Law: Income Tax Act, 1922

Section:

(On appeal from the judgment and order of the High Court of East Pakistan, Dacca, dated the 14th November 1960, in Reference Case No. 1 of 1960).   Income-tax Act (XI of 1922)-------S. 25 (3) (4), proviso-Company engaged in "construction and running" of Railway-Deposit of sur plus moneys in Bank-Articles of Association allowing company to "invest money''-Interest derived from deposit, held, not "income" from normal business in circumstances of case.   Commissioners of Inland Revenue v. Korean Syndicate Limited 1 K B D 598 ref.   Commissioners of Inland Revenue v. Korean Syndicate, Limited (1921) 3 K B D 258 considered.   Commissioner of Income-tax, East Pakistan v. Liquidator Khulna-Bagerhat Railway Co. P L D 1961 Dacca 108 armed. JUDGMENT   S. A. RAHMAN, J.-----This appeal comes to us, on a certificate of fitness, granted by the High Court at Dacca, under sections 109 and 110 of the Civil Procedure Code. It arises out of a reference made to the High Court under section 66 (1) of the Income-tax Act, 1922, at the instance of the Commissioner of Income-tax, East Pakistan.   The question referred to the High Court is in the following terms:-   "Whether in the facts and circumstances of the case income from interest from moneys kept in banks earned by the Company within the year ended on 31st March 1917, would be classed as income from business ?"   The question was answered in the negative by the High Court and the Commissioner of Income-tax assails the correctness of that answer in the present appeal.   The respondent to the appeal is Khulna-Bagerhat Railway Co. Ltd., Ahmadabad. It was incorporated in the year 1916 and entered into an agreement with the Secretary of State for India-in Council on the 14th of April 1916, for the construction of a Railway, in what Is now East Pakistan, and its management. Under that agreement, the State was entitled to acquire the Railway by giving the prescribed notice. In pursuance of this stipulation in the agreement, the Government of Pakistan acquired the Railway and took over its management on the 31st of March 1948.   The Company…