BELAGODU TRADERS Vs. INCOME TAX OFFICER
LAWS(IT)-1994-12-6
INCOME TAX APPELLATE TRIBUNAL
Decided on December 16,1994

Appellant
VERSUS
Respondents

JUDGEMENT

BALASUBRAMANYAM, J. M. : - (1.) THE point to be decided in this appeal by the assessee is simple. It arises out of the assessment on the assessee for the year 1985-86.
(2.) The assessee is a trust constituted by the founder on 3rd May, 1979. It was for the benefit of five beneficiaries who are particularly identified in the indenture of trust. Their shares are also specified. Trustees are appointed by the founder and their powers are defined. One was that they could carry on business using the trust fund for the benefit of the beneficiaries. In exercise of such power the trust was carrying on business upto 1984-85. The trust had liquidated cash. As the business had been stopped, the money was advanced to various parties. Such advances had earned interest. The interest income was Rs. 74,680. The assessee offered this amount to tax in the asst. yr. 1985-86 and, in the return, it was claimed to be assessable under the head "other sources". The ITO held that it was business income and, therefore, taxed it under s. 161(1A) adopting the maximum marginal rate.
(3.) THE assessee had appealed and the first appellate authority agreed with the ITO that the impugned interest income was business income. In that way, the assessment order came to be affirmed, though the assessee succeeded on another issue pertaining to levy of interest.;


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