Law: Income Tax Act, 1961

Section: 256(1)

Income-tax------Income---Public limited company---Interest on fixed deposit and late payment of call money received prior to setting up of business---No finding that receipts were directly related to a particular item of expenditure---Amount received assessable. The assessee, a public limited company, established a factory for the manufacture and production of electrographites and the production commenced on May 1, 1977. During the accounting period relevant to the assessment year 1978-79, the assessee received interest on fixed deposits and on late payment of call money. The Income-tax Officer held that the amounts were taxable but, on appeal, the Commissioner of Income-tax (Appeals) held that the period of accounting year under consideration was only from January 1, 1977 to April 30, 1977, and interest income for these four months before the commencement of production was not taxable. The Revenue, thereupon, preferred an appeal before the Tribunal, but the Tribunal dismissed the appeal. On a reference: Held, that the rules of accountancy required that where a particular item of miscellaneous income could be directly related to a particular item of expenditure, then it should be set-off against the expenditure and the net amount of expenditure should be treated in an appropriate manner depending upon its nature. In the instant case, however, the Tribunal had not found that the income earned by the assessee, namely, interest on fixed deposit and on late payment of call money, was related to any particular item of expenditure. In the absence of such a finding, the Tribunal was not justified in holding that the interest income received by the assessee on fixed deposits and on late payment of call money was not taxable as the assessee's income. Challapalli Sugars Ltd. v. C.I.T. (1975) 98 ITR 167 (SC); C.I.T. v. Bokaro Steel Ltd. (No. 1) (1988) 170 ITR 522 (Pat.); C.I.T. v. Nagarjuna Steels Ltd. (1988) 171 ITR 663 (AP); Madhya Pradesh State Industries Corporation Ltd. v. C.I.T. (1968) 69 ITR 824 (MP) and Traco Cable Co. Ltd. v. C.I.T. (1969) 72 ITR 503 (Ker.) ref. JUDGMENT G.G. SOHANI, ACTG. C.J.---By this reference under section 256(1) of the Income-tax Act, 1961…

Deprecated: trim(): Passing null to parameter #1 ($string) of type string is deprecated in /home/digixyei/sldsystempk.com/view/master-layout/view_case.php on line 492