- (1.) THE Income -tax Appellate Tribunal, Allahabad, has referred the following question of law under Section 256(1) of the Income -tax Act, 1961 (hereinafter referred to as 'the Act'), for opinion to this court : 'Whether, on the facts and in the circumstances of the case, the Tribunal was legally justified in allowing various expenses against the income from other sources ?'
(2.) BRIEFLY stated the facts giving rise to the present reference are as follows : The respondent is a co -operative sugar mill. During the assessment year in question it did not have any business activity as the manufacturing activity did not start in this year. It was in the process of erection/construction. The funds which it received were invested and it had interest income from those investments. The respondent had incurred expenses for the maintenance of office and for the planning of construction, etc. The Income -tax Officer did not allow any expense out of interest income as there was no business done. However, the Commissioner of Income -tax (Appeals) allowed expenses at the rate of 1 per cent. of the interest income. In the second appeal the Income -tax Appellate Tribunal has enhanced it from 1 per cent. to 5 per cent. We have heard Shri A.N. Mahajan, learned standing counsel for the Revenue, and have perused the impugned order. Under Section 57 the interest income is to be taxed under the head 'Income from other sources'. However Section 57 provides for deductions which are admissible from the income taxable under the head 'Income from other sources'. If a particular expenditure falls strictly under the clause of Section 57 of the Act only then it is liable to be allowed as expenses otherwise not. The expenditure incurred on maintenance of the office and for planning of construction does not fall under any of the clauses of Section 57 of the Act and therefore the assessee could not have been allowed the expenses as deduction from the interest income.
(3.) IN this view of the matter, we are of the opinion that the Tribunal had erred in allowing an exclusion of 5 per cent. on estimate basis. We accordingly answer the question of law referred to us in the negative, i.e., in favour of the Revenue and against the assessee. However, there shall be no order as to costs.;