MRUDA FINVEST P.LTD, MUMBAI V. ITO WD 6(3)(4), MUMBAI

ITA 2327/MUM/2013

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 7894 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 8 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-12-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 13-06-2016
• Assessment Year: 2002-2003
• Appeal Filed On: 25-03-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUMAN KUMAR
• Keywords: Business income

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH B, MUMBAI BEFORE SHRI D.T. GARASIA, JUDICIAL MEMBER AND SHRI MANOJ KUMAR AGGARWAL, ACCOUNTANT MEMBER ITA NO.6208/M/2010 ASSESSMENT YEAR: 2006-07 M/S. MRUDA FINVEST PVT. LTD., 108/D, KESHAVJI NAYAK ROAD, MASJID BUNDER, MUMBAI 400 009 PAN: AAACM 9719M VS. ITO WARD 6(3)(4), AAYAKAR BHAVAN, MUMBAI - 20 (APPELLANT) (RESPONDENT) ITA NO.2327/M/2013 ASSESSMENT YEAR: 2002-03 ITA NO.2328/M/2013 ASSESSMENT YEAR: 2003-04 ITA NO.2329/M/2013 ASSESSMENT YEAR: 2004-05 ITA NO.2330/M/2013 ASSESSMENT YEAR: 2005-06 ITA NO.7419/M/2014 ASSESSMENT YEAR: 2010-11 M/S. MRUDA FINVEST PVT. LTD., MANOJ CO-OP HSG. SOC. LTD., SHOP NO.1, 962, SHANKAR GHANEKAR MARG, PRABHADEVI, MUMBAI 400 025 PAN: AAACM 9719M VS. ITO WARD 6(3)(4), AAYAKAR BHAVAN, MUMBAI - 20 (APPELLANT) (RESPONDENT) ITA NO.6208/M/2010 & ORS. M/S. MRUDA FINVEST PVT. LTD. 2 PRESENT FOR: ASSESSEE BY : SHRI BHUPENDRA SHAH, A.R. REVENUE BY : SHRI SUMAN KUMAR, D.R. DATE OF HEARING : 02.11.2017 DATE OF PRONOUNCEMENT : 13.12.2017 O R D E R PER D.T. GARASIA , JUDICIAL MEMBER: THE ABOVE TITLED APPEALS HAVE BEEN PREFERRED BY TH E ASSESSEE AGAINST THE ORDERS DATED 14.05.2010, 17.12.2012, 17 .12.2012, 22.09.2014, 17.12.2012 & 17.12.2012 OF THE COMMISSI ONER OF INCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS TH E CIT(A)] RELEVANT TO ASSESSMENT YEARS 2006-07, 2003-04, 2002 -03, 2010-11, 2005-06 & 2004-05 RESPECTIVELY. 2. THE ONLY EFFECTIVE GROUND IN ALL THESE APPEALS I S GROUND NO.1 TAKEN BY THE ASSESSEE WHICH READS AS UNDER: 1. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND ALSO IN LAW, THE LEARNED AO ERRED IN TREATING INTEREST INCOME OF RS.16,33,663/- AS IN COME FROM OTHER SOURCES INSTEAD OF INCOME FROM BUSINESS EVEN THOUGH THE MAIN OBJECT OF THE COMPANY IS FINANCE AND INVESTMENT. THE LEARNED COMMISSIONER OF INCOME TAX (A) ALSO ERRED IN CONFIRMING THE SAME. 3. THE SHORT FACTS OF THE CASE ARE THAT THE ASSESSE E IS A PVT. LTD. COMPANY. THE ASSESSEES MAIN OBJECT, ACCORDING TO THE MEMORANDUM OF ASSOCIATION, WAS TO CARRY ON THE BUSI NESS AS FINANCE COMPANY AND ADVANCE MONEY TO ANY PERSON, FIRM OR BO DY CORPORATE. THE ASSESSEE HAS ADVANCED MONEY TO M/S. KANJI MOORA RJI AND INVESTED IN FIXED DEPOSIT WITH HDFC BANK. THE ASSE SSEE DOES NOT ITA NO.6208/M/2010 & ORS. M/S. MRUDA FINVEST PVT. LTD. 3 UNDERTAKE ANY OTHER BUSINESS ACTIVITY, OTHER THAN T HE BUSINESS OF FINANCING AND ADVANCING MONEY TO ANY PERSON, FIRM O R BODY CORPORATE. DURING THE YEAR UNDER CONSIDERATION, TH E ASSESSEE RECEIVED INTEREST OF RS.14,60,000/- AND RS.1,73,663 /- FROM M/S. KANJI MOORARJI AND HDFC BANK RESPECTIVELY. APART F ROM THIS THE ASSESSEE RECEIVED INTEREST ON INCOME TAX REFUND OF RS.3,951/-. THESE THREE ARE THE ONLY INCOME OF THE ASSESSEE DURING TH E YEAR AND THE SAME HAS BEEN CREDIT TO PROFIT AND LOSS ACCOUNT AND DEBITED ALL ADMINISTRATIVE, LEGAL & PROFESSIONAL CHARGES, DEPRE CIATION AND ALSO WRITTEN OFF PRELIMINARY EXPENSES TO PROFIT AND LOSS ACCOUNT. THE ASSESSEE SHOWED NET PROFIT AS INCOME FROM BUSINESS IN THE RETURN OF INCOME. HOWEVER, THE AO HAS CONSIDERED THE INTE REST INCOME FROM OTHER SOURCES AND DISALLOWED ALL THE EXPENSES DEBITED TO PROFIT & LOSS ACCOUNT AND ALLOWED ONLY 25,000/- U/S 57 OF THE ACT. 4. MATTER CARRIED TO THE LD. CIT(A) AND