Law:

Section:

Section 4 of the Income-tax Act, 1961 - Income - Assessable as - Assessee, a Government undertaking, received certain sums from Government, which were deposited in bank on short term deposits - Whether interest earned on said deposits constituted assessee's income chargeable to tax - Held, yes Section 56 of the Income-tax Act, 1961 - Income from other sources - Chargeable as - Whether in view of facts under head 'Income - Assessable as', impugned interest income was to be assessed under section 56 - Held, yes Facts The assessee, a Government of India undertaking, deposited in bank certain sums received from Government, on short term deposits and earned interest thereon. For the assessment year 1972-73, the assessee contended that said sum would reduce its cost of construction and was, therefore, not chargeable to tax. The Tribunal found that the income was interest earned by utilising the surplus money wherever it was not required in the business and that it was not expenditure to reduce cost of construction. In view thereof, it held that impugned income would be taxable as income from other sources. On reference: Held It is well established that a source of income cannot be brought under the residuary head, if it comes under any of the specific heads. In the instant case, the income from bank deposits was never income from business. They were never incidental to the assessee's business. It had rightly not been contended on behalf of the assessee that the interests from bank deposits were capital receipts. Not being capital receipts, they must be treated to be income of the assessee. It could not be income from business as the receipt was not incidental to the business of the assessee. It would, therefore, fall in the category of section 14(f) 'income from other sources' and computed in terms of section 56(1). Hence, the Tribunal was justified in assessing the impugned interest income in terms of section 56. Cases referred to CIT v. Bokaro Steel Ltd. [1988] 67 CTR (MP) 138, Madhya Pradesh State Industries Corpn. Ltd. v. CIT [1968] 69 ITR 824 (MP),Traco Cable Co. Ltd. v. CIT [1969] 72 ITR 503 (Ker.), Collis Line ( P.) Ltd. v. ITO [1982] 135 ITR 390 (Ker.),…

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