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TMI Blog2014 (12) TMI 511X X X X Extracts X X X X X X X X Extracts X X X X ..... nterest 3,46,728 Weighting charges 79,460 Sale of scrap 3,12,685 Hire charges 10,84,852 Less: Interest lease charges written off 77,07,577 Depreciation on assets on lease 44,712 (66,67,437) Total Income (35,86,816) 3.1 The AO questioned about the details and eligibility of the assessee to claim deduction of "interest and lease charges written off" referred above. The assessee submitted that it had offered the interest income of Rs. 61,14,577/- in the earlier years on accrual basis on the loan given to a subsidiary company named M/s Malankara Woods Ltd. The assessee had also offered lease rental income of Rs. 15,93,000/- in the earlier years on accrual basis on a plant leased out to the above said company. It was submitted that M/s Malankara Woods Ltd is a wholly owned subsidiary of the assessee company. It was further submitted that the above said subsidiary company could not pay the above said amount due to huge accumulated losses and accordingly made a representation to the assessee company to waive the amount of interest and lease rent payable by it. It was submitted that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under other sources or as business income that hardly makes any difference. Then it would only be a technical issue that if the appellant has shown their income under other sources can claim the loss on account of writing off of such accrued income which was already offered to tax in the past. Based on rationality, the claim put forward by the appellant seems to be a rightful claim and the same is allowed. Accordingly, the addition made by the AO is deleted and the appeal on this ground is allowed." Aggrieved, the revenue has filed this appeal before us. 4. We have heard the rival contentions. The Ld D.R submitted that the assessee itself has offered the interest income and lease rental income under the head "Other sources" in the earlier years. Further the assessee was not carrying on the business of financing or leasing of equipments. Accordingly the Ld D.R submitted that there is no merit in the claim of the assessee that the interest and lease rental income was wrongly offered under the head "Income from Other sources", instead of offering the same under the head "Income from business". The Ld D.R further submitted that the deduction of any claim is to be allowed in terms of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... activities. The assessee company advanced long term loans to the subsidiary to carry on its business smoothly which carried interest. However, the subsidiary could not succeed in its business due to many factors and it could not pay the interest which is accumulated year after year. The assessee was intimately connected with the subsidiary and the interests of the subsidiary were, therefore, vitally connected with the assessee's business interest. The subsidiary company was unable to pay the interest accrued over the years but still the assessee company offered the same for tax purpose and paid tax. When it is realized that there were absolutely no chance to recover the accrued interest the same is written off. This speaks well of the business prudence of the assessee." The Ld A.R further submitted that the assessee had advanced money and also had given the machinery on lease to the subsidiary company due to intimate business connection and hence they should be considered as one of the business activities of the assessee company. Accordingly he submitted that the interest income and lease rental income should have been offered under the head "Income from business". However, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the intention was to make investments, then the income arising there from is assessable under the head "Income from other sources". Further the business activity means a continuous activity in carrying on a particular trade or vocation, which is capable of producing a profit which can be taxed. 6.2 In the instant case, the facts remain that the assessee has been declaring the interest income and lease rental income under the head "Other sources" only in the earlier years. Even the amount written off by the assessee has also been set off against the income declared under the head "Other sources" during the year under consideration also. Further we notice that the assessee has not advanced funds or leased out machineries to any other concerns or parties. Thus it is a solitary instance of advancing money or leasing out the machinery to its wholly owned subsidiary. These facts show that there was no intention with the assessee to carry on business of either giving loans on interest or in leasing out its machinery. Further, we notice that the assessee has changed its stand only during the year under consideration and further it did not bring any material on record to show that the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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