1999 (9) TMI 57

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....he fixed deposit made by the assessee with the bank is an allowable deduction under section 57(iii) of the Income-tax Act ? The factual position as indicated in the statement of case is as follows : The assessee is a public limited company engaged in plantation business. In addition to its income from plantation business it has income from interest on fixed deposits with a bank which were assessable under the head "Other sources". Against this interest income the assessee claimed a sum of Rs. 1,40,647 as deduction towards interest paid by it on loans taken from the bank. The Assessing Officer disallowed the claim on the ground that interest payable relates to loans taken for business purposes which is purely agricultural income in nature....

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....57(iii) which reads as follows : "57. Deductions. - The income chargeable under the head 'Income from other sources' shall be computed after making the following deductions, namely :- ..... (iii) any other expenditure (not being in the nature of capital expenditure) laid out or expended wholly and exclusively for the purpose of making or earning such income. Interest means (in terms of section 2(28A)) : Interest payable in any manner in respect of any moneys borrowed or debt incurred (including a deposit, claim or other similar right or obligation) and includes any service fee or other charge in respect of the moneys borrowed or debt incurred or in respect of any credit facility which has not been utilised." Income-tax is att....

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.... of the Income-tax Act. Under the Income-tax Act, 1961, the total income of a company is chargeable to tax under section 4. The total income has to be computed in accordance with the provisions of the Act. Section 14 lays down that for the purpose of computation income of an assessee has to be classified under six heads. It is possible for a company to have six different sources of income each one of which will be chargeable to income-tax. Profits and gains of business or profession is only one of the heads under which a company's income is liable to be assessed to tax. If a company has not commenced business there cannot be any question of assessment of its profits and gains of business. That does not mean that until and unless the comp....