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Issues Involved:
The judgment addresses two main issues under section 256(1) of the Income-tax Act, 1961: 1. Whether income derived from letting out sheds owned by the assessee should be assessed as income from business. 2. Whether interest income derived from banks should be assessed as income from business. Issue 1: Income from Letting Out Sheds: The assessee, a public limited company formed by the Government of Andhra Pradesh for industrial development, developed industrial areas and estates in the State. The company's activities included leasing out sheds to industrialists, among other infrastructural services. The Revenue contended that the lease amount should be taxed as income from property, while the assessee argued it should be taxed as income from business. The Tribunal, following a previous judgment favoring a similar corporation, ruled in favor of the assessee. The court upheld this decision, stating that the income from letting out sheds should be assessed as income from business. Issue 2: Interest Income from Banks: The assessee, in the course of its business activities, kept funds in a bank due to the nature of receiving and disbursing funds, including Government funds. The Revenue argued that the interest earned on these deposits should be taxed as income from other sources, while the assessee contended it should be taxed as income from business. Citing a previous case involving the Andhra Pradesh State Financial Corporation, where funds were invested in easily convertible securities, the court found that the interest earned was part of the business activity and should be treated as income from business. Therefore, the court ruled in favor of the assessee on this issue as well. In conclusion, both questions raised in the case were answered in favor of the assessee, holding that income from letting out sheds and interest income from bank deposits should be assessed as income from business.
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