Law: Income Tax Act, 1961

Section: 28,56

Income-tax----Business income or income from other sources ---Assessee-company refining petroleum products---In the course of assessees business assessee receiving money on several counts---Surplus money not immediately required deposited with Banks---Interest received on term deposits with Banks--¬Deposit of moneys with Banks interlinked with carrying on of business of assessee---Department accepting claim of assessee to-treat deposit as capital employed for relief under S.80-J, Indian Income Tax Act, 1961---Income earned by capital employed is business income and not income from other sources---Interest income to be assessed as business income---Indian Income Tax Act, 1961, Ss.28 & 56. The assessee, carrying on business of refining petroleum products, received interest on term deposits with banks. For the assessment year 1974-75, the assessee claimed that the interest was to be assessed as business income. The Income-tax Officer held that the interest received was directly relatable to the deposits made in the banks and such interest had to be assessed as "income from other sources" and it was not profit derived from an industrial undertaking. The Appellate Assistant Commissioner affirmed the order of the Income-tax Officer. The Tribunal held that the investing of surplus moneys in term deposits was indisputably inter-connected with the carrying on of the assessees business, that in the course of the assessees business, the assessee received money on several counts, and that the money not immediately required was always deposited with the banks, which would serve two objectives, namely, one was easy accessibility to the money when needed and the other was earning of an interest which would reduce the cost of borrowing. The Tribunal also observed that the interest could be linked to the interest that the assessee-company charged from its customers on overdue payments, which would also be regarded as business income and never treated as income from "other sources". The Tribunal also found on an analysis of section 56 of the Income Tax Act, 1961, which alone permits taxation of income from "other sources", that the language used in that section also…

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