1987 (10) TMI 46 - HC - Income Tax

Summary

Issues Involved:
1. Taxability of receipts from letting out quarters to outsiders.
2. Classification of income from letting out properties.
3. Taxability of interest received from sums advanced to employees.
4. Taxability of interest received from bank on short-term deposits.
5. Taxability of interest received from amounts advanced to contractors.
6. Taxability of hire charges from letting out plant and machinery.
7. Taxability of royalty received for allowing contractors to raise stone chips.
8. Taxability of miscellaneous receipts.

Summary:

1. Taxability of Receipts from Letting Out Quarters to Outsiders:
The court addressed whether receipts from letting out quarters to outsiders, such as employees of contractors engaged in the construction of the plant, can be treated as the income of the assessee and/or should be adjusted against the cost of construction to reduce such cost. The court held that these receipts should be adjusted against the cost of construction and not treated as taxable income.

2. Classification of Income from Letting Out Properties:
The court examined whether receipts from letting out properties to outsiders should be assessed as income from property u/s 22, as business income u/s 28, or as income from other sources u/s 56. The court concluded that such income should be adjusted against the cost of construction and not be treated as taxable income under any of these sections.

3. Taxability of Interest Received from Sums Advanced to Employees:
The court considered whether interest received by the assessee from sums advanced to its own employees should be assessed as income from other sources or reduce the cost of construction. It was held that such interest should reduce the cost of construction and not be treated as taxable income, consistent with the earlier decision regarding interest received from contractors.

4. Taxability of Interest Received from Bank on Short-Term Deposits:
The court deliberated whether interest received from banks on short-term deposits should be assessed as income or reduce the cost of construction. The court held that such interest is liable to be taxed as "income from other sources" u/s 56, as it was not incidental to the business of the assessee.

5. Taxability of Interest Received from Amounts Advanced to Contractors:
The court reaffirmed its earlier decision that interest received by the assessee-company on amounts advanced to contractors was not taxable, thus answering this question in favor of the assessee.

6. Taxability of Hire Charges from Letting Out Plant and Machinery:
The court upheld the Tribunal's decision that hire charges received by the assessee-company for letting out plant and machinery to contractors were not taxable, consistent with the earlier decision.

7. Taxability of Royalty Received for Allowing Contractors to Raise Stone Chips:
The court agreed with the Tribunal's decision that royalty received by the assessee-company for allowing contractors to raise stone chips from the company's land was not taxable, following the earlier judgment.

8. Taxability of Miscellaneous Receipts:
The court held that miscellaneous receipts were not taxable, in line with the earlier decision.

Conclusion:
The court answered most questions in favor of the assessee and against the Revenue, except for the fourth question regarding interest income from bank deposits, which was held to be taxable as "income from other sources." The references were disposed of accordingly, with no order as to costs.