TMI Blog1994 (4) TMI 46X X X X Extracts X X X X X X X X Extracts X X X X ..... hould be assessed as business income ? " In Reference No. 109 of 1983, the question referred is as under : " Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the assessee has carried on business of advancing money on special and ordinary loans and such earnings should be assessed as business income ? " Since the questions of law arising out of the Tribunal's order are the same, both these references are disposed of by this common order. The brief facts of the case are that the assessee is a public undertaking incorporated by Act No. 17 of 1975, i.e., the Rajasthan Land Development Corporation Act, 1975. In the preamble to the Act, it is mentioned that the corporation was consti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n. The surplus money which was lying with the assessee was deposited with various banks and institutions and corporations and interest was received from them. The contention of the assessee was that the said income had to be assessed under the head " Business " because it was in the course of its business that the company had made the deposits and given advances as loans to the various banks, corporations, etc. The Income-tax Officer rejected the contention and held that the income has to be assessed as income from " other sources ". In appeal before the Commissioner of Income-tax (Appeals), it was held that it is not the business of the corporation to carry on money lending. It is, however, authorised to advance special loans to landho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich were invested from time to time as interest bearing advances. The Tribunal came to the conclusion that from the volume of the business carried by the assessee it is clear that the assessee carried on the business of advancing money on special and ordinary loans. Such earning should be assessed as " business income ". The term " business " has been defined under section 2(13) which provides that business includes any trade, commerce or manufacture or any adventure or concern in the nature of trade, commerce or manufacture. The word " business " has been the subject-matter of judicial scrutiny and interpretation and it has been held that it is of wider import which relates to real, substantial and systematic or organised course of acti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the State Government and banks and financial institutions. The provisions of Chapter 4, clause 17(k) permit the assessee to carry on the business of granting special loans. Clause 17(m) provides generally doing such other acts as may permit the execution of the projects or as may be necessary for or incidental to the exercise of its power or discharge of its duties under this Act. These two clauses do not permit grant of loan generally as has been done in this case. Clause 26 provides that the land holder may with the assistance of the corporation apply to a bank or a financial institution for an ordinary loan for meeting the proportionate cost of work. The amount of ordinary loan if sanctioned to the landholder shall be paid to the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s as " income from other sources ". The Tribunal has considered the various provisions of the Act by which the assessee-corporation was constituted and came to the conclusion that it was authorised to carry on the business of advancing special and ordinary loans and, therefore, the income earned is business income. From the various decisions and on the interpretation of various provisions of the Income-tax Act, we are of the opinion that the following principles emerge (i) interest on fixed deposits and other deposits before the commencement of the business is income from other sources, (ii) income from interest on deposits of surplus money during the construction period is also to be considered/treated as income from other sources, ( ..... X X X X Extracts X X X X X X X X Extracts X X X X
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