TMI Blog2009 (12) TMI 226X X X X Extracts X X X X X X X X Extracts X X X X ..... ual business and, therefore, it was incidental to the business activity of the assessee and interest on such short term deposit must be treated as business income - Appeals are allowed - 123 of 2000 - - - Dated:- 22-12-2009 - SUBHRO KAMAL MUKHERJEE and SANKAR PRASAD MITRA JJ. Dr. Debiprasad Pal, Ms. Manisha Seal and Malay Dhar for the appellant. M. P. Agarwal and Sailendra Nath Dutta for the respondents. JUDGMENT 1. SUBHRO KAMAL MUKHERJEE J. - This is an appeal against judgment and order dated October 4, 1999, passed by the Income-tax Appellate Tribunal, "B" Bench, Calcutta, in Income-tax Appeals Nos. 1259-1260 (Cal) of 1995 relating to the assessment years 1990-91 and 1991-92. 2. The aforementioned appeals were heard analogously and the Appellate Tribunal, inter alia, held that the interest earned by the assessee by investing surplus fund of the business in short-term deposits was income from other sources and not business income. 3. The assessee was carrying on the business of growing tea leaves by agricultural process in its own tea gardens in the States of Assam and West Bengal as, also, was manufacturing black tea out of the said green tea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of income derived from the sale of tea grown and manufactured by the seller in India and it did never extend to any other income. Therefore, the Commissioner of Income-tax opined that the orders of the Assessing Officers were erroneous and prejudicial to the interest of the Revenue. 8. The assessee submitted a reply on January 12, 1995, before the Commissioner of Income-tax and contended that the main activity of the assessee was of growing, manufacturing and selling of tea. Therefore, the Assessing Officers rightly assessed the income earned by the assessee from such short-term investments as the business income of the assessee. The income of interest was a part and parcel of the tea business of the assessee. 9. The Commissioner of Income-tax in his consolidated order dated March 29, 1995, for the aforementioned assessment years, inter alia, directed the Assessing Officer to revise the assessments in respect of the afore-mentioned assessment years by treating the interest income of the assessee from such short-term investments as 100 per cent. (hundred) per centum taxable under the said Act treating the same as income from other sources and not as part of growing and man ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income from the same business, namely, the tea business for the purpose of rule 8 of the Income-tax Rules, 1962? Dr. Debiprasad Pal, learned senior advocate, appearing in support of these appeals, however, prays for formulation of a further substantial question of law at the time of hearing of these appeals. He submits that the Tribunals below substantially erred in law in failing to appreciate that as in the admitted facts and circumstances of the case two views were possible and the Assessing Officers preferred to follow a view, the Commissioner of Income-tax should not have invoked his power under section 263 of the said Act because he preferred to follow a different view from that of the Assessing Officers. 15. Mr. M. P. Agarwal, learned advocate, appearing for the Revenue, strongly opposes the prayer of Dr. Pal. He submits that under the said Act these appeals are to be heard only on the substantial questions of law framed under sub-section (3) of section 260A of the said Act Mr Agarwal submits that the questions sought to be raised by Dr. Pal, at the time of hearing of these appeals, have been taken in the memoranda of appeal, but this court, while formulating the subst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eon containing the grounds on which such decision is founded and may award such cost as the High Court deems fit. 22. The Supreme Court in the case of Santosh Hazari v. Purshottam Tiwari reported in [2001] 251 ITR 84 (SC); [2001] 3 SCC 179, while dealing with the provisions of section 100 of the Code of Civil Procedure in detail holds that at the time of hearing of the second appeal, the scope of hearing is circumscribed by the substantial question of law formulated by the High Court. The respondent is at liberty to show that the question so formulated was not involved in the case. In spite of a substantial question of law determining the scope of hearing of the second appeal having been formulated by the High Court, its power to hear the appeal on any other substantial question of law, not earlier formulated by it, is not taken away subject to the twin conditions being satisfied: (i) the High Court feels satisfied that the case involves such question, and (ii) the High Court records reasons for its satisfaction. The High Court cannot proceed to hear a second appeal without formulating the substantial question of law involved in the appeal inasmuch as the existence of a sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me of hearing of this appeal. 29. Dr. Pal, in our view, rightly raised an objection that the Revenue is not entitled to file a written note taking new points and citing new decisions unless the appeals are fixed for further hearing and the assessee is given an opportunity of hearing. Dr. Pal mentions this matter, in the presence of Mr. Agarwal, learned advocate for the Revenue. Mr. Agarwal, in his usual fairness, submits that he shall not be relying upon the new submissions and new citations, which were neither argued nor cited at the time of hearing of these appeals. 30. Dr. Pal argues that interest earned by the assessee by investing surplus funds of the business in short-term deposits in banks and public financial institutions is an integral part of the business of the assessee of growing, manufacturing and selling of tea and is, therefore, business income of the assessee and not income from other sources. Dr. Pal in support of his sub missions cites the decisions in the cases of CIT v. Tirupati Woollen Mills Ltd. reported in [1992] 193 1TR 252 (Cal), CIT v. Tamil Nadu Dairy Development Corporation Ltd. reported in [1995] 216 ITR 535 (Mad) and CIT v. Producin P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tirupati Woollen Mills Limited [1992] 193 ITR 252 (Cal) held that the income arose from the utilization of commercial assets would be business income as the assessee utilized its commercial assets in making fixed deposits, which were lying temporarily surplus with the assessee. 35. Sitting in the co-ordinate Bench we are not only bound by such decision, but we, also, do not find any reason to take a different view in the matter. 36. In Tamil Nadu Dairy Development Corporation Limited [1995] 216 ITR 535 the Madras High Court held that the interest earned on short-term deposits of the assessee-company made out of the business funds available with the assessee - company before they were utilized for actual business, the same was incidental to the business activity of the assessee and the interest on such short-term deposits should be treated as business income. 37. In Producin P. Limited [2007] 290 ITR 598 (Karn) the assessee was a private limited company engaged in the business of export of processed food items. The assessee had received some amount from its foreign customers by way of advance in respect of the exports to be made by it. The advance amount so re ..... X X X X Extracts X X X X X X X X Extracts X X X X
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