Investment business test under tax law extends to organised income-earning deposits forming a company's primary activity.

For section 23A of the Indian Income-tax Act, 1922, the controlling enquiry is whether a company carries on a real, substantial and organised activity in investments as its primary business. "Investment" is not confined to a technical sense and may include deposits made to earn income where they form part of the company's systematic profit-making activity. On the facts, the assessee derived income from shareholdings and regular deposits of surplus funds with allied concerns, and that activity was held to be its main business. The company was therefore treated as one whose business consisted wholly or mainly in dealing in or holding investments, and the higher statutory percentage applied.

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Issues: Whether the assessee-company's business consisted wholly or mainly in dealing in or holding investments so as to attract the higher statutory percentage under Explanation 2(i) to section 23A of the Indian Income-tax Act, 1922.

Analysis: The relevant enquiry under section 23A and Explanation 2(i) is whether the company carries on a real, substantial and systematic or organised activity in relation to investments as its primary business. The expression "investment" is not confined to a technical sense and may include deposits made with the object of earning income, if the transactions are part of the company's organised profit-making activity. On the facts, the assessee earned income from shareholdings and from regular deposits of surplus funds with allied concerns, and that activity constituted its main business in the relevant years.

Conclusion: The assessee was a company whose business consisted wholly or mainly in the dealing in or holding of investments, and the question was answered in the affirmative, against the assessee and in favour of the Revenue.

Final Conclusion: The reference was answered by holding that the assessee fell within the scope of section 23A read with Explanation 2(i) of the Indian Income-tax Act, 1922, so the higher statutory percentage applied.

Ratio Decidendi: For the purpose of section 23A, investment includes deposits made in the ordinary and popular sense when they form part of the company's systematic, organised, and primary profit-making business in relation to investments.

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