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TMI Blog2008 (2) TMI 425X X X X Extracts X X X X X X X X Extracts X X X X ..... le profits for the purpose of deduction under section 32AB of the Act ? (2) Whether in view of the provisions of section 32AB(3) of the Act, the Tribunal was justified in excluding the interest which formed part of the profits computed in accordance with Parts 2 and 3 of Schedule VI to the Companies Act, 1956, for the purpose of quantifying the deduction under section 32AB of the Act ? (3) Whether the Tribunal was justified in holding that the surplus out of the amount approved by the Government for meeting additional expenditure by the appellant would constitute the income in spite of the fact that the said amount was held in a fiduciary capacity by the appellant on behalf of the Government of Karnataka ?" 3. However, at the time of hearing, learned counsel for the appellant fairly conceded that question No. 2 would not arise for consideration. Thus, we are required to consider questions Nos. 1 and 3 as mentioned hereinabove. 4. The facts of the case lie in a narrow compass, which are as under: The appellant is a Government owned company and is basically engaged in the manufacture of food products, cereals and cattle feed, etc. The appellant-assessee had claimed deduction und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o had received maize from the assessee. The Government of Karnataka on principle had agreed that the assessee would be entitled to charge Rs. 10 more per bag from the beneficiaries. 7. The Assessing Officer brought to tax the surplus out of the recovery made by the appellant, over and above the expenditure incurred by the assessee, holding the same to be the revenue receipts without accepting the assessee's contention that surplus was held by it only on behalf of the Government of Karnataka in a fiduciary capacity, thus the same could not have been brought within the net of taxable income. 8. On the aforesaid two counts, the Assessing Officer recorded a cryptic and perfunctory finding against the assessee. Feeling aggrieved by the same, the assessee was constrained to file an appeal before the Commissioner of Income-tax (Appeals). On both the counts, the Commissioner of Income-tax (Appeals) found that the interest earned by the assessee could not have been treated as income from other sources instead it should be treated as income from business as it was directly linked with the business activities carried on by the assessee. With regard to the other ground, a finding has been re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nterest and dividend are to be included in income for the purposes of deduction under section 32AB of the Act ?" 13. In view of the question of law referred to the High Court, it has been contended that it was not required on the part of the High Court to have considered the implication of section 32AB(3) of the Act and any finding recorded therein would only be obiter and not binding. 14. It is now well-settled that what is binding precedent is that which was referred to and has been answered by the court. And what ultimately the court decides there is the ratio decidendi and becomes binding precedent. In the reference before the High Court of the Gauhati the effect to implication of sub-section (3) of section 32AB of the Act had not at all been referred to. Hence, any passing remarks made thereon shall not have adverse effect to the facts of this case. 15. Learned counsel for the appellant further submitted that the issues projected in this appeal have been answered by two judgements of the Madras High Court and the Calcutta High Court reported in Carborandum Universal Ltd. v. CIT [2004] 265 ITR 372 and Assam Brook Ltd. v. CIT [2004] 267 ITR 121 respectively. 16. Per contra, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ermined on the facts of each case. In the instant case, the main activity of the assessee was export business and not that of earning interest on short-term fixed deposits. The deposits in the bank were made with the money received as advance in the export business. The assessee instead of keeping that amount idle, since it did not require it for its immediate business activity, had deposited that amount by way of short-term deposit in the bank and the amount so deposited was the funds which it had received towards the export to be made by it and the amounts so deposited in the bank and the interest income derived because of such deposit had a close link with the business activity of the assessee-company and, therefore, the interest on bank deposits was assessable as business income" 19. We have been given to understand that this matter, CIT v. Producin P. Ltd. [2007] 290 ITR 598 was carried to the Supreme Court and after considering the matter, the Supreme Court has remanded it to the Tribunal for fresh decision in accordance with law and to examine categorically, "whether the interest income received by the assessee on short-term fixed deposits constituted part of the tota ..... X X X X Extracts X X X X X X X X Extracts X X X X
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