TMI Blog1977 (8) TMI 33X X X X Extracts X X X X X X X X Extracts X X X X ..... aimed deduction of expenses against the said income by treating it as business income. The Income-tax Officer and, on appeal, the Appellate Assistant Commissioner, negatived the claim of the assessee. On further appeal, the Income-tax Appellate Tribunal, however, upheld the claim of the assessee. At the instance of the revenue, the Tribunal referred the following question of law arising out of its order for the opinion of this court "Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the income derived by the assessee-company from deposits and loans is 'income from business' and not 'income from other sources' ?" In order to properly answer the question, it may be useful to summarise briefly the findings recorded by each of the authorities. The Income-tax Officer held that : (1) the assessee was running a textile mill as far back as assessment year 1941-42 and thereafter it discontinued its said business and derived income from property and interest on deposits ; (2) the assessee always deposited the excess funds available with it with various parties and declared, up to assessment year 1969-70, interest income under the he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in the view of the Income-tax Officer. The Tribunal, on further appeal, referred to the various decisions cited before it and more particularly to the decision of the Supreme Court in Mazagaon Dock Ltd. v. Commissioner of Income-tax [1958] 34 ITR 368, and applying the well settled tests, it found that : (1) the expression "business", in the context of the income-tax law, was required to be construed in the broad rather than restricted sense ; (2) it was not disputed that the assessee had stopped its textile manufacturing business long ago ; (3) the assessee had certain funds lying with it which were being advanced to various parties from time to time ; (4) though the assessee had returned the income from interest and it was assessed under the head "Other sources" in the previous assessments, it was well established that the principle of estoppel or res judicata was not applicable to income-tax proceedings ; (5) on the evidence produced it was clear that the board of directors of the assessee had held meetings from time to with a view to regulate the advances to be made to various parties and it decided upon the amounts to be advanced as well as the rate of interest t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ber of persons and firms and the activity of the assessee did not satisfy the tests laid down by the decided cases for treating such activity as business. Now, we must start with the proposition, which is well established, that it is for the revenue to establish that the income earned by an assessee is within a particular taxing provision and that it is on that account liable to be taxed as such income. In the present case, therefore, it will be for the revenue to establish, having regard to all the materials on record, that the income derived by the assessee as and by way of interest was income from other sources and not business income as claimed by the assessee. The word "business" postulates the existence of certain elements in the activity of an assessee which would invest it with the character of business. In each case the question whether or not the assessee carried on business must necessarily be approached in the light of the intention of the assessee, having regard to the legal requirements which are associated with the concept of business. As observed in State of Gujarat v. Raipur Manufacturing Co. Ltd. [1967] 19 STC 1 (SC), in taxing statutes, the word "business" is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any from calendar years 1965 to 1972 along with full details of the copy of the relevant accounts. While making these documents a part of the statement of the case, the Tribunal has referred only to the documents referred to in item No. 3 as having been submitted before it at the time of the hearing of the appeal. It is, therefore, difficult to predicate as to whether the documents referred to in the other two items were also submitted at the time of the hearing of the appeal before the Tribunal or whether they were produced before the lower authorities. So far as the documents referred to in item No. 3 are concerned, however, it would appear from the order of the Income-tax Officer that the relevant account books were produced before him. From the observations made by him in his order it is clear that he scrutinized those accounts with a view to finding out as to how the assessee had dealt with its funds over a number of years. A legitimate inference could, therefore, be drawn that the original account books were produced before the lower authorities. The documents referred to in item No. 3 consisted of summary of loans and advances effected by the company from calendar years 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... capable of being waived. This applies to proceedings of a civil nature. While what is not relevant under the Evidence Act, cannot in proceedings to which the Evidence Act applies, be made relevant by consent of parties, relevant evidence can be brought on the record for consideration of the court or the Tribunal without following the regular mode if parties agree. The reason behind this rule is that it would be unfair to ask any party to prove a particular fact when the other party has already admitted that the way it had been brought before the court has sufficiently proved it. Where, therefore, a party not only raised no objection to certain evidence being brought on record but indeed appeared to have invited the adjudicating authority to act on such evidence, it cannot be allowed later on to object to such evidence having been considered by such authority merely because the decision has gone against it. When additional evidence is taken with the assent of both the sides or without objection at the time when it was taken, it is not open to a party to complain later on that it was in breach of the provision of law. The first two contentions of the revenue must, therefore, be rejec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itiate such admission. " In our opinion, this decision completely answers the objection raised on behalf of the revenue in the present case. Having regard to the circumstances under which additional material, if any, appears to have been taken on record in this case, the objection which is based on the ground of omission to record reasons loses its significance. That takes us to the main question which has been raised in this reference. The findings of the Tribunal which motivated it to reach the decision which it arrived at have already been summarized. The Tribunal had before it a clear concept of what "business" means in a taxing statute and having regard to the principles laid down in the decided cases to which it has referred, it proceeded to apply the relevant tests. The Tribunal noted that for a number of years the assessee had returned the income derived by it as and by way of interest under the head "other sources" and that it was assessed accordingly. It, however, proceeded to observe that the principles of estoppel and res judicata were not applicable to income-tax proceedings and that, therefore, the matter had to be viewed in the light of the facts and circumst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arried on could not alter the real character of the acquisition. In Raja Bahadur Kamakhya Narain Singh v. Commissioner of Income-tax [1970] 77 ITR 253, the Supreme Court observed that the name the assessee gave to his account, namely, "account of Rs. 48 lakhs floating in the share market", could not render the dealings in that account into trading transactions, if otherwise they were not. In Investment Ltd. v. Commissioner of Income-tax [1970] 77 ITR 533, the Supreme Court held that the description of stock in the balance-sheet as "investment" was not decisive. The fact, therefore, that the assessee returned interest income as income taxable under the head. "income from other sources" could not be held to be decisive. It was, as observed in Karam Chand Thapar Bros. P. Ltd. v. Commissioner of Income-tax [1971] 82 ITR 899 (SC), only a relevant circumstance which could have been relied on. If the Tribunal, therefore, having regard to the entire activity of the assessee in the light of other facts and circumstances on record did not treat this particular circumstance as having much bearing in the facts and circumstances of the present case, it could not have been said to have misdi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be thought necessary" and "to lend, deposit or advance money, securities and property to such persons, firms or companies, limited or otherwise, and on such terms as may seem expedient and in particular to customers and sellers and others having dealings with the company ......." The Tribunal had legitimately drawn an inference from the aforesaid two clauses that they authorised the assessee-company not only to invest and deal with the monies of the company in such manner as it may from time to time think necessary but also to lend, deposit, or advance moneys to such persons, firms or companies and on such terms as may seem expedient to the assessee-company. It is true, as contended on behalf of the revenue, that the last part of the objects clause 26 refers to advances being made in particular to customers and sellers and others having dealings with the company. We do not think, however, that the last part can be read as controlling the first part. The objects of the company, having regard to the language in which they are couched, authorised the company to make advances not only to customers and sellers but also to any "persons, firms or companies" as the assessee-company thought ..... X X X X Extracts X X X X X X X X Extracts X X X X
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