Law: Income Tax Act, 1922

Section:

Income-tax-----Business---Other sources---Business income or income from other sources---Meaning of business---Money-lending business carried on by HUF---Capital received by minor on partition of HUF---Finding that amount was utilized by minor in giving loans and earning interest---Tribunal correct in holding that assessee (minor) carried on money-lending business---Interest on loans assessable as business income---Indian Income Tax Act, 1961. The question whether a particular source of income is business must be decided according to ordinary notions of what a business is. The activity from which the income is derived must have a set purpose. The motive for the activity must be profit and not sport or pleasure. Even a single or isolated transaction can constitute business if it bears a clear indicia of trade, although the activity would normally be systematic and organised characterised by a course of dealings which are frequent, regular and continuous. The income returned by the assessee, who was an individual and a minor at the relevant time, for the assessment years 1966-67 to 1969-70 included interest from certain loan transactions. The Income Tax Officer, relying upon the fact that the entire capital that was received by the minor at a family partition had been invested in a small number of persons, was of the view that there was no money-lending business to which the interest income could be correlated. Therefore, he assessed the interest income under the head "Other sources". The Tribunal held that the fact that the assessee was a minor did not preclude him from carrying on business through his agent or guardian; that the assessee had obtained certain funds at a partition which were undoubtedly part of money-lending business prior to the partition; that after the partition, these amounts were withdrawn from the firm in which they had been invested under a financial arrangement; that at the time of so withdrawing the amounts, certain discount had been given which showed the treatment of the fund as stock-in-trade; that the assessee came from a family of money-lenders to whom money was always stock-in-¬trade and not capital; that interest had been earned…

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