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TMI Blog1993 (6) TMI 126X X X X Extracts X X X X X X X X Extracts X X X X ..... ted to have been derived from money-lending business by each of these assessees. Each of these assessees was represented by a common representative Shri Ravi Sarma, C.A. of M/s. Sarma Co. before the Income-tax Officer. The total incomes were accepted. However, tax was levied at maximum marginal rate by the Income-tax Officer by applying the provisions of section 161(1A) of the Income-tax Act in the case of each of these assessees. These assessments were completed in the case of each of these assessees under section 143(3) of the Income-tax Act by separate assessment orders dated 26-11-1988. 3. Aggrieved against the tax being levied at maximum marginal rate each of these assessees went up in appeal before the Commissioner of Income-tax (Appeals), Visakhapatnam. Before the Commissioner of Income-tax (Appeals), the assessees relied upon certain favourable orders passed by this Tribunal for earlier years and he contended that their incomes are not liable to be taxed at maximum marginal rate but only at ordinary rates. In fact the assessee relied upon the decision in Sitaratnam Family Trust v. ITO [1987] 22 ITD 117 (Hyd.) before the Commissioner of Income--tax (Appeals) and it is co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plea of the assessee that following Sitaratnam Family Trust's case, ordinary rates should be applied to the incomes returned was not accepted and their plea was rejected in that regard. For the first time, the learned Commissioner (Appeals) pointed out that a plea was raised before him by the learned counsel for the assessee that the assessee did not carry on any money-lending business and since no business was carried on, the income earned does not fall under the head 'Income from other sources' and if no business was carried on by a Trust, the application of maximum marginal rate should be set aside and the application of ordinary rates of tax to the returned income should be ordered in the case of each of these assessees. The learned Commissioner of Income-tax (Appeals) dismissed this contention also holding that it was never raised in the course of assessment proceedings nor could the claim be supported by any relevant material on record inasmuch as, the return together with computation of total income furnished by the assessee clearly declared the source as 'income from own business' (money-lending) barring an amount of Rs. 6,014 in the case of Vijaya Family Trust from bank i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the claim but on further appeal the Tribunal held that since the entire assessment was open before the AAC there was no reason for his not entertaining the claim, or directing the ITO to allow appropriate relief. On a reference the High Court upheld the view taken by the Tribunal. On appeal this Court set aside the order of the High Court as it was of the view that the AAC had no power to interfere with the order of assessment made by the ITO on a new ground not raised before the ITO, and therefore, the Tribunal committed error in directing the AAC to allow the claim of the assessee under section 84. Apparently this view taken by the three Judge Bench of the Court in Kanpur Coal Syndicate's case. It appears from the report or of the decision in Gujarat High Court case the three Judge Bench decision in Kanpur Coal Syndicate's case was not brought to the notice of the Bench in Gurjargravures (P.) Ltd.'s case. In the circumstances the view of the larger Bench in Kanpur Coal Syndicate's case hold the field. However, we do not consider it necessary to over-rule the view taken in Gurjargravures (P.) Ltd.'s case as in our opinion that decision is founded on the special facts of the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntioned that the returns were filed specifically stating that the incomes were derived by carrying on money-lending business. Secondly it was never the contention of the assessee-trusts in the assessment proceedings that they did not carry on any money-lending business but were deriving only interest income under the head other sources. Thirdly they did not mention in any of the grounds raised before the Commissioner (Appeals) that in fact they were not carrying on any money-lending business but were deriving interest amount, only on deposits made by them. Fourthly they did not file any additional ground before the Commissioner (Appeals). For assessment year 1986-87, Vijaya Family Trust derived gross interest income of Rs. 19,423.90 which is shown under the head business income in its computation of total income filed for assessment year 1986-87. The said Trust filed its trial balance as on 31-3-1986 which disclosed inter alia, the following amounts as interest receipts : Rs. 13-9-1985 Sri Bhavani Castings Pronote interest 965.65 11-1-1986 Sri Bhavani Castings Pronote interest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fficer the particulars of which are as follows : (1) Smt. K. Seetaratnam Rs. 14,524.00 (2) Sri Bhavani Castings Rs. 24,381.48 ------------- Rs. 38,905.48 ------------- 7. Now coming to Seetaratnam Family Trust, for assessment year 1985-86 for which the previous year ended by 31-3-1985, interest income received was bifurcated under the head other sources and under the head money-lending business separately in the computation of income filed before the Income-tax Officer. The interest income received from business is stated to be Rs. 39,099.00 the particulars of which are as follows : (1) Sri Padmalaya Finance Corpn. Rs. 11,677.50 (2) -do- Rs. 326.80 (3) -do- Rs. 11,677.50 (4) -do- Rs. 2,451.00 (5) K. Saradhi R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the course, and as part, of the business. If not so, it will fall under the residuary head 'Income from other sources'." Business has been defined under section 2(13) as including any trade, commerce, manufacture or any adventure or concern in the nature of trade, commerce or manufacture. This definition is inclusive and not exhaustive, and the words used in the definition are wide. But it is only some real, substantial and systematic or organised activity or conduct with a set purpose that constitutes business income. In support of this statement of law the learned authors cited the decision of the Supreme Court in Narain Swadeshi Wvg. Mills v. CEPT [1954] 26 ITR 765. 9. In the view of this Tribunal, to judge whether interest income should be treated as part of business income or should be treated as falling under residuary head 'Income from other sources', one has to see whether the assessee had followed any systematic or organised course of business activity or conduct with a set purpose of earning interest. Firstly each of these assessees had bifurcated interest earned into two heads namely, interest income from money-lending business and interest income which falls unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ach of them also varied from year to year. Thus, the evidence on record would clearly show that all these three trusts have been carrying on money-lending business as business and was earning interest in the course of that business and each of these assessees had taken up money-lending business as an organised course of activity and carried on the business systematically. It cannot be said that interest was earned by merely depositing the amounts just like depositing in a bank. Further each of these trusts has an establishment and they have been incurring expenditure for running that establishment also. Each of these trusts has got its own registered office and business premises of its own. Therefore, all these elements should exist only in a case where there is an organised business activity. No doubt it is argued that it is the true nature and quality of the receipt and not the head under which it is entered which would prove decisive and if a receipt is a trade receipt the fact that it is not shown in the account books of the assessee would not prevent the assessing authority from treating it as a trade receipt and vice versa and in support of this proposition, the decision of t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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