9911796707
TMI Blog1988 (12) TMI 60X X X X Extracts X X X X X X X X Extracts X X X X ..... transactions and the total amount was Rs. 2,01,445. The assessee also advanced Rs. 3,09,950 by way of loan to Batra Finance Corporation through different transactions. The assessee received Rs. 18,349 from the aforesaid two debtors, as interest in the accounting year. In the profit and loss account, the aforesaid amount of interest was shown as income and the expenditure was shown under the heads, "Salary, bank charges, interest paid, rent, audit fee", etc. In the return for the assessment year 1977-78, a net profit of Rs. 1,441.21 was shown, after adjusting the expenses incurred against the interest income. The Income-tax Officer came to the conclusion that the assessee had not carried on its main object and the object of lending mon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lal Hirabhai Spinning and Weaving Co. Ltd. [1978] 113 ITR 173 (Guj), for the proposition that even if the main object of the company is not carried out and only the ancillary object is carried out, that amounts to carrying on the business of the company and such expenses incurred in the running of the company should have been allowed. In the alternative, it was argued on behalf of the assessee that even if income from interest is considered as income from "Other sources", such income along with business income, if any, has to be added and the expenses incurred by the company have to be deducted therefrom under section 71 of the Income-tax Act, 1961 (for short "the Act"), and if still there was loss, it could be carried forward under section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing and running it even if the main objects of the company are not being carried on. It is not disputed that the assessee-company has been incorporated. It is also not disputed that the assessee-company collected share capital of Rs. five lakhs, and this can be done only after having staff and other office establishment. Even if the share money received by it had not been invested by way of loan, yet it was entitled to carry forward its office expenses by way of loss. Since the assessee has earned income from "other sources", the business loss can be adjusted against the income from other sources in view of section 71 of the Act. In this case, the applicability of section 72 would not arise as, after adjustment, there is a net profit of R ..... X X X X Extracts X X X X X X X X Extracts X X X X
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