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It was argued that the year under consideration was an initial year of the company. No good project was coming forth and therefore in order to avoid keeping the funds idle, the assessee had advanced money and earned interest income and also carried out activities in trading in shares and securities. Thus, clearly even according to the assessee, the interest was earned by advancing its funds. Thecasenow put up before us that such investment was in the nature of a deposit and not by way of advance was never raised earlier. We do not dispute that the term “interest” defined under section 2(7) of the Act would mean interest on loans and advances and if therefore in a givencaseit is established that the interest earned by the assessee was not out of either loan or advance but through some other source, the interest tax would not apply to such interest. However, when no such factual dispute was raised, no material on record to hold contrary to what the assessee itself had contended before the Commissioner of Income Tax (Appeals), the contention of the counsel for the assessee must be rejected. For the reasons recorded by this court in Asman Investment Limited v. Assistant Commissioner of Income Tax in Tax Appeal No.154 of 2007 (supra), the question is answered in the affirmative, that is, in favour of the revenue and against the appellant assessee. It is held that in the facts and under the circumstances of thiscase, the Income Tax Appellate Tribunal was right in law in holding that the appellant is liable to pay interest tax on the interest earned by it. The appeal, therefore, fails and is, accordingly, dismissed with no order as to costs.

Income Tax Act, 1961—Interest tax – The appeal of the assessee as admitted on the substantial question of law as to whether, the Income tax Appellate Tribunal was right in law in holding that the appellant is liable to pay interest tax on the interest earned by it. Tribunal, found that the facts and circumstances in Interest Tax Appeal No.55/Ahd/2003 are similar and the parties had advanced the same arguments and, accordingly, for the reasons assigned in Interest Tax Appeal No.55/Ahd/2003 has also dismissed the appeal being Interest Tax Appeal No.56/Ahd/2003. The assessee had challenged the common order dated 21.7.2007 passed by the Tribunal in Interest Tax Appeal No.55/Ahd/2003 before High Court and High Court had dismissed the said appeal by holding that the Tribunal had correctly held the assessee company to be a finance company. Thus, following the aforesaid view of the Tribunal which was upheld in further Appeal, High Court dismissed the Appeal of the assessee holding that “the Tribunal was right in law in holding that the appellant is liable to pay interest tax on the interest earned by it”. - ASMAN INVESTMENTS LTD. V/s DEPUTY CIT - [2020] 23 ITCD Online 136 (GUJ)
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