Commissioner of Income Tax vs Wandoor Jupitor Chits (P) Ltd.

G. Sivarajan, J.—These three cases are posted for defect, since the applicant has not remitted the printing charge, nor produced paper books.

Learned standing counsel for the Revenue appearing for the applicant submits that the question referred for decision of this Court is covered by the judgment of the Supreme Court in Vijaya Laxmi Sugar Mills Ltd. v. CIT : [1991]191ITR641(SC) .

We have heard Shri N.F. James, learned counsel appearing for the respondent-assessee also.

The following question of law is referred for the decision of this Court :

"Whether, on the facts and in the circumstances of the case, the assessee is entitled to the deduction u/s 57(iii) of the IT Act, 1961 ?"

The assessee is a company in liquidation. For the asst. yrs. 1987-88 and 1988-89, the assessee, a company in liquidation, returned Rs. 1,78,470 and Rs. 2,77,900, respectively, as interest earned on the funds of the company invested in fixed deposits and claimed Rs. 1,65,000 and Rs. 2,30,083 as expenses. The AO, however, restricted the expenses to be allowed u/s 57(iii) of the IT Act to 10 per cent of the total receipts. In appeal, the CIT(A) held that the assessee is entitled to deduct certain expenses including a portion of the remuneration paid to estate clerk, u/s 57(iii) and disallowed the claim in respect of the balance. In appeals by the assessee and by the Department, the Tribunal, by a common order, allowed the assessee''s appeals and dismissed the appeal filed by the Revenue. IT Ret Nos. 90 and 93 are filed against the order of the Tribunal for the asst. yr. 1988-89 and IT Ref. No. 91 of 2000 is filed against the order of the Tribunal for the asst. yr. 1987-88.

In Vijaya Laxmi Sugar Mills Ltd. v. CIT (supra) mentioned above, the Supreme Court was concerned with the question of deduction of expenses incurred by the liquidator towards salaries, legal fees, liquidation expenses, etc., from the interest earned on the amount realised by the sale of assets kept in fixed deposit with banks. The Supreme Court held that in merely relating the assets of the appellant-company in the course of its winding up and banking the proceeds in fixed deposits, the liquidator could not be considered as having carried on any business of the company, and therefore, the appellant-company cannot be said to have carried on any business to bring the interest income within the meaning of Section 28 of the IT Act, 1961. It was accordingly held that the income from interest was liable to be computed only under the head income from other sources.

In view of this decision, the Tribunal was not correct in allowing the expenses u/s 57(iii) of the Act. We, accordingly, answer the question referred in the negative, i.e., in favour of the Revenue and against the assessee.