Ajit K.Sengupta, J. - (1.) In this reference under Section 256(1) of the Income-tax Act, 1961, the following questions of law have been referred to this court for the assessment year 1979-80 : "1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the fixed deposits were not transferred to the shareholders and that the interest income of Rs. 31,105 (after deduction of expenses) on the said fixed deposits was assessable in the hands of the assessee ? Whether in the event of absence of transfer of the said fixed deposits, the Tribunal should have held that the interest income from the said fixed deposits could be assessed in the hands of the assessee only as trustee for the shareholders to whom the fixed deposits were handed over ?"
(2.) Shortly stated, the facts are that the assessee is a company which has been carrying on fishery business for a long time. For availing of the benefits of Section 54E of the Act, the assessee made fixed deposit of Rs. 4,20,000 on October 18, 1977, with the United Bank of India, Beliaghat Branch, Calcutta, for 61 months with effect from October 18, 1977, on interest of 10% per annum. The assessee follows the Bengali calendar year as its accounting year. Subsequently, on January 18, .1978, the aforesaid term deposit was reinvested in 84 term deposits of Rs. 5,000 each. In the return for the assessment year under consideration, the assessee disclosed the amount of Rs. 16,904 as interest. The Income-tax Officer enquired why the amount of Rs. 16,904 was shown as interest in the place of. Rs. 42,000. In reply, the assessee stated that the liquidator, appointed subsequently, distributed 38 term deposits amounting to Rs. 1,90,000 on March 11, 1978, and credited 27 term deposits amounting to Rs. 1,35,009 to the accounts of the respective shareholders. On a consideration of the inspection report of the Income-tax Inspector and other materials, the Income-tax Officer was of the opinion that the term deposits were not actually transferred. As such, he assessed to tax the amount of Rs. 31,105 after deducting the expenses of Rs. 10,895 from the interest income of Rs. 42,000.
(3.) Being aggrieved, the assessee preferred an appeal before the Commissioner of Income-tax (Appeals). The Commissioner of Income-tax (Appeals) was of the opinion that the assets were not transferred in specie and as such the income accruing or arising from the said assets was taxable in the hands of the assessee in terms of Section 60 of the Act. He also negatived the contention of the assessee that the assessee was merely a trustee of the said assets on behalf of the shareholders and as such the said interest was not taxable.;