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

Court :
INCOME TAX APPELLATE TRIBUNAL

Brief :
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.

Citation :
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)