1979 (7) TMI 83 - HC - Income Tax

Court affirms tax ruling on interest from bank deposits by District Magistrate, clarifying liability.

The court upheld the Tribunal's decision, ruling in favor of the department and awarding costs of Rs. 200. The judgment clarified the tax liability of ... Banking Company, Representative Assessee Issues:1. Taxation of interest received on deposits made by the District Magistrate as income of Rampur Bankers Ltd.Analysis:The judgment pertains to the assessment years 1957-58 to 1971-72 and revolves around the taxation of interest received on deposits made by the District Magistrate as income of Rampur Bankers Ltd. The case originated from a scheme by Rampur Bankers promising exaggerated returns to depositors, leading to fraud convictions of its directors. The District Magistrate took over the bank under court orders and invested seized money in Government securities, earning interest. The controversy arose regarding the taxation of this interest, with the Tribunal assessing it in the hands of the District Magistrate. The court examined the applicability of Section 41 of the Indian Income Tax Act, 1922, which allows assessment on a person managing property under court orders. The court held that the District Magistrate, as a receiver or manager of Rampur Bankers' assets, could be assessed under this provision. The argument that interest represented depositors' income was dismissed, emphasizing that until money is returned, it remains property of the bank. Therefore, the court upheld the Tribunal's decision, ruling in favor of the department and awarding costs of Rs. 200.In conclusion, the judgment clarifies the tax liability of interest received on deposits made by the District Magistrate in the capacity of managing Rampur Bankers Ltd.'s assets. It highlights the legal provisions allowing assessment on court-appointed property managers and rejects the notion that depositors' interest income should be treated separately. The decision underscores the principle that until funds are returned, they remain property of the bank, justifying the assessment of interest in the hands of the District Magistrate.