COMMISSIONER OF INCOME TAX Vs. KARANPURA COLLIERIES LTD

JUDGEMENT

(1.) In this reference under Section 256(1) of the Income-tax Act, 1961, for the assessment year 1976-77, the following question has been referred to this court :

(2.) The facts relating to this reference are that from a scrutiny of the accounts, the Income-tax Officer found that the assessee-company did not carry on any business whatsoever during the relevant previous year and had only income from interest in investments amounting to Rs. 5,560 and that the expenses were claimed at Rs. 75,044 under different heads, such as, salary, travelling expenses, miscellaneous expenses, loss on sale of motor car, etc. Considering the facts and circumstances of the case, the Income-tax Officer held that the assessee had not carried on any business during the year and had only income from investments which had to be considered as "income from other sources" and that expenses attributable to such income were admissible under Section 57(iii) of the Income-tax Act, 1961. He estimated the admissible expenses which were wholly and exclusively expended for the purpose of earning such taxable income at Rs. 1,000 only.

(3.) In the appeal before the Commissioner of Income-tax (Appeals), the assessee contended that though no business activity in the form of coal mining or trading in coal was carried on, it had to incur the minimum expenditure on office establishment and administration till such time it received the entire compensation amount with interest under the Coal Mines (Nationalisation) Act. The assessee pleaded that the balance of expenses of Rs. 74,044 should be allowed as a deduction. The Commissioner of Income-tax (Appeals) held that the assessee was not entitled to the deduction of expenses totalling Rs. 74,044 as no business activity was carried on during the relevant previous year.