9911796707
TMI Blog2009 (12) TMI 226X X X X Extracts X X X X X X X X Extracts X X X X ..... wn in its tea gardens as well as acquired from other growers and selling the same both in the domestic and in the international markets. 4. The assessee procured loans from banks and other public financial institutions for its tea growing and manufacturing business. Part of such funds procured by the assessee, by way of loans from the aforementioned sources, remain unutilized. The said unutilized funds were invested in interest bearing short-term deposits. Consequently, the assessee earned interest from such investments. 5. The assessee contended that such interest income from such short-term interest bearing investment was incidental to integral part of its tea growing and manufacturing business and, therefore, such income was to be treated as income from its tea business. The assessee asserted that the income-tax should be assessed according to the principles envisaged in sub-rule (1) of rule 8 of the Income-tax Rules, 1962 (the said Rules in short). In other words, the assessee contended that only 40 per cent. (forty) per centum of such income should be deemed to be income liable to income-tax. 6. The Assessing Officers in their assessment orders dated March 29, 1993, for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sioner of Income-tax held that a distinction has to be drawn between the tea income in which manufacturing and agricultural activities were involved and non- tea income in which no agricultural activity was involved. The Commissioner, however, found that the assessee procured the loans for the purpose of its different businesses and not for earning interest by way of various investments. 10. The assessee being aggrieved by and dissatisfied with the afore mentioned order dated March 29, 1995, passed by the Commissioner of Income-tax preferred two appeals before the Income-tax Appellate Tribunal, Calcutta. The appeals were registered as Appeal No. 1259 (Cal) of 1995 pertaining to the assessment year 1990-91 and Appeal No. 1260 (Cal) of 1995 pertaining to the assessment year 1991-92. 11. The Income-tax Appellate Tribunal, "B" Bench, Calcutta, considered those two appeals analogously and disposed of those appeals by a common judgment and order dated October 4, 1999, holding, inter alia, that it was difficult to find out a nexus between the tea business of the assessee and the utilization of the surplus for the purpose of generating further income by way of interest from such investme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ementioned question as a substantial question of law. Mr. Agarwal submits that in view of sub-section (4) of section 260A of the said Act, these appeals could be heard only on the questions so formulated and the Revenue should be allowed to argue that these appeals do not involve such substantial questions of law. 16. Mr. Agarwal cites the decision of the apex court in M. Janardhana Rao v. Joint CIT reported in [ 273 ITR 50 and draws our attention to the observation of the apex court that it is essential for the High Court to first formulate the question of law and, thereafter, to proceed with the hearing of the appeal. It is against the scheme of the Act to formulate the question subsequently after conclusion of arguments for the purpose of adjudication. 17. We do not think that M. Janardhana Rao [2005] 273 ITR 50 (SC) has any application in this case. Dr. Pal prays before us to formulate the new substantial question of law for the purpose of adjudication not after the conclusion of arguments. When the hearing of these appeals commences, immediately Dr. Pal prays before us to consider whether another substantial question of law is involved in this appeal or not. 18. Section 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 100 of the Code of Civil Procedure. 23. It is true that in the memoranda of appeal filed by the assessee the question sought to be formulated by Dr. Pal at the time of hearing of these appeals has been taken, but the High Court while formulating the substantial question of law under sub-section (3) of section 260A of the said Act only formulated the aforesaid two substantial questions of law. 24. However, we are unable to accept the objection of Mr. Agarwal that at the time of hearing of these appeals it is not permissible for the appellant to suggest that there exists another substantial question of law merely because such substantial questions of law have been stated in the memoranda of appeals, but at the time of formulating the substantial question of law such question was not formulated by the High Court. 25. The proviso to sub-section (4) of section 260A of the said Act recognises the power of the High Court, for reasons to be recorded, to hear the appeal on any other substantial question of law not formulated by the High Court, if the High Court is satisfied that the case involves such question. 26. When the High Court formulated the said substantial quest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing surplus funds of the business in short-term deposits is not business income of the assessee, but is income from other sources. Mr. Agarwal submits that sub-rule (1) of rule 8 of the said Rules contemplates that the income derived from the sale of tea grown and manufactured by the seller in India shall be computed as if it were income derived from business and 40 per cent. (forty) per centum of such income shall be deemed to be income liable to tax. Mr. Agarwal submits that on proper interpretation of sub-rule (1) of rule 8 of the said Rules, the said rule is not applicable to income, which has no relation to tea business. Mr. Agarwal heavily relies upon the decision in Sookerating Tea Co. P. Ltd. v. CIT [1978] 111 ITR 457 (Gauhati). 32. It is an admitted position that the assessee is carrying on the business of growing green tea leaves by agricultural process in its own tea gardens in the States of Assam and West Bengal and is, also, engaged in manufacturing black tea out of the said green tea leaves grown in its tea gardens as well as acquired from other growers. The company procured loans from banks and other public financial institutions for its tea growing and manufacturin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e treated the interest receipts on the said short-term deposits made in the bank as part of business income. 38. The Karnataka High Court holds that it is now well settled position of law that what is business income and what is not business income has to be determined on the facts of each case. The main activity of the assessee is export business and not that of earning interest on short-term fixed deposits. When the earning of interest is connected with the carrying on of the business of the assessee and if the fixed deposits are utiuised in such a manner so as to provide a sufficiently perceptible link with the business activity of the assessee there should be no objection to the treatment of the interest as business income. We are respectfully concurring with the views expressed in Producin P. Limited [2007] 290 ITR 598 (Kan). 39. As we have already narrated above that the assessee in this case procured loans from banks and other financial institutions for its tea growing and manufacturing business and part of such funds remain temporarily unutilized. The assessee, instead of keeping the amount idle, invested the surplus funds in short-term interest bearing fixed deposits and ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
