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TMI Blog2019 (1) TMI 672X X X X Extracts X X X X X X X X Extracts X X X X ..... BI as NBFC. Merely, the fact that the assessee is not registered with RBI AS NBFC, cannot lead to draw an inference that the assessee is not carrying out the business activity. The registration with RBI as NBFC and business activity of the assessee, both are different aspects and cannot be applied for holding that the assessee is not engaged in the business activity. we also note that the assessee has been carrying on the business of money lending in a systematic manner without having the registration with RBI as NBFC. Merely, the fact that the assessee is not registered with RBI AS NBFC, cannot lead to draw an inference that the assessee is not carrying out the business activity. The registration with RBI as NBFC and business activity of the assessee, both are different aspects and cannot be applied for holding that the assessee is not engaged in the business activity. The genuineness of the expenses claimed by the assessee have not been doubted by the authorities below. Moreover, there is no issue regarding the genuineness/reasonableness of the expenses claimed by the assessee arising from the order of authorities below. Therefore, we are not inclined to adjudicate the same. In v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s including finance of short and long term deposits etc. 4.1 The assessee in the year under consideration has shown income from other sources amounting to ₹ 70,42,709/- as detailed under: Sr. No. Particulars Amount 1. Bank interest 3,10,188/- 2. Other interest 66,17,003/- 3. Dividend income 3,597/- 4. Interest on Income Tax Refund 1,11,921/- Total 70,42,709/- (-) Exempted dividend income (-) 3,597/- Taxable Income 70,39,112/- 4.2 The assessee has not shown any sales/income from operations in the year under consideration but has claimed expenses in its profit and loss account amounting to ₹ 68,34,897/- only. These expenses included the following: Sr No. Particulars Amount 1. Salary, Wages & Other Benefits 26,14,916/- 2. Administrative & General Expenses 35,24,952/- 3. Interest & Financial Expenses 3,39,668/- 4. Depreciation 3,35,361/- Total 68,34,897/- 4.3 As a result, the assessee has shown loss of ₹ 60,51,522/- after making the suitable adjustment on account of depreciation claimed under the companies Act vis-à-vis under the Income Tax Act. 4.4 The assessee set off the business loss against the income from other so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roking activities as well as giving loans and advances for the purpose of interest income. Both the activities of the assessee were duly mentioned in the main object of its memorandum of association. 5.1 The assessee up to the A.Y. 2006-07 has been offering interest income under the head business and profession which was also duly accepted by the Revenue either u/s 143(1) or 143(3) of the Act. 5.2 There were scrutiny assessments u/s 143(3) of the Act pertaining to the A.Ys. 2003-04 & 2006-07 wherein, the interest income was accepted from the source of business and profession. 5.3 Subsequent to the A.Y. 2006-07 the auditor of the company advised to show the interest income under the head income from other sources as the assessee cannot carry out money lending business without getting it-self registered with RBI as NBFC. Therefore, the assessee on the advice of the auditor started offering interest income under the head income from other sources. Similarly, the assessee was claiming expenses incurred in relation to such interest income under the head business and profession. As such, there was no income under the head business and profession but the expenses were claimed under th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad debts amounting to ₹ 3,87,793/- out of which a sum of ₹ 3,05,642/- was offered to tax in the earlier years. The balance amount of ₹ 82,151/- (3,87,793 - 3,05,642) will be allowed as deduction arising in the course of the business. However, the ld CIT(A) disregarded the contention of the assessee and confirmed the order of the Assessing Officer by holding that it has not carried out any business activity. The relevant extract of the order is reproduced below: 4.3. I have considered the facts of the case, the submissions of the appellant and the AO's observation. From the submissions made by the appellant, it is an admitted fact that the appellant had itself shown the income earned by way of interest under the head 'income from other sources'. The reason behind this has also been explained by the appellant itself by stating that since it had been not registered as NBFC with RBI, hence, the interest income earned by it could not be assessed as business income and were to be assessed as income from other sources only. The appellant has relied upon the decisions of the ITAT Ahmedabad in the case of National Housing Finance Corporation Ltd. (supra) to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was income under the head income from other sources but there was loss under the head business and profession. Accordingly, the AO held that the assessee is not entitled to claim the set off of the loss shown under the head business and profession against the income from other sources on the ground that there was no business activity. The view taken by the AO was subsequently confirmed by the ld CIT(A). 