1984 (8) TMI 106

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....reated this amount as income from other sources. In appeal, the Commissioner (Appeals) directed the ITO to treat this amount as business income. The department has now come in appeal before us and the contention is that the said amount should be treated as income from other sources. 2. In support of the contention that the said income was income from other sources, the learned departmental representative has relied on the decision of the Madras High Court in Smt. B. Seshamma v. CIT [1979] 119 ITR 314. On the other hand, the learned counsel for the assessee has relied on the decision of the Punjab and Haryana High Court in R.B. Jodhamal Kuthiala v. CIT [1972] 83 ITR 464 and the decision of the Supreme Court in Donald Miranda v. CIT [1961]....

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....sonal compensation, but it is paid for deprivation of the use of the money. .." From this observation, it is clear that what has been held in the said case is that receipt of interest does not arise out of activity concerning business or investment ; it arises out of the deprivation suffered by the assessee of the use of the money and as such, the amount represents ' Income from other sources ' and not business income. 4. As regards the nature of payment of advance tax and nature of refund, the observations of the High Court in the said case are instructive. It is stated therein that advance income-tax is paid in respect of income chargeable to tax and as such, the liability to pay advance income-tax is with reference to income charge....

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....espect of any business but on chargeable income. Secondly, under section 12 of the Excess Profits Tax Act, the tax was an allowable deduction for computation of the profits, while the income-tax under the 1961 Act is not an allowable deduction. In these circumstances, the payment of excess profits tax constituted business expenses, with the result that when the excess was refunded with interest, the whole amount was a business receipt. In the case of income-tax under the 1961 Act, the refund of the excess does not constitute a business receipt and as such, the interest imbedded in the refund also would not constitute business receipt. As already stated, the interest represents compensation received for deprivation of the use of the money wh....