments presented, the application of precedent and consistency, the final decision, and the implications of the ruling.
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