Company registered with the object of advancing loan on interest can set off its loss with its earning of interest from bank deposite

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI ‘H’ BENCH

BEFORE I.P. BANSAL, JM & SHRI A.N. PAHUJA, AM

ITA no.5464/Del/2011

Assessment year: 2008-09

ACIT,Ci rcle-17(1),C.R.

Building, IP Estate,

New Delhi

(Appellant)

V/s.

Vashulinga Finance Pvt . Ltd.

1004, Chiranjiv Tower, 43,

Nehru Place, New Delhi

[PAN: AABCV 4461 G]

 (Respondent)

Assessee by Shri V.R. Kumar , AR

Revenue by Dr. B.R.R. Kumar, DR

Date of hearing 22-05-2012

Date of pronouncement 22-05-2012

O R D E R

A.N.Pahuja:- This appeal filed on 07.12.2011 by the Revenue against an order dated 12.09.2011 of the ld. CIT(A)-XIX, New Delhi, raises the following grounds:-

1. “On the facts and in the circumstances of the case and in law the learned CIT(A) has erred in allowing the appeal of the assessee company by holding that the interest on FDR etc. amounting to ``91,26,226/- was assessable under the head “business income and hence the benefit of set off brought forward business loss was to be allowed.”

2. The appellant craves for reserving the right to amend, modify, alter, add or forego any  ound(s) of appeal at any time before or during the hearing of appeal. “

2. Facts, in brief, as per relevant orders are that return declaring nil income filed by the assessee, was selected for scrutiny with the service of a notice u/s 143(2) of the Income-tax Act, 1961 (hereinafter referred to as the Act), issued on 27th August, 2009. During the course of assessment proceedings, the Assessing Officer (A.O. in short) noticed that the assessee claimed set off of brought forward business loss against income of ``24,94,407/- for the year under consideration. On perusal of profit and loss account , it was revealed that the assessee earned interest income amounting to ``91,26,226/- from the deposits in the banks and thus, wrongly claimed set off of brought forward business loss against such interest income . To a query by the AO, seeking to assess interest income from deposits in the banks under the head ’Income from Other Sources’, the assessee replied that the company was registered as a non banking financing institution and engaged mainly in the business of advancing the loans. Since their main business is the earning of interest income and during the year, the assessee could not find suitable borrowers to whom the loans could be given, surplus funds lying idle were utilized in earning interest income from deposits in the banks. Accordingly, the assessee claimed that interest income was business income and, therefore, set off of brought forward business losses against the said income, could not be denied. However, the AO did not accept the submissions of the assessee on the ground that not even a single rupee was earned by way of interest on loans and advances while the entire interest income was earned from bank deposits. Accordingly, relying upon the decisions in Orissa Tyres Ltd. vs CIT, 188 ITR 342;Collis Line(P) Ltd. vs. ITO,135 ITR 390(Ker);CIT vs. Jose Thomas,253 ITR 553(Ker.);CIT vs. Manglam Cement Ltd.,217 ITR 369(Raj.);Saraf Textile Industries,217 ITR 507(Raj.);Shree Krishna Polyster Ltd. vs. DCIT,274 ITR21(Bom.); CIT vs. Gimpex P Ltd.,268 ITR 377(Mad.) & CIT vs. Monarch Tools Pvt. Ltd.,260 ITR 258(Mad.), the AO assessed interest income under the head ’Income from other sources’ and denied set off of brought forward business loss against the same.

3. On appeal, the ld. CIT(A) following his own decision in the preceding assessment year, allowed the claim of the assessee.

4. The Revenue is now in appeal before us against the aforesaid findings of the ld. CIT(A). At the outset, both the parties agreed that the issue is squarely covered by decision dated 15.6.2011 in the assessee’s own case in I.T.A. no.103/D/2011 for the AY 2007-08.

5. We have heard both the parties and gone through the facts of the case. We find that the ld. CIT(A) merely followed his own decision in the preceding assessment year 2007-08 and allowed the claim of the assessee. The appeal of the Revenue against the said decision of the ld. CIT(A) has been dismissed by a co-ordinate bench vide their aforesaid decision dated 15.6.2011 in the assessee’s own case in I.T.A. no.103/D/2011. Since the facts and circumstances in the year under consideration are parallel to the facts and circumstances in the preceding assessment year, wherein the ld. CIT(A) concluded that interest on bank deposits and other interest receipts are to be considered as income from business and not under the head “income from other sources” while the Revenue have not placed before us any material controverting the aforesaid findings of the ld. CIT(A) in the year under consideration so as to enable us to take a different view fin the matter, we are not inclined to interfere. Therefore, ground no.1 in the appeal is dismissed.

6. No additional ground having been raised before us in terms of residuary ground no.2 in the appeal, accordingly, this ground is dismissed.

7. No other plea or argument was made before us.

8. In result, the appeal is dismissed.

Order pronounced in open Court

                                                          Sd/-                          Sd/-

                                                (I.P. BANSAL)     (A.N. PAHUJA)

                                                (Judicial Member)  (Accountant Member)

NS

Copy of the Order forwarded to:-

1. Assessee

2. ACIT,Circle-17(1),C.R. Building, IP Estate, New Delhi

3. CIT concerned.

4. CIT (A)-XIX, New Delhi.

5. The DR, ITAT,’H’ Bench, New Delhi

6. Guard File.

By Order,

Deputy/Asstt.Registrar

ITAT, Delhi