1975 (8) TMI 31 - HC - Income Tax

Charitable Purpose Charitable Trust General Public Utility Not Involving The Carrying On Of Any Activity For Profit

Issues Involved
1. Res judicata or estoppel under the Income-tax Act.
2. Classification of interest on fixed deposits as "income from other sources" or "business income."
3. Taxability of interest under a Supreme Court decree as revenue receipt.
4. Taxability of interest payable to a third party as revenue receipt.

Detailed Analysis

Issue 1: Res Judicata or Estoppel under the Income-tax Act
The Tribunal held that there was no bar of res judicata or estoppel under the Income-tax Act, and that revenue authorities were not bound by previous orders while assessing interest income from fixed deposits as income from other sources for the assessment year 1969. The court agreed with the Tribunal's view, emphasizing that the doctrine of res judicata does not apply to income tax assessments because each assessment year is a separate unit.

Issue 2: Classification of Interest on Fixed Deposits
The Tribunal ruled that the interest on fixed deposits was taxable as "income from other sources" and not as "business income." The court provided an in-depth analysis of this issue. The assessee-company, a banking company in liquidation, had ceased its main business activities following a winding-up order. The Income-tax Officer treated the interest income from fixed deposits as "income from other sources" for the assessment year 1969-70, a decision upheld by the Appellate Assistant Commissioner and the Tribunal.

The court examined whether the liquidator was carrying on business or merely realizing assets. It was found that the liquidator was not engaging in any business activities but was instead realizing assets and investing surplus funds pending distribution. The court concluded that the investment of surplus funds did not amount to carrying on business. The court emphasized that the liquidator's activities were part of the winding-up process and were not business activities. Consequently, the interest income was correctly classified as "income from other sources."

Issue 3: Taxability of Interest under Supreme Court Decree
The Tribunal held that the interest of Rs. 20,826 under a Supreme Court decree was liable to be taxed as a revenue receipt. This issue was not pressed by the assessee's advocate during the hearing, and therefore, the court did not provide a detailed analysis.

Issue 4: Taxability of Interest Payable to a Third Party
The Tribunal also ruled that the interest of Rs. 8,800.90 payable to M/s. Harshadrai Mohanlal & Co. was liable to be taxed as a revenue receipt. Similar to Issue 3, this issue was not pressed by the assessee's advocate, and the court did not delve into a detailed examination.

Conclusion
The court answered the primary question (Issue 2) in the affirmative, holding that the interest income from fixed deposits was rightly classified as "income from other sources." The court found no grounds to disturb the Tribunal's finding that the liquidator's activities did not constitute carrying on business. The other issues were not pressed by the assessee's advocate, and thus, the court did not provide detailed rulings on them. The court concluded that there should be no order as to costs in this reference.

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