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Issues Involved:
The judgment addresses the following issues: 1. Whether certain amounts earned by the assessee constitute capital receipts and cannot be taxed under the head 'Other sources' for the assessment years 1980-81 and 1981-82. Analysis of the Judgment: Issue 1 - Assessment Year 1980-81: The court referred to Tuticorin Alkali Chemicals and Fertilizers Ltd. v. CIT [1997] 227 ITR 172 (SC) where it was held that interest earned on surplus funds deposited in banks during the installation of the company should be treated as income and not part of the capital structure. Therefore, the amount of Rs. 23,385 earned by the assessee was considered as income and taxable under the head 'Other sources' for the assessment year 1980-81. Issue 2 - Assessment Year 1981-82: Part A: Regarding the amounts of Rs. 360 and Rs. 79,100 earned from selling tender forms and empty cement bags, the court differentiated between interest income and receipts from sale of goods. It was argued that the sale of empty cement bags was part of the purchase of cement and the amount realized reduced the cost of cement used in construction. Since the business had not commenced, any income from these activities should be considered as part of the capital structure and not taxable under 'Income from other sources'. Thus, this part of the question was answered in favor of the assessee. Part B: For the interest earned on surplus funds and other amounts like Rs. 18,909, Rs. 1,506, and Rs. 17,301, the court reiterated that such interest should be treated as income and not capital receipts. Therefore, these amounts were held as taxable under the head 'Other sources' for the assessment year 1981-82. In conclusion, the judgment clarified the tax treatment of various receipts earned by the assessee for the mentioned assessment years, distinguishing between income and capital receipts based on the nature of the transactions and the status of the business operations.
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