1987 (4) TMI 18

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....ee is a subsidiary company of Andhra Sugars Ltd. The assessee-company was set up for the purpose of manufacturing chemicals. Certain money was lying with it during its formative period. With a view not to keep the said money idle, it deposited the same with the holding company, i.e., Andhra Sugars Ltd. These deposits were to mature only on December 31, 1974. Meanwhile, the assessee required some money and it borrowed a sum of Rs. 2 lakhs from Andhra Sugars Ltd. The inter it paid on this amount of Rs. 2 lakhs was set off against the interest earned on the deposits made by the assessee with Andhra Sugars Ltd. and only an amount of Rs. 21,401 was returned by the assessee. To be more precise, the interest earned on the deposits made by the asse....

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.... and not Rs. 34,865. Accordingly, we must reframe the question in the following terms: " Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in holding that though for the purpose of accountancy, there appeared to be two independent transactions in truth and in reality there was only one transaction ? " Learned standing counsel for the Revenue contended that inasmuch as the assessee had not commenced business, nor has it carried on any business during the accounting year relevant to the assessment year concerned herein, the amount of Rs. 13,464 cannot be deducted under section 37. The income of Rs. 34,865 is taxable under the head "Other sources " under section 56 of the Act. If so, the ded....