Income from Other Sources: interest on liquidator's realisations held pending distribution is taxable as non-business income.

Whether interest earned on realisations by an official liquidator and invested pending distribution constitutes business income was resolved by treating the activities as liquidation functions rather than carrying on the company's business; the banking substratum had ceased post winding up and there were no banking operations, so realised assets became capital in character and temporary deposits were for distribution completion, not ongoing profit-making. Consequently, interest on such fixed deposits is taxable as income from other sources, not as business income, favouring the revenue on the facts recited.

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Issues: Whether interest earned by the official liquidator on realisations and invested pending distribution is taxable as "income from other sources" and not as "business income" (assessment year 1969-70).

Analysis: The question turns on whether, after a court-ordered compulsory winding up, the liquidator's activities of realising assets and depositing surplus realisations in short-term bank deposits amount to carrying on the company's business. Section 6 of the Banking Regulation Act, 1949 permits additional business only to a company that is a banking company as defined by section 5(c) and subject to licence requirements under section 22; suspension of competence to carry on banking undermines entitlement to engage in additional banking activities. The factual finding is that the banking substratum had ceased after the winding up order and that there were no banking operations such as acceptance of deposits or withdrawals. The liquidator's actions consisted of realisation and temporary investment of surplus funds with the court's permission pending distribution to creditors. Precedent and principles distinguish activities undertaken to wind up and distribute assets from commercial business operations; realised assets assumed a capital-asset character and the temporary investment of realised funds pending distribution was undertaken for completion of winding up rather than for profit-making as a continuing business. On these facts, the activities were not business operations of the company but liquidation functions, so the receipts from interest are not business receipts for set-off purposes under income-tax provisions.

Conclusion: Interest on fixed deposits arising from realisations invested pending distribution is taxable as "income from other sources" and not as "business income"; decision against the assessee (in favour of the revenue).

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