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TMI Blog2013 (3) TMI 194X X X X Extracts X X X X X X X X Extracts X X X X ..... ndent by : Mr. A.K. Nayak ORDER PER V. DURGA RAO, J.M.: Both these appeals filed by the assessee are directed against the orders of CIT(A) for the assessment years 2004-05 2005-06. Since some identical issues involved in these appeals, they were heard together and therefore, a common order is passed for the sake of convenience. ITA NO. 5428/Mum/2007 for AY 2004-05 2. This appeal is directed against the order of CIT(A)-XXVI, Mumbai, passed on 01/06/2007. 3. Ground No. 1 is pertaining to treating interest income of Rs. 3,44,038/- as taxable under the head income from other sources instead of business income disallowance of entire interest expenses of Rs. 79,44,067/-. 4. Briefly stated the facts relating to raise this ground are that the assessee is a company engaged in holding portfolios of scrips largely of group companies. In the assessment order, the AO had observed that on perusal of the accounts for the year, it is seen that out of the total receipts of Rs. 1,72,18,396/-, credited to the P L A/c, Rs. 1,47,80,978/- pertains to dividend, Rs. 20,93,076/- pertains to profit on sale of investments, Rs. 3,44,038/- pertains to interest and Rs. 303/- per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 91 Total funds available 34,84,38,144 The above funds during the year were utilized in the following manner: (Amounts in Rs.) i. Investments 28,24,05,056 ii. Loans Advances a. Inter corporate deposit (interest free) Opening balance 5,59,32,209 Add: Advanced during yr 5,75,50,000 Total 11,34,82,209 Less: repaid during yr 5,16,90,000 Closing balance 6,17,92,209 b. Inter corporate deposit (interest bearing) opening balance NIL add: advances during yr 1,25,00,000 Total 1,25,00,000 Less: repaid during yr 1,00,00,000 Closing balance 25,00,000 Total ICD 6,42,92,209 c. Advance payment of taxes 29,13,876 d. interest receivable 2,73,510 Total Loans Advances 6,74,79,595 iii. Other net current assets (-)15,58,506 Iv Preliminary expenses 1,12,000 Total 34,84,38,145 5. The AO noted that it can be seen from above that only Rs. 1.25 cr. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee carried the matter in appeal before the CIT(A). 7. It was submitted before the CIT(A) that the assessee is in the business of lending funds and this fact has been accepted by the department in the preceding assessment years and also by the AO in para 13 of the assessment order. It was further submitted that the assessee had given loan of Rs. 1.25 crores against the total funds of Rs. 34.84 crores which according to AO is very small percentage of the total funds. It was also submitted that interest income of Rs. 3,44,038/- constitutes 4.33% of the total interest paid of Rs. 79,44,067/- and the same is in accordance with the practice of normal prudent businessman who has earned his business income. It was contended that the AO has not brought any material on record to come to the conclusion that interest income is not business income and failed to appreciate that interest free loans were given to such companies in which assessee had invested by purchasing the shares and therefore interest income was the income earned in the normal course of business. After considering the submissions of the assessee, the CIT(A) observed that the AO had discussed the issue in great detail in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ideration of Rs. 34,84,38,146/-, out of which the assessee has only given on inter-corporate deposits of Rs. 1.25 crores. The AO has clearly observed that only fraction of 3.59% of funds available with the assessee has given on interest and therefore based on the findings of the AO vide paragraphs 9,10, 11, 12 13 in the assessment order, it is very clear that though the assessee has registered as NBFC with the RBI, the assessee is not in the business of money lending. It is clear from the assessment order that the assessee has given huge inter-corporate deposits to the sister concern and no interest was charged on the same. When we asked the learned counsel for the assessee, he submitted that interest was not charged because of business expediency. We do not agree with the submissions of the learned counsel for the assessee for the reason that when the assessee is in the business of money lending, intercorporate deposits were given to the sister concern and no interest was charged on the same. We are of the view that unless the assessee fulfils the object for which the company was established, simply because it has been registered as NBFC with RBI it cannot be said that the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the CIT(A) and, therefore, the order of the CIT(A) is hereby upheld and the ground raised by the assessee is dismissed. 11. As regards other grounds are concerned, the same have already been decided by the ITAT vide order dated 24th December, 2009, therefore, the same are remain unchanged. ITA NO. 1737/Mum/2009 AY 2005-06 12. Ground No. 1 regarding treating interest income as taxable under the head income from other sources instead of business income , is similar to the ground No. 1 raised in AY 2004-05 (supra). Respectfully following the conclusions drawn in AY 2004-05 (supra), we dismiss this ground of appeal. 13. As regards Ground No. 2 regarding disallowance of Demat Charges of Rs. 7,185/-, this issue is covered by the decision of ITAT in assessee s own case for AY 2004-05 wherein the Tribunal held that we hold that this expenditure is revenue expenditure and it has to be necessarily incurred under the SEBI rules. This expenditure is required to be incurred whether the assessee chooses to transfer shares or not. In such circumstances, we are unable to appreciate the argument of the assessee that this expenditure is necessarily to be incurred in connection w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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