COMMISSIONER OF INCOME TAX Vs. GIMPEX P LTD

JUDGEMENT

(1.) TWO questions are referred to us. They are : 1. Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in holding that the assessee is entitled to weighted deduction under S. 35B on foreign travel, advertisement, foreign branch expenses, etc. though the assessee was only purchasing goods from China and selling the same in USA and no export of Indian goods was carried on ?

(2.) WHETHER , on the facts and in the circumstances of the case, the Tribunal was correct in holding that the interest received by the assessee from the fixed deposit of surplus funds should be assessed under the head 'business' ? 2. We shall take the first question first. The Tribunal has held in favour of the assessee on the basis of its earlier orders for the asst. yrs. 1981-82 and 1982-83. The case of the Department is, however, that the assessee is not exporting any goods and admittedly the goods are being purchased in China and sold in U.S.A. and, therefore, if the goods are not being exported ex-India, the benefits under S. 35B would not be available. The question is no more res integra. The Supreme Court in the decision reported as CIT vs. Bombay Burmah Trading Corporation (2000) 159 CTR (SC) 110 : (2000) 242 ITR 298 (SC) has observed,

(3.) IN this case, the company had not started its business and invested some amount in short-term deposit from which it earned interest. However, the contention raised was that this was the income out of the business and not otherwise. There was a basic argument made in this case that the Supreme Court had made these observations in the light of the fact that the company had not yet commenced the business. However, it is obvious that the Supreme Court had not made these observations in the light of those facts but independently thereof to straighten out the legal position. The said judgment was followed by the Division Bench of our High Court in a matter reported in South India Shipping Corporation Ltd. vs. CIT (2000) 163 CTR (Mad) 617 : (1999) 240 ITR 42 (Mad). The learned Judges after taking stock of various decisions came to the conclusion that all those decisions stood impliedly overruled by the decision in Tuticorin Alkali Chemicals, cited supra. The learned Judges also noted that the question was considered in case of the very same assessee. viz. South India Shipping Corporation Ltd. way back in the year 1983 wherein the Court had come to the conclusion in T.C.P. No. 108 of 1983 decided on 18th July, 1983, that the view taken by the Tribunal that such income is only be brought under "income from other sources" was the right view. In fact then the Court had also referred to the decision of Phillips Carbon Block Ltd. vs. CIT (1982) 28 CTR (Cal) 333 : (1982) 136 ITR 205 (Cal) : TC 25R.791 and Addl. CIT vs. Madras Fertilizers Ltd. (1979) 13 CTR (Mad) 261 : (1980) 122 ITR 139 (Mad) : TC 41R.734. The learned Judges have also commented that these three decisions were in accord with the Tuticorin Alkali Chemicals cited (supra), and that it was unfortunate that they were not brought to the notice of the High Court and the Court has, therefore, held that the Tribunal was right in holding that the interest from the bank deposits and other interest on loan to others is to be assessed under the head "income from other sources". Situation is no different here and we have already pointed out that the assessee here has invested amounts in the short-term deposits and has earned an income therefrom. We see no reason to take any different view from the one which has been taken by the Division Bench in South India Shipping Corporation's case. In that view we answer the second question against the assessee and hold that the interest received by the assessee from the fixed deposit surplus funds cannot be assessed under the head "Income from business". The reference is answered accordingly. *****