2002 (2) TMI 12

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....g the same in USA and no export of Indian goods was carried on? 2. Whether, on the facts and in the circumstances of the case, the Tribunal was correct in holding that the interest received by the assessee from the fixed deposit of surplus funds should be assessed under the head 'Business'?" We shall take the first question first. The Tribunal has held in favour of the assessee on the basis of its earlier orders for the assessment years 1981-82 and 1982-83. The case of the Department is, however, that the assessee is not exporting any goods and admittedly the goods are being purchased in China and sold in U.S.A. and, therefore, if the goods are not being exported ex-India, the benefits under section 35B would not be available. The ....

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....s the first question is concerned. The second question is also more or less covered by the Supreme Court decision, but against the assessee. Here the assessee had made some short-term deposits and had earned interest therefrom. The question was as to whether the interest was to be treated as "business income" or was to be treated as the "income from other sources". It seems that the Tribunal has held in favour of the assessee by holding it as "business income" on the basis of its earlier order passed for the assessment years 1981-82 and 1982-83. The senior standing counsel for the Department, Mrs. Venkatraman, however, pointed out that the Tribunal has gone completely wrong in holding this as an income from the business inasmuch as this que....

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.... this case, keep the surplus funds in short-term deposit in order to earn interest. Such interest will be chargeable under section 56 of the Act." In this case, the company had not started its business and invested some amount in short-term deposit from which it earned interest. However, the contention raised was that this was the income out of the business and not otherwise. There was a basic argument made in this case that the Supreme Court had made these observations in the light of the fact that the company had not yet commenced the business. However, it is obvious that the Supreme Court had not made these observations in the light of those facts but independently thereof to strengthen out the legal position. The said judgment was fo....