1990 (1) TMI 4 - HC - Income Tax

Summary

Issues:
1. Assessment of income from fixed deposits under the head 'Income from other sources' instead of 'Profits and gains of business or profession.'

Analysis:
The judgment pertains to the assessment of income from fixed deposits under the head 'Income from other sources' for the assessment year 1977-78. The dispute arose when the Income-tax Officer assessed the interest received on fixed deposits under 'Income from other sources.' The assessee contended that the income should be assessed under 'Profits and gains of business or profession' as the deposits were maintained to meet specific liabilities to foreign shipping principals. The Commissioner (Appeals) rejected this argument, stating that the fixed deposits were not trading assets. On second appeal, the Tribunal upheld the Commissioner's decision, emphasizing that the nature of the business did not consider fixed deposits as trading assets or circulating capital. The Tribunal found no evidence supporting the claim that the deposits were solely for facilitating remittance to foreign principals, leading to the conclusion that the income from fixed deposits should not be assessed as business income.

The Tribunal's decision was challenged before the High Court, where the assessee cited a judgment from the Andhra Pradesh High Court involving a similar scenario where funds were kept in a bank without the intention to earn interest. However, the High Court distinguished that case from the present one, emphasizing the unique circumstances of each case. Ultimately, the High Court answered the question of law in the affirmative, favoring the Revenue's position and upholding the assessment of income from fixed deposits under 'Income from other sources.'

Both judges, BHAGABATI PRASAD BANERJEE and SUHAS CHANDRA SEN, concurred with the decision, and no costs were awarded in the matter.