ORISSA TYRES LIMITED Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE assessee is a company registered under the Companies Act, 1956. Its main business is to manufacture tyres and sell them. It is not disputed that the company has not yet started its business. It is incurring expenses for the purpose of construction of a factory to start the business. THE company is prohibited from investing funds except by depositing in scheduled banks. As per Article 24 of the memorandum of association, the company has made some fixed deposits from out of which it receives interest. For assessment for the four years in dispute, the Income-tax Officer accepted the claim of the company that interest received is not business income. THE Commissioner, however, in exercise of his power of revision, set aside the order and directed the Income-tax Officer to assess the company by considering the interest received as income from other sources as provided under Section 56 of the Income-tax Act. Aggrieved by the revisional order, the assessee preferred appeal before the Income-tax Appellate Tribunal. THE Tribunal has held that it is not income from business. Against the said finding the assessee sought reference to this court under Section 256(1) of the Act and the Tribunal has referred the following question :

(2.) INVESTMENT in banks of the amounts is not the main business of the assessee. It is on account of the fact that there is a direction that funds of the company cannot be taken anywhere else other than being deposited in scheduled banks. Clause 24 of the memorandum of association has been incorporated. In the circumstances, on the facts as available, it can only be said that the Tribunal is correct in saying that it is not income from business.