TMI Blog1998 (3) TMI 24X X X X Extracts X X X X X X X X Extracts X X X X ..... such persons and on such terms as may deem expedient to discount, buy, sell, exchange and deal in bills, notes, warrants, coupons and other negotiable or transferable securities or documents. (3) To issue on commission, subscribe for, take, acquire or hold, sell, exchange and deal in shares, stock, bonds, obligations or securities of any Government, local authority or company. (4) To guarantee or become liable for the payment of money or investments or for performance of any obligations and to transfer all kinds of trusts and agency business. (5) To borrow or take deposits of money at interest or otherwise from any person or persons, local authority or Government and advance, lend or deposit any such money or other moneys on such security or otherwise as the company may deem expedient without doing banking business as defined in the Banking Companies Act, 1949." The assessee filed its returns of income for the assessment years 1977-78 to 1981-82 and admitted the income under the head "Business". The claim of the assessee was that its income under the head "Business" should be set off against the business loss brought and carried forward from the earlier assessment years. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g business. The assessee has challenged the finding of the Appellate Tribunal and the question of law set out earlier has been referred under section 256(1) of the Income-tax Act. Mr. V. S. Jayakumar, learned counsel appearing for the assessee submitted that right from the assessment year 1973-74, the assessee had been claiming that the interest income on the money lent to the fourteen private trusts should be assessed under the head "Business". He also brought to our attention the finding of the Appellate Tribunal for the assessment year 1976-77 wherein the Appellate Tribunal accepted the case of the assessee and recorded a finding that the assessee was carrying on business in share dealing and in money-lending business. For the assessment years 1977-78 and 1978-79, the matter was reagitated and when the matter reached the Appellate Tribunal, the Appellate Tribunal set aside the assessment for the three assessment years and directed the Income-tax Officer to redo the assessment. Learned counsel submitted that the Appellate Tribunal has accepted the case of the assessee for the assessment year 1976-77 that the assessee was carrying on money-lending business and, according to him, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the assessee also relied on a decision of the Supreme Court in CIT v. Calcutta National Bank Ltd. [1959] 37 ITR 171, wherein the Supreme Court considered the provisions of the Excess Profits Tax Act, 1940, and in that context, the Supreme Court held that the term "business" is a word of very wide import and though ordinarily, "business" implies a continuous activity in carrying on a particular trade or avocation, it may also include an activity which may be called "quiescent" and submitted that there was continuous activity and the activity carried on by the assessee should be regarded as business activity. Learned counsel for the assessee also brought to our notice the decision of this court in CIT v. R. M. Meenakshisundaram [1995] 212 ITR 220 and submitted that a question as to whether a particular source of income was from a business or not should be decided according to ordinary notions and whether the income was derived from an activity which has a set purpose and the motive for the activity was profit, and even a single or isolated transaction would constitute business. He, therefore, submitted that the decision of this court in CIT v. R. M. Meenakshisundaram [1995] 212 I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... act. Learned counsel for the Revenue placed reliance on the decision in Ghanshyamdas Gangadhar v. CIT [1954] 25 ITR 318, wherein the Patna High Court held that the question whether the assessee was or was not carrying on the business is a mixed question of fact and law and it is not purely a matter of legal inference and it is open to the Tribunal on the facts to hold that the assessee was not carrying on any business. He, therefore, submitted that in all the cases what is relevant is the nature of the activity carried on by the assessee and when the Tribunal as the final fact-finding authority on the basis of the materials came to the conclusion that the assessee was not carrying on money-lending business, the finding arrived at by the Appellate Tribunal is a pure finding of fact and it cannot be interfered with. Learned counsel also placed reliance on the decision of the Supreme Court in Amarchand Sobhachand v. CIT [1971] 82 ITR 591 and submitted that the finding of the Appellate Tribunal that the assessee. carried on money-lending business is a finding of fact and when that finding is supported by evidence on record, that would be binding on the court. Learned counsel for the Re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee was carrying, on business both in shares as well as in money-lending business. The Tribunal had considered the matter for the present assessment year and found that the earlier Tribunal has not considered the question in detail as the amount involved for the assessment year 1976-77 was a paltry amount of Rs. 1,046. Therefore, the finding recorded by the Appellate Tribunal for the assessment year l976-77 cannot be regarded in any way as conclusive of the fact that the assessee was carrying on money-lending business from the assessment year 1976-77 onwards. The Tribunal, as a final fact-finding authority examined its own order for the assessment year 1976-77 and found the because of the amount involved in the year, the Tribunal had not deeply gone into the matter which it should have done and, therefore, the finding recorded by the Appellate Tribunal for the said earlier assessment years could not be conclusive of the matter. The decision of the Supreme Court on which learned counsel for the assessee placed strong reliance is the case of Investment Ltd. v. CIT [1970] 77 ITR 533, does not help the assessee. The Supreme Court in the said case held that the finding recorded by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... business. It is only because of the finding recorded by the Commissioner of Income-tax (Appeals) that the money was given as deposit, the Tribunal has recorded a finding that the assessee did not make any advance to any other party. Therefore, the decision relied on by learned counsel for the assessee is of no avail to the assessee. Learned counsel for the assessee referred to the object clause. Under the object clause, the assessee is empowered to lend money on securities and properties to certain persons in the prescribed terms. We are of the opinion that the mere presence of the objects clause would not be sufficient to hold that the assessee was carrying on money-lending business. Learned counsel mainly relied on the decision of the Supreme Court in CIT v. Nainital Bank Ltd. [1965] 55 ITR 707, wherein the Supreme Court laid down certain tests to find out whether a person is carrying on business or not. The apex court held that it would depend upon the volume of the business, frequency of the transaction, continuity, and the need under which the transaction was entered into. If the decision of the Supreme Court in Nainital Bank Ltd.'s case [1965] 55 ITR 707 is applied, it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on must be decided according to ordinary notions of what a business is and the activity from which the income is derived must have a set purpose. It is seen in the instant case that there were no business dealings with any other person except the fourteen trusts and there was an absence of motive for the interest charged at the abysmally low rate of six per cent. which was comparatively lower than the prevalent market rate of interest. This court, no doubt, held that even a single or isolated transaction can be regarded as business if there are indicia of trading activity, but we have seen that there was no systematic or organised activity carried on by the assessee in dealing with the money. There was only an isolated transaction and there was no continuous activity in dealing with the money and the only transaction entered into by the assessee was the lending of the money to the fourteen private trusts and the assessee had received the principal sum even before it received the interest. Therefore, applying the principle laid down by this court, in our opinion, the assessee cannot be said to be carrying on money-lending business. The decision of the Delhi High Court in Bharat In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... business. The decision of the Supreme Court in Amarchand Sobhachand v. CIT [1971] 82 ITR 591 is to the effect that the finding arrived at by the Tribunal on the evidence on record is a finding of fact and would be binding on the court. The Tribunal, in our opinion, on the basis of the materials has come to the right conclusion that the assessee had merely invested its surplus fund in the fourteen trusts and the interest charged was at a low rate of interest and it was an isolated transaction and the assessee had not advanced money in the course of its business in pursuance of the object clause in the memorandum of association. The Tribunal, in our opinion, has come to the correct conclusion in holding that the income of the assessee cannot be regarded as income derived from money-lending business, and it was derived from the deposits or investments made. In our view, the finding arrived at by the Appellate Tribunal on the basis of the materials is a pure finding of fact and no interference is called for in the tax case reference. Accordingly, we answer the common question of law referred at the instance of the assessee, for various assessment years in the affirmative and against ..... X X X X Extracts X X X X X X X X Extracts X X X X
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