Interest received from bank deposits is income of the assessee and not incidental to the construction of the assessee, hence, it would not reduce the cost of construction.

Uday Sinha, J.

1. These are two references under Sec.256(1) of the Income-tax Act, 1961 (hereinafter referred to as " the Act"). They relate to the assessment year 1972-73. Taxation Case No. 41 of 1978 is at the instance of the assessee and Taxation Case No. 42 of 1978 is at the instance of the Revenue. The Income-tax Appellate Tribunal was seized of fourteen appeals bearing Nos. 1537 to 1543 (Pat) and Nos. 1463 to 1469 (Pat) of 1973-74. They were all disposed of by a common judgment. Those appeals gave rise to fourteen references to this court which were numbered as Taxation Cases Nos. 34 to 47 of 1977. Taxation Cases Nos. 34 to 40 of 1977 were at the instance of the Commissioner of Income-tax, Bihar-II, Patna, while the other cases were at the instance of the assessee. Those references were disposed of by a Bench of this court presided over by S.K. Jha and A.K. Sinha JJ., [1988] 170 ITR 522 (supra). All the questions referred to in those references were answered in favour of the assessee and against the Revenue. In the present references, all except one are common to the eaflier cases disposed of by the earlier Bench by judgment dated August 7, 1987. For that purpose, I must set out the questions referred to us. A consolidated reference has been made to us, at the instance of the Revenue as well as the assessee. The questions referred at the instance of the assessee are the following :

"(1) Whether, on the facts and in the circumstances of the case, the receipts arising from the letting out of the quarters to the outsiders, such as employees of the contractors engaged in the construction of the plant can be treated as the income of the assessee and/or, in any event, should be adjusted against the cost of construction so as to reduce such cost ?

(2) Whether, on the facts and in the circumstances of the case, the receipts from the letting out of the properties to outsiders, such as the employees of the contractors engaged in the construction of the plant are to be assessed as income from property under Sec.22 of the Income-tax Act, 1961, or the said income should be assessed under Sec.28 of the Income-tax Act, 1961, as business income or in any event, under Sec. 56 of the Income-tax Act, 1961, as income from other sources ?

(3) Whether, on the facts and in the circumstances of the case, the interest received by the assessee from sums advanced to its own employees is liable to be assessed as income from other sources in the hands of the assessee or whether, on the facts and in the circumstances of the case, such interest would reduce the cost of construction of the assessee and should not be treated as income chargeable to tax ?

(4) Whether, on the facts and in the circumstances of the case, the interest received from the bank on short-term deposits is liable to be assessed as the income of the assessee or such interest should reduce the cost of construction of the assessee and, therefore, would not constitute the income of the assessee ? "

2. The questions referred at the instance of the Revenue are the following :

"(1) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that interest received by the assessee-company on the amounts advanced to contractors was not taxable ?

(2) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that the hire charges received by the assessee-company for letting out plant and machinery to contractors were not taxable ?

(3) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that the royalty received by the assessee-company for allowing contractors to raise stone chips from companys land, was not taxable ?

(4) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that the miscellaneous receipts were not taxable ? "

3. Two of the questions referred to this court read as follows :

"(1