Godavari Sugar Mills Ltd vs Commissioner of Income Tax

T.D. Sugla, J.—This is the assessee''s reference. The assessment year involved is 1967-68. The Tribunal has referred to this court only one question of law u/s 256(1) of the Income Tax Act, 1961. The question reads thus :

"Whether, on the facts and in the circumstances of the case, the income of Rs. 12,38,387 being interest received on loans and advances is taxable in law as income from business as contended by the assessee or as income from other sources as contended by the Income Tax Department ?"

It is pertinent to mention that a similar issue had arisen in the assessee''s assessment for the assessment year 1966-67. The tribunal had held that the interest received by the assessee on loans and advances was taxable as the assessee''s income from other sources and not as business income. The said order of the tribunal was not challenged by way of reference.

In the year under reference, the Tribunal has dealt with this question in paragraph 4 of its appellate order. Besides recording the fact that the facts for this year were in no way different from what they were in the earlier assessment year, i.e., 1966-67, the tribunal has held the interest income to be income from other sources, inter alia, on the grounds (i) that the interest paid by the assessee on borrowings was allowed as business expenditure and, therefore, those borrowings must have been used by the assessee for the purpose of its business; (ii) it inferred from the aforesaid fact that the monies available for advancing loans, thus, had or could have their sources in the assessee''s own reserves and surpluses from the profits; and (iii) it may be taken on the basis of the Tribunal''s order for assessment year 1966-67 that the advances were mostly to the assessee''s subsidiary companies and its other allied concerns. On these facts, even if we find something wrong with one or the other of the reasoning of the Tribunal, it cannot be said that the conclusion arrived at by the Tribunal that the interest income in dispute was assessable as the assessee''s income from other sources was incorrect or not justified. Needless to mention, it was for the assessee to place the material before the departmental authorities or the tribunal to show that these monies on which the interest in dispute was earned were advanced in the course of the assessee''s business or that the amounts advanced/lent there short-term deposits not for earning interest as such but for not keeping the money idle. We do not find that the assessee had placed any material of the kind before any of the authorities below.

In the above view of the matter. We answer the question thus :

"The income of Rs. 12,38,387 being interest received on loans and advances is taxable as income from other sources."

No order as to costs.