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

G. Sivarajan, J.

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

Learned counsel for the revenue appearing for the applicant submits that the question referred for decision of this court is covered by our judgment in ITA Nos. 90, 91 and 93 of 2000, wherein we followed the judgment of the Supreme Court in Vijaya Laxmi Sugar Mills Ltd. v. CIT : [1991]191ITR641(SC) .

We have heard the 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 Income Tax Act, 1961 ?"

The assessee is a company in liquidation. For the assessment year 1987-88 the assessee returned Rs. 1,78,470 as interest earned on the funds of the company invested in fixed deposits and claimed Rs. 1,65,080 as expenses. The assessing officer, however, restricted the expenses to be allowed u/s 57(iii) of the Income Tax Act to 10 per cent of the total receipts. In appeal, the Commissioner (Appeals) held that the assessee is entitled to deduct the various expenses listed in computing the income by way of interest taxable under the head "income from other sources''. In appeal by the assessee and by the department, the Tribunal allowed the assessee''s appeal and dismissed the appeal filed by the revenue. Hence, the reference.

In Vijaya Laxmi Sugar Mills Ltd.''s case (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 realising 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 Income Tax Act, 1961. It was accordingly held that the income from interest was liable to be computed only under the head ''Income from other sources''.

We had earlier answered the same question in the case of the assessee, itself by our judgment in ITA Nos. 90, 91 and 93 of 2000, relying on the authoritative decision of the Supreme Court mentioned above. We accordingly answer the question referred in favour of the revenue and against the assessee.