Accrued Interest on Loans is taxable as business income.

The Kolkata bench of the Income Tax Appellate Tribunal ( ITAT ) recently held that the Interest accrued on Loans is taxable as business income under the provisions of the Income Tax Act, 1961
In instant case, the Assessee is a limited company where AO observed that the assessee is not engaged in the money lending business later Assessee pleaded for the same. While placing keen observation on the financial statement of Assessee, AO found that major part of assessee’s fund had given to certain parties through lending and earn money as interest income.
In reply, the Assessee argued that assessee offered the said interest income under the head income from business consistently in the past and which has been accepted by the Department and assessed as such under the head income from the business.
However, the AO did not accept the aforementioned contention of Assessee and proceeded to disallow the entire write off of bad debts. The same action of AO was restored by the Commissioner of Income Tax (Appeal) while considering the first appeal. Aggrieved, the assessee went for an appeal before Tribunal.
The Tribunal bench comprising Judicial Member Aby. T. Varkey and Accountant Member M.Balaganesh analyzed the facts of the case that more funds have been deployed by the assessee for lending activity than the amounts deployed for dealing in shares and other activities this indeed proves that he is in the business of money lending.
The Tribunal bench found that even the borrowed fund was also used for lending purpose but on the counterpart, Revenue contended that argued that the assessee company is not a non-banking finance company and lending is not part of its business.
inally, the bench approved the nature of activity carried by the Assessee was lending money and held that receipt of interest on Loans is taxable as Business Income.

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