TMI Blog2011 (4) TMI 1165X X X X Extracts X X X X X X X X Extracts X X X X ..... he knowledge that the directors of the company and the partners of the firm were closely related, yet, AO accepted the bona fides of the claim and allowed the interest arising from the same transaction as a business income, although on the claim of bad debt, he rejected the assessee's contention. The status or relationship between the parties, by itself, is not a ground for rejecting the claim of the assessee, particularly when the Revenue itself had accepted the interest arising out of the same transaction as business income. In the absence of any material at the hands of the Revenue, the Tribunal rightly held that the claim of the assessee could not be rejected. Having regard to the pure finding of fact by the Tribunal, no hesitation in c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t from this, the assessee was also stated to have been engaged in money-lending business. Every year, the interest charged on the amount claimed was offered for income-tax and the same was assessed under the head of business income. 3. It is seen from the records placed before this court that the assessee had advanced money on various occasions to M/s. Dyes and Pigments India. The borrower had a running account with the assessee and every year, on the payment of the principal and the interest, there was an adjustment of the same towards the amount due, and the outstanding amount on the closing date was struck. 4. Incidentally, it may also be pointed out that some of the directors of the assessee-company where the partners in the fir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rest income and the writing off of the principal amount as a bad debt as in the course of business. It also considered the claim of the assessee as regards the bona fides of writing off of the principal amount as a bad debt. Considering the rival contentions, the Tribunal pointed out that the assessee did have money-lending business and that the interest returned on the amount lent was accepted by the Revenue as part of its business income. It further pointed out that admittedly, the debtor had deducted tax at source before paying interest to the assessee and the TDS return had also been filed with the Department. As regards the objection raised by the Revenue that the memorandum of articles and association of the assessee did not authorise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... carrying on business in money lending. 7. It is seen from the order of the Tribunal that it had, in an elaborate manner, considered the claim of the assessee as well as the Revenue, on the aspect of the assessee doing business in money-lending. A perusal of the order of the Tribunal and the assessment order shows that right from the assessment years 1991-92 to 2000-01, the assessee had been consistently receiving interest from the money-lending business as a business income and the same was offered as business income, the Revenue accepted the claim of the assessee in the assessment made for the earlier years under section 143(3) of the Income-tax Act. Even for the assessment year 2000-01, the interest arising out of the same transaction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transaction assumes relevance in a case where the transaction itself is of such a dubious character that one may not know whether the transaction falls under a particular character as, namely, money-lending business. A perusal of the statement filed before the authorities below shows that apart from M/s. Dyes and Pigments India, the assessee had money transactions with other concerns too, which were treated as part of the money-lending business. In the circumstances, we have no hesitation in confirming the finding of the Tribunal that the assessee had money-lending business also as part of its business. Given the fact that the assessee had been carrying on business in money-lending, which had been accepted so by the Revenue, and in the abs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... business income. As regards the money lent to the close relatives who happened to be the partners of the debtor firm and incidentally the directors of the company too, the Tribunal held that the Department had, had the knowledge that the directors of the company and the partners of the firm were closely related, yet, the Assessing Officer accepted the bona fides of the claim and allowed the interest arising from the same transaction as a business income, although on the claim of bad debt, he rejected the assessee's contention. The status or relationship between the parties, by itself, is not a ground for rejecting the claim of the assessee, particularly when the Revenue itself had accepted the interest arising out of the same transaction as ..... X X X X Extracts X X X X X X X X Extracts X X X X
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