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2015 (6) TMI 564 - AT - Income TaxAssessment of the interest income - under the head "Profit & gains of business or profession" OR "Income from other sources" - Held that:- There is no evidence of any organized activity or embarking on housing finance business in any manner. The loan, given to a director, prior to the stated decision of change in the business, is not shown to be for the purchase or acquisition of any house property. Further, rather than the same being recalled, it continues to outstand year after year, with even the interest thereon being not received or recovered. The interest income, under the circumstances, which are admitted and borne out by the record, would necessarily fall to be classified for assessment purposes under the residuary head of income, i.e., as income from other sources, or u/s. 56 of the Act. Allowability of the various expenses claimed by the assessee in terms of section 57 - Held that:- The said expenditure is general expenditure incurred for various functions/activities, ostensibly for maintaining the establishment of the assessee’s undertaking. The same would thus not fall to be covered within the compass of section 57(iii), given its limited scope, i.e., for earning income, and which is only the interest income on a single loan granted by the assessee to, one, Shri Maneklal Bhandari. In fact, the expenditure allowed, i.e., on filing fees, bank charges and audit fee, would, again, strictly speaking, not fall within the purview of section 57(iii), and stands allowed on being the minimum statutory expenses required to be incurred in view of the legal requirement incident on the assessee as a company. The decision by the AO, since endorsed by the ld. CIT(A), cannot, therefore, be faulted with. - Decided against assessee. Addition being notional interest on advances paid to M/s B.U. Bhandari treating the same as a loan - Held that:- When the principal amount itself is not forthcoming, there is great uncertainty in collecting interest, which has not been provided for. The same can, under the circumstances, be either agreed to between the parties, or directed by a third party, as an arbitrator, for example, to whom the parties may approach, or a court of law. We are conscious, when we state so, that we presume a normal, genuine problem on hand, while the Revenue’s case is based on the transaction, as being reflected, in the absence of any evidence, as not true, raising serious and valid doubts with regard to its genuineness. True, but that would not by itself imply of the assessee-company to have benefited, at the cost of the payee, to any extent. Tax, it is trite law, can only be charged on real income, while we find no basis for inferring the interest cost on the part of Revenue. - Decided in favour of assessee.
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