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TMI Blog1990 (10) TMI 156X X X X Extracts X X X X X X X X Extracts X X X X ..... e not part of the assessee's business activity. He felt that the assessment order under s. 143(3) read with s. 144B passed by the ITO on 10th July, 1984 for the asst. yr. 1982-83 was erroneous and prejudicial to the interest of Revenue. Proceedings under s. 263 of the IT Act, 1961 were initiated by notice dt. 5th March, 1987. The Commissioner proposed to modify the assessment by excluding the amount from "business income" and considering the same under the head "other sources'. The assessee appeared before the Commissioner and filed written submissions dt. 21st March, 1987. It was submitted therein that the Government of Tamil Nadu granted Rs. 2 crores towards share capital and Rs. 1.60 crores towards Ways and Means loan to the assessee. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e is to be treated as 'Business Income". In that view he directed the ITO to exclude the amount of interest income from business income and consider the same under the head 'other sources'. Aggrieved by the order of the Commissioner under s. 263, the assessee has preferred the present appeal before the Tribunal. 4. At the time of hearing, the assessee's counsel filed a paper book of Annexures A to I, copy of the notice under s. 263 dt. 5th March, 1987, copy of the assessee's reply dt. 21st March, 1987 printed accounts of the assessee company for the financial years ending on 31st March, 1975, 31st March, 1979, 31st March, 1981 and 31st March, 1982 and copy of the Memorandum and Articles of Association of the assessee company. The argument ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed an interest income of Rs. 49,73,865. This was shown as business income and was assessed as such in the assessment made on 10th July, 1984. The direction of the Commissioner to the Assessing Officer to exclude the amount of interest income from business income and assess the same under the head 'other sources' is not warranted on the facts and circumstances of the case. Upto asst. yr. 1981-82 the interest income was treated as business income. The earning of interest and payment of interest are parts of the assessee's business activity. Interest earned out of the funds invested by the assessee company is part of its business routine. The assessee company deposited the monies with the banks and other corporations and earned interest. Such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5) 156 ITR 542 (Mad). The case of A.P. Industrial Infrastructure Corpn. Ltd. relied on by the assessee's counsel is distinguishable on facts. In that case disbursement of funds was the assessee's business. 6. We have considered the rival submissions, paper filed before us and the case law cited. The assessee company was incorporated under the Companies Act, 1956 on 11th April, 1974. The main object of the assessee company is to purchase, charter, hire steamships and to maintain and operate transport services by water. The incidental or ancillary objects included borrowing money and lending money as can be seen from sub-cls (vii) and (viii) of cl. 21 of the Memorandum of Association. As laid down by the Supreme Court in the case of State of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 91,141 31st March, 1979 13,33,844 31st March, 1980 1,15,15,239 31st March, 1981 1,79,51,802 31st March, 1982 2,21,75,475 In the Auditors Reports for the years ending 31st March, 1981 and 31st March, 1982 the following appeared : "The parties to whom the loans have been given by the company are repaying the principle amount and interest as stipulated". From the above, it is clear that the assessee's business activity included not only shipping but also lending money for interest. Lending money on interest was a part of its business activity. Upto the asst. yr.1981-82 interest income has been treated by the IT authorities as the assessee's business income. The cases realied on by the Departmental Representative are distinguishable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... these funds have been utilised only for business purposes of the assessee, as the assessee company has taken overdraft facilities on the security of the term deposit with the State Bank of India. The materials placed by the assessee establish that these funds were kept in short-term deposits, so that they are really and easily available to the assessee company for its business deposits transactions at short notice. The placing of these monies in such short-term instead of keeping them in current account without earning any interest would not make the interest earned on such short-term deposits "income under other sources". All these transactions are normal business activities carried on by any prudent business man in the ordinary course of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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