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1993 (6) TMI 126
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....Rs. 40,710 respectively. The whole of the total income was stated to have been derived from money-lending business by each of these assessees. Each of these assessees was represented by a common representative Shri Ravi Sarma, C.A. of M/s. Sarma & Co. before the Income-tax Officer. The total incomes were accepted. However, tax was levied at maximum marginal rate by the Income-tax Officer by applying the provisions of section 161(1A) of the Income-tax Act in the case of each of these assessees. These assessments were completed in the case of each of these assessees under section 143(3) of the Income-tax Act by separate assessment orders dated 26-11-1988. 3. Aggrieved against the tax being levied at maximum marginal rate each of these assessees went up in appeal before the Commissioner of Income-tax (Appeals), Visakhapatnam. Before the Commissioner of Income-tax (Appeals), the assessees relied upon certain favourable orders passed by this Tribunal for earlier years and he contended that their incomes are not liable to be taxed at maximum marginal rate but only at ordinary rates. In fact the assessee relied upon the decision in Sitaratnam Family Trust v. ITO [1987] 22 ITD 117 (Hyd.....
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.... reported in Sitaratnam Family Trust's case and, therefore, the plea of the assessee that following Sitaratnam Family Trust's case, ordinary rates should be applied to the incomes returned was not accepted and their plea was rejected in that regard. For the first time, the learned Commissioner (Appeals) pointed out that a plea was raised before him by the learned counsel for the assessee that the assessee did not carry on any money-lending business and since no business was carried on, the income earned does not fall under the head 'Income from other sources' and if no business was carried on by a Trust, the application of maximum marginal rate should be set aside and the application of ordinary rates of tax to the returned income should be ordered in the case of each of these assessees. The learned Commissioner of Income-tax (Appeals) dismissed this contention also holding that it was never raised in the course of assessment proceedings nor could the claim be supported by any relevant material on record inasmuch as, the return together with computation of total income furnished by the assessee clearly declared the source as 'income from own business' (money-lending) barring an amo....
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....e claim for exemption under section 84 before the AAC who rejected the claim but on further appeal the Tribunal held that since the entire assessment was open before the AAC there was no reason for his not entertaining the claim, or directing the ITO to allow appropriate relief. On a reference the High Court upheld the view taken by the Tribunal. On appeal this Court set aside the order of the High Court as it was of the view that the AAC had no power to interfere with the order of assessment made by the ITO on a new ground not raised before the ITO, and therefore, the Tribunal committed error in directing the AAC to allow the claim of the assessee under section 84. Apparently this view taken by the three Judge Bench of the Court in Kanpur Coal Syndicate's case. It appears from the report or of the decision in Gujarat High Court case the three Judge Bench decision in Kanpur Coal Syndicate's case was not brought to the notice of the Bench in Gurjargravures (P.) Ltd.'s case. In the circumstances the view of the larger Bench in Kanpur Coal Syndicate's case hold the field. However, we do not consider it necessary to over-rule the view taken in Gurjargravures (P.) Ltd.'s case as in our ....
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....reon can be supported by the evidence on record. Firstly it may be mentioned that the returns were filed specifically stating that the incomes were derived by carrying on money-lending business. Secondly it was never the contention of the assessee-trusts in the assessment proceedings that they did not carry on any money-lending business but were deriving only interest income under the head other sources. Thirdly they did not mention in any of the grounds raised before the Commissioner (Appeals) that in fact they were not carrying on any money-lending business but were deriving interest amount, only on deposits made by them. Fourthly they did not file any additional ground before the Commissioner (Appeals). For assessment year 1986-87, Vijaya Family Trust derived gross interest income of Rs. 19,423.90 which is shown under the head business income in its computation of total income filed for assessment year 1986-87. The said Trust filed its trial balance as on 31-3-1986 which disclosed inter alia, the following amounts as interest receipts : &nb....
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....sp; 1,487.00 (4) Kum. Kantipudi Jaya 380.00 --------- 18,718.28  ....
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....; ------------- Giving the particulars of the interest account in the trial balance as on 31-3-1986, the nature of the interest receipt was stated to be as follows : 13-9-1985 Sri Bhavani Castings Rs. 1,131.28 11-3-1986 Pronote by interest from Sri Bhavani Castings Rs. 26,618.22 31-3-1986 &nbs....
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....p; (1) Sri Padmalaya Finance Corpn. Rs. 11,677.50 (2) -do- Rs. 326.80 (3) -do- Rs. 11,677.50 (4) -do- Rs. 2,451.00 (5) K. ....
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....bsp; Rs. 1,387.50 (4) K. Saradhi (HUF) Rs. 14,400.00 (5) Sri Sarasa Movies Rs. 13,708.00 (6) Sri Bhavani Castings Rs. 815.83 ---....
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.... ITR 765. 9. In the view of this Tribunal, to judge whether interest income should be treated as part of business income or should be treated as falling under residuary head 'Income from other sources', one has to see whether the assessee had followed any systematic or organised course of business activity or conduct with a set purpose of earning interest. Firstly each of these assessees had bifurcated interest earned into two heads namely, interest income from money-lending business and interest income which falls under the head other sources. This Tribunal has already cited from the computation of total income filed by each of these assessees for assessment year 1986-87 as well as for the immediately preceding assessment year 1985-86. Secondly, the assessee filed its income-tax return, returning interest income as having been derived in the course of money-lending business carried by each of the assessees. Thirdly, the assessee never contended before the Income-tax Officer or the grounds raised before the first appellate authority that they did not carry on any business of money-lending. Under the head interest income shown in the trial balance as on 31-3-1986 in the case of V....
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....siness premises of its own. Therefore, all these elements should exist only in a case where there is an organised business activity. No doubt it is argued that it is the true nature and quality of the receipt and not the head under which it is entered which would prove decisive and if a receipt is a trade receipt the fact that it is not shown in the account books of the assessee would not prevent the assessing authority from treating it as a trade receipt and vice versa and in support of this proposition, the decision of the Hon'ble Supreme Court in CIT v. Bazpur Co-operative Sugar Factory Ltd. [1988] 172 ITR 321 at page 329 is cited. No doubt, the Supreme Court's decision clearly supports this contention of the assessee. This Tribunal is bound by the decision of the Supreme Court. But unfortunately the decision does not help the assessee at all. In view of the finding of fact recorded by this Tribunal that these assessees have been carrying on money-lending business in an organised and systematic manner with a set purpose of earning interest income, this Tribunal holds that not only the assessee has been earning interest income in the course of its money-lending business but it ha....