THE LD. CIT (A) HAS DISMISSED THE SAME. 5. THE LD. A.R. SUBMITTED THAT COMPANYS MAIN OBJEC T, ACCORDING TO THE MEMORANDUM OF ASSOCIATION, IS TO CARRY ON TH E BUSINESS OF FINANCE. MOREOVER, THE PERIOD OF TIME MONEY HAS BE EN INVESTED IN HDFC BANK AND M/S. KANJI MOORARJI FIRM. SINCE THE LOAN AND ADVANCES ARE BUSINESS OF THE COMPANY INTEREST INCOM E WAS TREATED AS BUSINESS INCOME. THE ASSESSEE FILED THE LEDGER ACC OUNT OF M/S. KANJI MOORARJI WITH RESPECT TO ADVANCE OF LOAN AND DEPOSI T AND NATURE OF LOAN. ASSESSEE SUBMITTED THE DETAIL OF INTEREST IN COME FROM M/S. ITA NO.6208/M/2010 & ORS. M/S. MRUDA FINVEST PVT. LTD. 4 KANJI MOORARJI AND HDFC BANK, COPY OF BALANCE SHEET AND PROFIT AND LOSS ACCOUNT OF THE COMPANY. THE MEMORANDUM OF ASSOCIATION OF THE COMPANY WAS INCORPORATED TO CARRY ON THE BUS INESS OF FINANCING AND ADVANCING MONEY. THE BALANCE SHEET O F THE COMPANY SHOWS THAT ADVANCE MADE TO M/S. KANJI MOORARJI HAS REMAINED THE SAME IN EARLIER YEARS AND THE FIXED DEPOSITS WITH H DFC BANK WAS RAISED UP TO RS.50 LAKHS. THE LD. A.R. RELIED UPON THE ORDER OF HONBLE SUPREME COURT IN THE CASE OF RAYALA CORPORA TION PVT. LTD. VS. ACIT [2016] 386 ITR 500 (SC) AND CHENNAI PROPER TIES AND INVESTMENTS LTD. VS. CIT [2015] 373 ITR 673 (SC). 6. ON THE OTHER HAND, THE LD. D.R. RELIED UPON THE ORDER OF THE REVENUE AUTHORITIES. 7. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE P ARTIES. WE HAVE GONE THROUGH THE PAGE 14 OF THE MEMORANDUM OF ASSOCIATION WHEREIN THE MAIN OBJECT OF THE COMPANY TO BE PURSUE D BY THE COMPANY ON ITS INCORPORATION READS AS UNDER: 1. TO CARRY ON THE BUSINESS AS THE FINANCE COMPANY AND ADVANCE MONEY TO ANY PERSON, FIRM OR BODY CORPORATE AND TO RECEIVE MONEY ON DEPOSIT OR LOAN AND TO CARRY ON BUSINESS AS FINANCI ERS FACTORS AND TO UNDERTAKE AND CARRY ON EXECUTE ALL KINDS OF FINANCIAL ACTIVIT IES BUT THE COMPANY SHALL NOT CARRY ON BANKING BUSINESS IN THE BANKING REGULATION ACT, 1949. 2. TO CARRY ON THE BUSINESS OF AN INVESTMENT COMPAN Y AND FOR THAT PURPOSE TO INVESTING ACQUIRE, UNDERWRITE, SUBS CRIBE FOR, HOLD SHARES, BONDS, STOCKS, SECURITIES, LAND, PROPERTY, BUILDING S PRECIOUS MOTELS, SILVER, GOLD & OTHER ASSETS, DEBENTURES, DEBENTURES , DEBENTURE STOCK ISSUED OR GUARANTEED BY ANY COMPANY CONSTITUTED AND CARRYING ON BUSINESS IN INDIA OR CENTRAL OR PROVISIONAL COMMISS IONER, PORT TRUST, PUBIC BODY OR AUTHORITY, SUPREME, MUNICIPAL LOCAL OR OTHERWISE WHETHER IN INDIA OR ELSEWHERE. ITA NO.6208/M/2010 & ORS. M/S. MRUDA FINVEST PVT. LTD. 5 8. WE FIND THAT THE MAIN OBJECT OF THE COMPANY IS T O FINANCE AND INVESTMENT. THEREFORE, WHATEVER THE IN COME IS EARNED BY THE COMPANY IS INCOME FROM BUSINESS. WE ALSO FIND THAT COMPANY HAS ONLY DERIVED INCOME FROM INTE REST OF LOAN AND DEPOSIT. FURTHER, NO PUBLIC DEPOSITS ARE TAKEN BY THE COMPANY THE PROVISIONS OF NBFC DO NOT APPLY TO THEI R CASE. WE FIND THAT IN CASE OF RAYALA CORPORATION PVT. LTD . VS. ACIT (SUPRA) AND IN CASE OF CHENNAI PROPERTIES AND INVESTMENTS LTD. (SUPRA) THE ASSESSEES MAIN INCOME IS INTEREST ON FINANCE AND INVESTMENT. WE FIND THAT M INIMUM EXPENSES REQUIRED TO RUN THE COMPANY AND MAINTAIN T HE CORPORATE STATUS ARE ALWAYS ALLOWABLE AS PER THE CA SE OF KAVITA MARKETING (P.) LTD. 70 TAXMAN.COM 391 MUMBAI . RESPECTFULLY FOLLOWING THE SAME, WE ALLOW ALL THE A PPEALS. 9. IN THE RESULT, ALL THE APPEALS OF THE ASSESSEE A RE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 13.12.2017. SD/- SD/- (MANOJ KUMAR AGGARWAL) (D.T. GARASIA) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 13.12.2017. * KISHORE, SR. P.S. ITA NO.6208/M/2010 & ORS. M/S. MRUDA FINVEST PVT. LTD. 6 COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORD ER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.