The Ahmedabad bench of the Income Tax Appellate Tribunal ( ITAT ) directed re-adjudication, ruling that interest on non-recovery of loans falls within the purview of business activity only and not under income from other sources.
The Assessing Officer ( AO ) treated interest income Rs.83, 43,000/- received on the loans and advances to staff loans as “income from other sources” instead of “business income”
The Assessee offered an explanation regarding interest income earned by it, from advances given to its employees as well as provision of electricity and water charges collected from water through its employees and contractors for facilities in the township, receipt from transit hostel, sale of scrap, insurance claim etc.
The bench found it proper to direct the AO to consider the issue afresh upon examining the same in regard to the heads of income after considering the facts of the case. Treating miscellaneous receipts of Rs.19, 75, 52,000/- as “income from other sources” instead of “business income”. The assessee claimed that the above income has been arisen in the ordinary course of business and is exclusively attributable to the activities of the business.
The company had given the houses owned by it, to its Directors for their residences, it is doing so only in the course of his business. The principle is that if the owner of a property carries on business with a property owned by him, the income from that property must be assessed as only “income from business”
Since the Tribunal found that the house property had been used by the assessee as a part of the business and treated as business, the finding of the ITAT that the income from the property could not be assessed separately as income from house property and included in the assessee’s business income, was correct.”
Further the Delhi High Court in the case of Triveni Engg. & Industries Ltd, wherein the “loss on account of non-recovery of loan given to employees was treated as loss incidental to business activity, then the interest on such loan falls within the purview of business activity only and not “income from other sources”.
The two member bench of the tribunal comprising Waseem Ahemad ( Accountant member ) and T.R. Senthil Kumar ( Judicial member ) found it fit to remand this issue to the file of the Assessing Officer for verification of the facts with proper materials and allow the claim in accordance with law. Accordingly this ground raised by the assessee was partly allowed.
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