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TMI Blog2001 (12) TMI 187X X X X Extracts X X X X X X X X Extracts X X X X ..... come from other sources as the assessee-company had not done the business of consignment agent for any outside parties. The AO had also pointed out that the assessee could not have acted as an agent without a specific resolution as per provisions of s. 149(2A). The assessee furnished a reply which according to the AO was not satisfactory. He, accordingly, treated the receipts of Rs. 2,10,285.09 as income of the assessee from other sources. Deduction under s. 57 was allowed of Rs. 55 only. The AO had relied upon the decision of Madras High Court in the case of South India Shipping Corporation vs. CIT (2000) 163 CTR (Mad) 617 : (1999) 240 ITR 24 (Mad) in support of the finding that the income from the activities carried on by the assessee is assessable under the head income from other sources. 3. The assessee appealed to the CIT(A) pleading that the income from interest, etc. may be assessed under the head "business income" and the expenses of Rs. 2,32,888 relating to business be allowed. Reference was made to the special resolution passed in the meeting of the shareholders authorising the company to carry on the business of financing and investment. The CIT(A) has confirmed the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esentative, on the other hand, contended that the assessee has not carried on any activity resulting in the activity of business. The assessee has invested surplus funds with bank and with sister concerns and derived interest therefrom. Such income is assessable to tax under the head "Income from other sources" as held by their Lordships of the Hon'ble Supreme Court in the case of Tuticorin Alkali Chemicals Fertilisers Ltd. vs. CIT (1997) 141 CTR (SC) 387 : (1997) 227 ITR 172 (SC). Reliance was placed on the findings of the AO as well as the CIT(A) in support of the contention. The learned Departmental Representative further contended that the commission was shown to have been received from a sister concern and the assessee has not carried on any activity as commission agent. It was also contended that the expenses claimed by the assessee are unrelated to the activities of earning income and, therefore, are neither allowable under the head "Income from business" nor under the head "Income from other sources". It was pointed out that the main income of the assessee is from the bank interest and interest from sister concerns against which substantial deduction is claimed by the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... preme Court in the case of Karnani Properties Ltd. vs. CIT (1971) 82 ITR 547 (SC) at p. 554 reproduced hereunder are relevant: "It was next urged by Mr. Manchanda that our decision in this case may preclude the Department from reconsidering the correctness of the findings reached by the ITO, the AAC and the Tribunal in the assessee's case in the subsequent years. This apprehension may again be not well founded. Generally speaking, the rule of res judicata does not apply to taxation proceedings. We have not gone into the correctness of the findings of fact reached by the Tribunal. Therefore, whether those facts and circumstances were correctly found or not may still be a matter for consideration in any future assessment. We do not wish to say anything more on this aspect as we do not want to pronounce on question which are not before us." Similar view has been taken by their Lordships of the Hon'ble Supreme Court in the case of M.M. Ipoh vs. CIT (1968) 67 ITR 106 (SC) at p. 118. The relevant portion is quoted as under: "The doctrine of res judicata does not apply so as to make a decision on a question of fact or law in a proceeding for assessment in one year binding in anot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t would be relevant to consider as to what is meant by "business". In this connection, the decision of the jurisdictional High Court of Gujarat in the case of CIT vs. Motilal Hirabhai Spinning Weaving Co. Ltd. 1977 CTR (Guj) 674 : (1978) 113 ITR 173 (Guj) will be relevant where the word "business" has been defined. In this case, their Lordships held that the relevant tests to be applied are volume, frequency, continuity and regularity of the transactions in reaching to the conclusion that the activities of the assessee constituted business. The decision of the Hon'ble Supreme Court in the case of Dalhousie Investment Trust Co. Ltd. vs. CIT (1967) 66 ITR 473 (SC) is also relevant. In that case, Their Lordships held that the mere fact that an investment company periodically varies its investment does not necessarily mean that the profit resulting from such variation is taxable under the IT Act. Their Lordships further held that the variation of this investment must amount to dealing in investment before such profit can be taxed as income under the IT Act. The sum and substance of the aforementioned decision is that mere fact that assessee has earned income may not be decisive to ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... requency, continuity and regularity of the transactions could be relevant for considering as to whether the assessee has carried on the activities as activities of business. In this case, the money has not been advanced to any outsider and the activity of advancing money has not been carried out in an organised manner nor is there frequency of transactions. In fact, it is a case of a company where no business has been started and the surplus funds have been invested before the commencement of the business. The decision of the Hon'ble Supreme Court in the case of Tuticorin Alkali Chemicals Fertilisers Ltd., in my view, directly applies to this case. The income derived from investment is assessable under the head "Income from other sources". Even otherwise, the facts and circumstances of this case clearly demonstrate that the assessee had not carried on the financing business. The CIT(A) has pointed out that the permission of the Reserve Bank of India is required for carrying on the business of financing. No such permission has been obtained. The company has also not made it known to outsiders that they are in financing business so as to develop the business. I am, therefore, of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al in this case as the expenses claimed by the assessee were not considered by the Tribunal in the preceding year. 13. Taking the totality of the facts and circumstances of this case into consideration, I have no doubt in my mind that the activities carried on by the company do not constitute the activities of business. The entire receipts are thus, accordingly, assessable under the head "Income from other sources". 14. Now, I proceed to consider the claim of the assessee relating to expenses. I may point out that the real issue involved in this appeal is as to whether the assessee is entitled to deduction of substantial expenses claimed. Whether the income is assessed under the head "Income from business" or "income from other sources", the AO shall have to consider the claim relating to expenses in accordance with law. In case the income is assessed under the head "Income from business", the assessee would be entitled to deduction of the expenses incurred or laid out for purposes of business. Similarly, if the income is assessable under the head "Income from other sources", the assessee would be entitled to deduction of the expenses incurred for earning the income. 15. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. (1967) 66 ITR 710 (SC), their Lordships of the Hon'ble Supreme Court held that the Tribunal has the power to grant relief on any ground not even raised before it. On the same analogy, the relief not due to the assessee is to be rejected on any ground not even raised by the AO in the assessment order. This view is further supported by the decision of the Calcutta High Court in the case of Steel Containers Ltd. vs. CIT (1978) 112 ITR 995 (Cal). I, therefore, reject the objection of the assessee in this regard. 16. In the light of the above finding, I proceed to consider the claim of the assessee relating to expenses irrespective of the head under which the income is assessed to tax. As pointed out earlier, the major source of income of the assessee is the interest income. Out of the total receipts of Rs. 2,10,285, the interest component is of Rs. 1,79,225. The interest on income-tax refund is Rs. 2,431. The assessee had deposited money with the bank from which interest is earned. Moreover, money had also been advanced to sister concerns and interest has accrued on those deposits. The assessee has not borrowed money on payment of interest. Therefore, no expenditure has been incu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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