TMI Blog2004 (10) TMI 66X X X X Extracts X X X X X X X X Extracts X X X X ..... The Income-tax Appellate Tribunal, Delhi, has referred the following three questions of law under section 256(1) of the Income-tax Act, 1961, hereinafter referred to as "the Act" for opinion to this court: "1. Whether on the facts and in law, the Tribunal was justified in confirming the action of the Commissioner of Income-tax (Appeals) who upheld the action of the Income-tax Officer in taking action under section 148 of the Income-tax Act, 1961? 2. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in upholding the action of the Commissioner of Income-tax (Appeals), who confirmed the addition of Rs. 10,417 made by the Income Tax Officer under section 143(3)/148 on account of interest payable to the U.P. Government on seed loan taken by the company? 3. Whether, on the facts and in law and in the circumstances of the case, the Tribunal was legally right in holding that the interest pay able to the U.P. Government on seed loan taken was not deductible from the interest earned from the investments of the same loan by the appellant?" Briefly stated the facts giving rise to the present reference are as follows: The applicant is a company in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 002] 256 ITR 1 (Delhi) [FB]. Sri A.N. Mahajan, learned standing counsel appearing for the Revenue, however, submitted that under section 57 of the Act deduction is permissible from the income assessed under the head "Income from other sources" which has been laid out wholly and exclusively for the purposes of making or earning such income. As the applicant had paid interest to the State Government on "seed loan for industrial estate" when that industrial estate has not yet come into existence and no such income of the industrial estate has been assessed the deduction could not have been allowed. He further submitted that the Income-tax Officer was fully justified to take proceedings under section 147 of the Act as the deduction had been wrongly allowed to the applicant in view of the decision of the Calcutta High Court in the case of New Central Jute Mills Co. Ltd. [1979] 118 ITR 1005. In support of his aforementioned submission he has relied upon the following decisions: (1) CIT v. New Central Jute Mills Co. Ltd. [1979] 118 ITR 1005 (Cal); and (2) Phool Chand Bajrang Lal v. ITO [1993] 203 ITR 456 (SC). Having heard learned counsel for the parties we find that admittedly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such situations, it is not a case of mere change of opinion or the drawing of a different inference from the same facts as were earlier available but one of acting on fresh information. In the case of Indian and Eastern Newspaper Society v. CIT [1979] 119 ITR 996 the apex court has held that section 147(b) of the Act is read as referring to "information" as to law, what is contemplated is information as to the law created by a formal source. It is law, we must remember, which, because it issues from a competent Legislature or a competent judicial or quasi-judicial authority, influences the course of the assessment and decides any one or more of those matters which determine the assessee's tax liability. The apex court has held that the declaration or exposition set forth in a judgment of a court or the order of a Tribunal in itself bears the character of law. Thus, if on the plain language of section 57 of the Act an expenditure which has not been incurred exclusively for earning the income which is to be assessed under the head "Income from other sources" the deduction has been allowed and subsequently in view of the law laid down by one of the High Courts, the Income-tax Offi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company to have six different sources of income, each one of which will be chargeable to income-tax. Profits and gains of business or profession is only one of the heads under which the company's income is liable to be assessed to tax. If a company has not commenced business, there cannot be any question of assessment of its profits and gains of business. That does not mean that until and unless the company commences its business, its income from any other source will not be taxed. If the company, even before it commences business, invests the surplus funds in its hands for purchase of land or house property and later sells it at profit, the gain made by the company will be assessable under the head 'Capital gains'. Similarly, if a company purchases a rented house and gets rent, such rent will be assessable to tax under section 22 as income from house property. Likewise, a company may have income from other sources. It may buy shares and get dividends. Such dividends will be taxable under section 56 of the Act. The company may also, as in this case, keep the surplus funds in short-term deposits in order to earn interest. Such interest will be chargeable under section 56 of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X
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