Cit Vs. Official Liquidator, Pilot Pen Co. (P) Ltd. - Court Judgment

Excerpt:
counsels: mrs. chitra venkataraman, for the revenue p. p. s. janarthana raja, for the assessee head note: income tax loss--carry forward and set offamount incurred as security charges catch note: expenditure incurred as security charges in respect of land and factory building should be treated as loss from separate sub-source of income and was eligible for set off against other incomes. ratio: expenditure incurred as security charges in respect of land and factory building should be treated as loss from separate sub-source of income and was eligible for set off against other incomes. case law analysis: cit v. gannon dunkerley & co. (p) ltd. (2000) 243 itr 646 (mad) applied. application: also to current assessment year. decision: in favour of assessee. income tax act 1961 s.70 in the madras high court r. jayasimha babu & k. gnanaprakasam, jj. - constitution of india article 141; [a.p. shah, c.j., f.m. ibrahim kaliffulla &v. ramasubramanian, jj] reference to larger bench - precedent - full bench decision held, it is binding on the division bench. only if the full bench comes to conclusion that earlier full bench decision is incorrect, there is scope for making reference to larger bench. division bench doubting correctness of full bench decision cannot direct registry for placing papers before chief justice to make reference to larger bench. k. gnanaprakasam, j.at the instance of the revenue, the following questions are referred for the assessment years 1986-87 and 1987-88, respectively :'whether, on the facts and in the circumstances of the case, the income tax appellate tribunal was right in law in holding, that the expenditure of rs.52,945 for the assessment year 1986-87 incurred as security charges in respect of the land and factory building should be treated as loss from a separate sub-source of income and eligible for set off against other incomes, irrespective of the fact, that there is no income from this sub-source during the relevant previous year ?whether, on the facts and in the circumstances of the case, the income tax appellate tribunal was right in law in holding that the expenditure of rs. 68,422 for the assessment year 1987-88 incurred as security charges, in respect of the land and factory building, should be treated as loss from a separate sub-source of income and eligible for set off against other incomes, irrespective of the fact, that there is no income from this sub-source during the relevant previous year ?'the assessee made a claim that the amount incurred by way of security charges, in respect of the land and factory building should be treated as loss from a separate sub-source of income and eligible for set off against other incomes. the said contention of the assessee was accepted by the tribunal and as against this, this reference has been made.the learned advocate for the revenue fairly placed before us, the decision in the case of cit v. gannon dunkerley and co. (p) ltd. : [2000]243itr646(mad) , wherein it was held that the expenditure that had been incurred by the official liquidator by way of rent and payment of statutory dues had nexus with the earning of interest and, therefore, those amounts were deductible and the assessee is entitled to the claim made by it.the principles laid down in the said case are squarely applicable to the case on hand, as the assessee spent the amount towards security charges to safeguard its land and factory building. hence, the tribunal was correct in coming to the aforementioned conclusion and, therefore, the reference is answered in favour of the assessee and against the revenue.