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TMI Blog2010 (8) TMI 39X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of the Supreme Court in the case of K.P. Varghese v. Income Tax Officer, Ernakulam and Anr. 2008 -TMI - 5862 - SUPREME Court] concluded that the principal business of the assessee was that of money lending and allowed the adjustment of losses suffered on account of sale/purchase of shares from other business income. – ITAT accepted the order of CIT(A) – Held that - that assessee's case fails under exception clauses of Explanation to 73. - principal business of the assessee is money lending is based on cogent evidence and material on record, it being a finding of fact and therefore, it cannot be treated as perverse. - 1007 of 2008 - - - Dated:- 26-8-2010 - CORAM :- HON'BLE MR. JUSTICE A.K. SIKRI HON'BLE MS. JUSTICE REVA KHETRAPAL ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome consists mainly of income which is chargeable under the heads "Interest on securities", "Income from house property", "Capital gains" and "Income from other sources" and secondly, in case of a company, the principal business of which is the business of banking of the granting of loans and advances. 2. The assessee had pleaded before the AO that the principal business of the assessee was of granting of loans and advances and earning the income therefrom and therefore, the Explanation to Section 73 of the Act would not apply in the case of the assessee. It is in this backdrop that the AO went into the question as to whether the principal business of the assessee was that of lending money and earning the income therefrom. He concluded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he object clause categorically stipulate the objects of carrying on business of consultancy, rendering all kinds of consultancy and advisory services, consultants in the field of business, industrial productivity, management, administration, etc. to act as financial consultants, advisers to public issue, preparation of project reports. Thus, consultancy and money lending had become the main business of the company after the aforesaid amendment in the object clauses, which was carried out, as mentioned above within four months of its incorporation. In view thereof, the first four reasons given by the AO would lose their validity. 4. The Fifth reason, which was given by the AO was that the interest income of the assessee was only 27% of its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court in the case of K.P. Varghese v. Income Tax Officer, Ernakulam and Anr. [(1981) 131 ITR 597 (SC)] concluded that the principal business of the assessee was that of money lending and allowed the adjustment of losses suffered on account of sale/purchase of shares from other business income. 7. The Income Tax Appellate Tribunal (in short 'the ITAT') has accepted the aforesaid reasoning of the CIT (A) in its impugned order. The relevant discussion contained in the ITAT's order reads as under: "6. On the other hand, the learned counsel for the assessee explained the provisions of Section 73 including exception clauses of Explanation to Section 73. Then he took the Bench to the various head of the income of last three years and stated t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rental income has to be taken into consideration. Further reliance was placed on the decision of Hon'ble Allahabad High Court in the case of Motor General Sales Pvt. Ltd. Vs. CIT 226 ITR 137 wherein financing of vehicles was held as business of money lending. Reliance was also placed on the decision of Hon'ble Supreme Court reported in 196 ITR 149/156. 7. We have heard rival submissions and considered them carefully. After considering the relevant material and case laws and the details on which our attentions were drawn by the learned counsel, we find that assessee's case fails under exception clauses of Explanation to 73. We have seen amended clauses of the company and found that the company had amended its objects by which the compan ..... X X X X Extracts X X X X X X X X Extracts X X X X
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