TMI Blog1968 (4) TMI 2X X X X Extracts X X X X X X X X Extracts X X X X ..... Whether, on the facts and in the circumstances of this case, the sum of Rs. 20,856 received by way of interest by the assessee should be taxed under section 28 as business income or under section 56 as income from 'other sources'?" The material facts are that the assessee, the Madhya Pradesh State Industries Corporation Ltd., is a Government private limited company. It was incorporated on 11th April, 1961, for taking over and running certain concerns of the Government of Madhya Pradesh, namely, the Ratlam Power Alcohol Project, Spinning Mill, Sanawad, and the Cottonseed Solvent Extraction Project, Ujjain. The shares in the company are held by the Government of Madhya Pradesh, the Madhya Pradesh Electricity Board, and the Director of Indus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r held that though the company was authorised to do money-lending business, the interest received by it on deposits from the banks was not any income received from money-lending business. He treated the interest income as income from "other sources" under section 56 of the Act. He allowed deduction of a part of the expenses incurred in earning this interest income. The assessee's appeal before the Appellate Assistant Commissioner failed. Thereupon, it filed a second appeal before the Income-tax Appellate Tribunal, which was also dismissed. While dismissing the appeal, the Tribunal observed : " In this case it is common ground that the projects had not gone into production and in that sense there was no business carried on by the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dealings with the company." Then sub-clause (20) says : " To invest and deal with the money of the company in any securities, investments, properties, movable or immovable, and in such manner as may, from time to time, be determined and to sell, transfer or deal with the same." Clause 72(1) of the articles of association, which is material here, runs as follows : " 72. Without prejudice to the general powers conferred by the last preceding article, and the other powers conferred by these articles, and subject to the provisions of the Act, the directors shall have the following powers, that is to say, powers : (1) to invest in such securities as may be approved by the Governor and deal with any of the moneys of the company upon su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e share capital of the assessee in current account or in deposit with any bank cannot by any stretching of the meaning of the term "money-lending" be said to be an act of money-lending. Shri Chitaley, learned counsel appearing for the assessee, did not press before us the argument that the interest received by the assessee from the bank was receipt of income from money-lending activity. He, however, contended that share moneys were moneys relating to the business of the assessee and any interest thereon would be business income as the assessee was authorised under sub-clause 20 of clause III of its memorandum of association and article 72(1) of the articles of association to invest in and deal with the money of the company in any securiti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case, one of the objects of the assessee-company is no doubt to "invest and deal with the money of the company in any securities, investments, properties......" The assessee could have carried on this business. But the question to be determined is whether the act of the assessee-company in keeping the amount of share-money in current account or in deposit with bank and earning interest thereon was one done in pursuance of the object of the company enumerated in sub-clause (20) of clause III of the memorandum of association or article 72(1) of the articles of association. In our opinion, on the facts of the case it is impossible to hold that the deposit of share-money in certain bank was an investment made by the assessee-company pursuant t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e in a certain bank did not constitute any business of the company, then it follows that the interest, earned by the assessee on those deposits cannot be regarded as income under the head "profits and gains of business or profession" under section 28 of the Act. The decision of the Supreme Court in Commissioner of Income-tax v. Calcutta National Bank Ltd., cited by the learned counsel for the assessee, has no applicability here. In that case, the assessee was a banking company. It owned a building and realised income by way of rent for the portion of the building let out. One of the objects stated in the memorandum of association of the company was "to purchase or take on lease or in exchange or otherwise acquire any movable or immovable ..... X X X X Extracts X X X X X X X X Extracts X X X X
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