9911796707
TMI Blog2002 (12) TMI 15X X X X Extracts X X X X X X X X Extracts X X X X ..... termination: "Whether the Tribunal was right in holding that interest income earned by the assessee was taxable under the head 'Other sources of income' and not under the head 'Business income' and, therefore, the Assessing Officer was not justified in charging maximum marginal rate under section 161(1A)?" Facts: On May 25, 1989, a return of income was filed by M/s. J.K. Holdings returning income of Rs. 1,76,360. M/s. J.K. Holdings is owned by K.J. Family Trust. The assessee had accepted deposits and had advanced loans to various parties. It had paid interest for borrowings and it received interest for lending. The income and expenditure account of the assessee shows payment of salary and bonus, staff welfare expenses, brokerage, bank ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... family members of the beneficiaries were the partners. That, the trustees of the trust had invested the amount without any intention of carrying on business and, therefore, the Assessing Officer erred in concluding that the assessee was in the business. The Commissioner came to the conclusion that the expenses claimed were of the nature of business expenses claimable under section 28 to section 44 of the Income-tax Act. That, the trust has created M/s. J.K. Holdings as a separate taxable entity only to avail of the lower tax rate. The appeal was, therefore, dismissed. Being aggrieved, the assessee carried the matter in appeal to the Tribunal. The Tribunal concluded that M/s. J.K. Holdings-assessee was created to centralise all minors' inve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat, loans were taken from minors and beneficiaries and family friends and they were passed on to the firms in which relatives of beneficiaries were the partners. That, there was no intention to make profits. That, M/s. J. K. Holdings had all the attributes of business. However, there was no intention to make profits. That, the intention was to channelise the funds of the beneficiaries and relatives. That, on one side, beneficiaries had surplus funds and, on the other side, there were firms, which were in need of funds. In support, he relied upon the judgment of the Supreme Court in the case of Sole Trustee, Loka Shikshana Trust v. CIT [1975] 101 ITR 234. Findings: The point which arises for consideration in the above three appeals is whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. Therefore, the Assessing Officer was right in coming to the conclusion that the assessee's income from undisclosed sources was introduced in the guise of loans. On the facts of this case, therefore, we hold that the entire device was to avail of the cheaper tax rate. On the facts of this case, we have decided the matter. The loans have not been proved. The source of income has not been proved. Hence, the judgment of the Supreme Court in Loka Shikshana Trust reported in [1975] 101 ITR 234 has no application. Conclusion: For the aforestated reasons, we hold that the income earned by the assessees was taxable at the maximum marginal rate under section 161(1A) of the Act. That, the said section was applicable as in this case the assessee h ..... X X X X Extracts X X X X X X X X Extracts X X X X
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