TMI Blog1984 (6) TMI 20X X X X Extracts X X X X X X X X Extracts X X X X ..... ntered into by the company with certain financiers, the Tribunal is right in law in treating the medium-term dollar loans as debentures for the purpose of computing relief under section 80-J ? 4. A. Y. 1970-71: Whether, on the facts and in the circumstances of the case and on an interpretation of the agreements entered into by the company with certain financiers, the Tribunal is right in law in treating the medium-term dollar loans as debentures for the purpose of computing relief under section 80-J ? " The last two questions are covered by the decision of this court in CIT v. Cochin Refineries Ltd. [1983] 142 ITR 441, in favour of the assessee and are accordingly answered in the affirmative, that is, in favour of the assessee and against the Revenue. The first two questions concern the assessment years 1969-70 and 1970-71 relating to the interest received from bank deposits and investments as well as the income derived by the hire of machines and cars and certain other miscellaneous receipts. The receipts arising for consideration are the following: During the accounting year relevant to the assessment year 1969-70, a sum of Rs. 10,18,145 had been received by the assessee as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eceived by the company are the result of the commercial use to which these commercial assets had been put and were accordingly exigible to deduction under s. 80-I. The same argument is urged in regard to the various miscellaneous items. Before we read the relevant section, we could refer to the decision of this court in Collis Line Pvt. Ltd. v. ITO [1982] 135 ITR 390, where the question as to the nature of the interest received by the assessee was considered by one of us (Kochu Thommen J.). That was a case where it was contended that the assessee was entitled to set off the unabsorbed development rebate in terms of s. 33 against interest received from amounts deposited in bank on the basis that such interest was part of the profits and gains of the business and not income from other sources. Rejecting that contention, it was held (p. 393): " The assessee is not a banking company. Money was not deposited by it by way of money-lending as a business. That was not its object. The interest arose from amounts deposited in bank otherwise than by way of business. The amount was deposited because money was lying idle and it was safer and wiser to put it in the bank. The interest thereby ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g in s. 80E and " derived under s. 80J, and said that s. 80E was wider in scope than s. 80J. Accordingly, court held that even such income which had not been directly derived from business could be treated as profits and gains for the purpose of s. 80E, so long as it had sufficient nexus so as to be attributable to the business. In referring to the three steps by which s. 80E was operated for the purpose of computing the deduction, this is what the court said (P. 91): " First, compute the total income of the concerned assessee in accordance with the other provisions of the Act, i.e., in accordance with all the provisions except section 80E; secondly, ascertain what part of the total income so computed represents the profits and gains attributable to the business of the specified industry (here generation and distribution of electricity); and, thirdly, if there be profits and gains so attributable, deduct 8% thereof from such profits and gains and then arrive at the net total income exigible to tax. As regards the first step mentioned above, the important words in sub-section (1) are those that appear in parenthesis, namely, 'as computed in accordance with the other provisions o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the company ......: "Gross total income " is defined under s. 80B(5) as: "80B. (5) 'gross total income' means the total income computed in accordance with the provisions of this Act, before making any deduction under this Chapter or under section 280-0 and without applying the provisions of section 64. " " Priority industry " is defined under s. 80B(7) as: " 80B. (7) 'priority industry ' means the business of generation or distribution of electricity or any other form of power or of construction, manufacture or production of any one or more of the articles or things specified in the list in the Sixth Schedule or the business of any hotel where such business is carried on by an Indian company and the hotel is for the time being approved in this behalf by the Central Government. " It has to be noticed that s. 80-I, as it stood during the relevant years, when read with statutory definitions of " gross total income " and " priority industry " was in substance identical to s. 80-E which was considered by the Supreme Court in Cambay Electric Supply Industrial Co.'s case [1978] 113 ITR 84 (SC). Section 80-I is applicable only in respect of companies which carry on business a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ween the two sections and laid stress on the fact that, for the purpose of s. 80-I, it was not necessary that the profits and gains had been "derived" from the business in the sense that the business activity yielded such profits and gains, but it was sufficient that they were attributable to the business so as to rope in even a notional income referred to under s. 41(2). This decision does not support the contention that any income other than business income qualifies for deduction under the section. Deduction is provided for in respect of profits and gains, whether in actual fact derived from, or by fiction of law attributable to, a priority industry. It is further contended by the assessee that the expression " profits and gains attributable to any priority industry " should take in not only the " profits and gains " of that industry in the narrow sense, as understood under s. 28, but also all other incomes attributable to a priority industry, irrespective of the heads of income, as distinguished from any other income of the assessee. The assessee as a company may have received income from various sources, other than the priority industry, under various heads, and for the purp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t was open to it if at any time it found that any part of its plant 'for time being' could not be advantageously employed for earning profit by the company itself, to earn profit by leasing it to somebody else.' It is difficult to hold that the income thus earned by the commerical asset is not income from the business of the company that has been solely incorporated for the purpose of doing business and earning profits. There is no material whatever for taking the view that the assessee-company was incorporated with any object other than of carrying on business or trade. Owning properties and letting them was not purpose for which it was formed and that being so, the disputed income cannot be said to fall under any section of the Indian Income-tax Act other than section 10. Cases of undertakings of this nature stand on an entirely different footing and are distinguishable from cases of individuals or companies acquiring lands or buildings and making income by letting them on hire." The question to be examined is whether the assets let out by the company were commercial assets, meaning assets used in business, and whether the act of letting out was itself a commercial activity. In ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
