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Issues:
1. Taxability of interest income as income from other sources. 2. Consideration of additional grounds of appeal. 3. Jurisdiction of Special Bench under s. 255(3) of the IT Act, 1961. Analysis: 1. Taxability of interest income as income from other sources: The case involved the taxability of interest income amounting to Rs. 22,84,994 earned by the assessee during the assessment year 1978-79. The Special Bench considered the Supreme Court decision in Tuticorin Alkali Chemicals and Fertilizers Ltd. vs. CIT, emphasizing that income from sources other than business or profession is taxable under s. 56 of the IT Act, irrespective of whether the company has commenced business. The Court clarified that interest received from investments, even if utilizing borrowed capital, is considered revenue income and subject to taxation. Therefore, the Special Bench held that the interest earned by the assessee was rightly taxed, following the principles established by the Supreme Court. 2. Consideration of additional grounds of appeal: The assessee sought to raise additional grounds of appeal before the Tribunal, challenging the inclusion of the interest income in the total income. Initially, these additional grounds were not included in the appeal filed before the Tribunal. However, the assessee later submitted a forwarding letter requesting to raise these grounds, arguing that the interest income should not be taxable as it was received before the commencement of its business. The Tribunal initially declined to entertain these additional grounds, but the matter went up to the Supreme Court, which remanded the proceedings back to the Tribunal for consideration of the new grounds raised by the assessee. Despite the remand, the Special Bench ultimately dismissed the additional grounds, upholding the taxability of the interest income based on established legal principles. 3. Jurisdiction of Special Bench under s. 255(3) of the IT Act, 1961: The Special Bench was constituted under s. 255(3) of the IT Act, 1961, to consider the additional grounds of appeal raised by the assessee regarding the taxability of the interest income. The Tribunal recommended the formation of the Special Bench, which was accepted by the Hon'ble President. The Special Bench, comprising members V. Dongzathang, M. K. Chaturvedi, and Sikander Khan, heard the arguments presented by the authorized representatives of both the assessee and the Department. After due consideration and referencing the relevant legal precedents, the Special Bench concluded that the interest income in question was taxable as income from other sources, in line with the provisions of the IT Act and judicial interpretations. In conclusion, the judgment by the Appellate Tribunal ITAT Delhi affirmed the taxability of the interest income earned by the assessee, dismissed the additional grounds of appeal challenging the inclusion of the income, and highlighted the legal principles governing the taxation of income from sources other than business or profession.
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