JUDGMENT
1. The Income-tax Appellate Tribunal, Allahabad, has under Section 256(1) of the Income-tax Act, 1961, referred the following questions for the opinion of this court :
"1. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in holding that the assessee-company was not an authority as envisaged by Section 10(20A) and was therefore not entitled to the exemption under Clause (20A) of Section 10 of the Income-tax Act, 1901 ?
2. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal rightly held that since the assessee-company's claim of carrying on business cannot be accepted and the only expenses shown to have been incurred for earning the income from interest on fixed deposits and miscellaneous income were the bank charges, only these expenses and no other expenses could be allowed as a deduction against the income from interest on fixed deposits and miscellaneous income which falls for assessment under the head 'Income from other sources' ?"
2. The aforesaid questions are stated to arise out of the Tribunal's order dated September 18, 1979, passed in ITA Nos. 530 and 531 (Alld.) of 1978-79 for the assessment year 1976-77 and 1977-78.
3. We have heard Sri. A. Uppadhya, advocate holding brief from Sri V. B. Uppadhya, senior advocate, learned counsel for the assessee, and Sri A. N. Mahajan, learned counsel for the respondent.
4. The assessee-company was registered as a Government public company, as defined in Section 617 of the Companies Act, 1956, for a large number of objects which are mentioned in Clauses (1) to (42) of the memorandum of association, which includes objects like (a) modernisation, maintenance and operation of the irrigation system, (b) development of field channels and field drains within the command of each outlet, (c) consolidation of holdings and re-drawing of field boundary, (d) development of ground water to supplement surface irrigation, (e) development of marketing and processing and communication, (f) town planning, etc, etc. During the two years under consideration, no activity of any sort mentioned in its objects was taken up and the only income derived was from interest earned on fixed deposit, etc. It claimed its income to be exempt under Section 10(20A) of the Income-tax Act, 1961. This claim has been negatived throughout, and in our view rightly, because the assessee was not an authority constituted by or under any law enacted either for the purposes of dealing with and satisfying the need for housing accommodation or for the purpose of planning, development or improvements of cities, towns and villages. It was a company registered under the general law relating to companies as contained in the Companies Act, 1956, and therefore, it could not be treated as an authority as contemplated by Section 10(20A) of the Act. Therefore, we answer question No. 1, as reproduced above, in the affirmative, i.e., in favour of the commissioner and against the assessee.
5. As regards question No. 2, we find that the Assessing Officer had allowed only Rs. 15 on account of bank charges as a deduction against the income on fixed deposit and savings bank account amounting to Rs. 1,11,625 in the assessment year 1976-77 and a sum of Rs. 10 as against a similar income of Rs. 3,18,630 in the assessment year 1977-78. It was a company that had to incur many expenses for its existence which was necessary for earning the income of interest as well. No doubt, the business, as contemplated in the objects was not set up, yet the existence of the company was necessary without which it could not earn any income even from interest. Therefore, a reasonable proportion of the other expenses like those on salaries, rent, audit fee, etc., should also have been allowed as deduction. However, we find that the company's operations were wound up somewhere in January, 1977. Therefore, it would be a futile exercise to order a fresh enquiry into the allowable part of the expenditure. In view of the above circumstances and in view of the long lapse of time, we decline to answer question No. 2.
6. An authenticated copy of this judgment be forwarded to the Tribunal, as required by law.