Suhas Chandra Sen, J. - (1.) The following question of law has been referred to this court by the Tribunal under Section 256(2) of the Income-tax Act, 1961 : " Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that the entire remuneration to the custodian and other administrative expenses were admissible deductions under Section 57(iii) of the Income-tax Act ?"
(2.) The assessment year involved is the assessment year 1974-75 for which the relevant period of account is the year ending on May 30, 1973.
(3.) The facts stated by the Tribunal are as under : The dispute in all these appeals related to the assessee's claim for deduction of remuneration to the custodian and other administrative expenses incurred by it against its income from other sources. The assessee is a limited company and was engaged in the manufacture and production of various engineering equipment of national importance. It went into bad ways and, therefore, the Government of India decided to acquire its undertaking by the Richardson and Cruddas Limited (Acquisition and Transfer of Undertaking) Act, 1972, the relevant terms whereof are mentioned in paragraph 1 of the order of the Tribunal. The custodian, on behalf of the assessee, received Rs. 30 lakhs from the Central Government and deposited the same in a scheduled bank as required by the Act. Out of the interest received thereon, the custodian paid his own emoluments and also the administrative expenses. The question of assessing the assessec-company arose for the first time in the assessment year 1975-76 after the taking over of the undertaking of the assessee by the new company, The assessee claimed before the Income-tax Officer that the interest received by the assessee-company through the custodian on Rs. 30 lakhs deposited in the scheduled bank was not liable to be assessed as its income. Secondly, it was contended that the expenses incurred in administering the company should be allowed as a deduction and only the net interest income should be taxed if at all. The Income-tax Officer rejected the first contention and allowed a sum of Rs. 5,000 only as expenditure on estimate and brought the balance to tax, For the subsequent years, i.e., up to the assessment year 1978-79, the Income-tax Officer followed the same line except that he allowed some more amounts by way of estimates.;