Law:

Section:

Section 56 of the Income-tax Act, 1961 - Income from other sources - Chargeable as - Assessment year 1978-79 - During accounting year under consideration, assessee, who was in process of setting-up sugar mill, had borrowed funds from financial institutions and banks on which it had paid interest - A part of funds so received was deposited in short-term deposits with banks on which assessee had earned interest - Assessee claimed that interest receipts should be set off against interest payments and, therefore, no interest income was assessable in its hands - Assessing Officer rejecting claim of assessee held that interest earned by assessee was assessable under head 'Income from other sources' - Whether in view of decision in case of Tuticorin Alkali Chemicals & Fertilizers Ltd. v. CIT [1997] 227 ITR 172/ 93 Taxman 502 , interest earned by assessee had rightly been held to be its income and taxable under head 'Income from other sources' - Held, yes CASES REFERRED TO India Cements Ltd. v. CIT [1966] 60 ITR 52 (SC) [Para 5], Challapalli Sugars Ltd. v. CIT [1975] 98 ITR 167 (SC) [Para 5], Addl. CITv. Indian Drugs & Pharmaceuticals Ltd. [1983] 141 ITR 134 /[1982] 9 Taxman 95 (Delhi) [Para 5], CIT v. Paramount Premises (P.) Ltd. [1991] 190 ITR 259 (Bom.) [Para 5], CIT v. Tirupati Woollen Mills Ltd. [1992] 193 ITR 252 (Cal.) [Para 5], CIT v. New Central Jute Mills Co. Ltd. [1979] 118 ITR 1005 /2 Taxman 246 (Cal.) [Para 6], Addl. CIT v. Madras Fertilisers Ltd. [1980] 122 ITR 139(Mad.) [Para 6], CED v. Smt. Kalawati Devi [1980] 125 ITR 762 /4 Taxman 250 (All.) [Para 6], Tuticorin Alkali Chemicals & Fertilizers Ltd. v. CIT [1997] 227 ITR 172/ 93 Taxman 502 (SC) [Para 6], CIT v. Coromandal Cements Ltd. [1998] 234 ITR 412 (SC) [Para 6], and CIT v. Bokaro Steel Ltd. [1999] 236 ITR 315 (SC) [Para 8], CIT v. Autokast Ltd. [2001] 248 ITR 110 / 102 Taxman 94 (SC) [Para 8]. Vikram Gulati for the Applicant. A.N. Mahajan for the Respondent. JUDGMENT R.K. Agrawal, J. - The Income Tax Appellate Tribunal, New Delhi has referred the following question of law under section 256(1) of the Income-tax Act, 1961, hereinafter referred to as the Act, for opinion to this Court.…

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