8.2 From the preceding discussion, we note that certain undisputed facts as detailed under: i. The assessee up to the A.Y. 2006-07 was showing interest income under the head business and profession which was duly accepted by the revenue either u/s 143(1) or 143(3) of the Act. As such, there was scrutiny assessment u/s 143(3) of the Act pertaining to the A.Y. 2003- 04 & 2006-07 where revenue has accepted interest income as income under the head business and profession. ii. Subsequent to the A.Y. 2006-07, the assessee has changed its method of disclosing the interest income on the advice of the consultant. Accordingly, the assessee classified interest income from other sources and claimed losses under the head business and profession on account of expenses. Accordingly, the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f there was no change, it was in support of the assessee - we do not think the question should have been reopened and contrary to what had been decided by the Commissioner of Income-tax in the earlier proceedings, a different and contradictory stand should have been taken. "Parties are not permitted to begin fresh litigations because of new views they may entertain of the law of the case, or new versions which they present as to what should be proper apprehension by the Court of the legal result either of the construction of the documents or the weight of certain circumstances. If this were permitted litigation would have no end, except when legal ingenuity is exhausted. It is a principle of law that this cannot be permitted ..." 8.4 In addition to the above, we also note that the assessee has been carrying on the business of money lending in a systematic manner without having the registration with RBI as NBFC. Merely, the fact that the assessee is not registered with RBI AS NBFC, cannot lead to draw an inference that the assessee is not carrying out the business activity. The registration with RBI as NBFC and business activity of the assessee, both are different aspects an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... siness of housing finance. The income received from the advances/loans can only be treated as "Income from other sources". Accordingly, the receipts of the assessee company for "Income from other sources" are worked out as below: Income from other sources (Interest income, Service charges etc.) Rs.62,48,428/- Less: Direct expenses (interest part) ₹ 15,61,546/- Income from other sources Rs.46,36,882/- Thus, an amount of ₹ 46,86,882/- is added to the total income of the assessee company as "Income from other sources". Penalty proceedings u/s.271(1)(c) of the IT Act are initiated separately for furnishing inaccurate particulars of income leading to concealment of income." From the above, it is evident that the only reason for the assessing the income under the head "Income from other source" was that the assessee company was not registered as a housing finance company- In our opinion, whether the assessee company is registered as a housing finance company or not is irrelevant for determining whether the assessee is carrying on the business of financing or not. If the assessee is carrying on the business of finance, despite ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order of authorities below. Therefore, we are not inclined to adjudicate the same. In view of above, we are of the view that the interest income of the assessee should have been treated as income from business and profession. Therefore, we set aside the order of ld. CIT(A) and direct the AO to treat the interest income of the assessee as income under the head business and profession. 8.7 As we have set aside the order of ld CIT(A) and directed the AO to treat the interest income of the assessee under the head business and profession, the other grounds raised by the assessee in its appeal do not require any separate/specific adjudication. Accordingly, we direct the AO to consider the allowability of the expenses claimed by the assessee under the head business and profession as per the provision of law. 8.8 We also note that the assessee has earned dividend income amounting to ₹ 3597/- only whereas, the CIT(A) has made the disallowance of the expenses in relation to the dividend income amounting to ₹ 1,08,559/- only. It is a settled law that the disallowance of 14A r.w.r 8D cannot exceed the amount of dividend income. In this regard we place our reliance on the order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... activity and that the assessee did not claim deduction u/s.57(iii) of the Act against income from other sources in the return of income. 2. On the facts and in the circumstances of the case, and in law, the Ld. C.I.T. (A) erred in applying the ratio of Hon'ble Gujarat High Court in the case of Smt. Veermati Ramakrishna 131 ITR 659 (Guj) without appreciating the facts of the present case is distinguishable from the case of Smt. Veermati Ramakrishna in as much as the assessee had claimed deduction u/s. 57(iii) of the Act, whereas in the present case, the assessee did not claim deduction u/s. 57(iii) of the Act against income from other sources in the return of income." 10. At the time of the hearing, we observe that the tax effect in the appeal filed by the Revenue is less than ₹ 20 lacs. As per the Circular No. 3 of 2018 dated 11/07/2018 issued by CBDT recently all pending appeals filed by Revenue are liable to be dismissed/ withdrawn/ not pressed to reduce the litigation where the tax effect does not exceed the prescribed monetary limit, i.e., ₹ 20 Lacs. The relevant extract of the circular is reproduced below: "2. Inr supersession of the above Circular, it ha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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