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1995 DIGILAW 953 (MP)

Hope Textiles Ltd. v. Commissioner Of Income-Tax

1995-12-12

A.R.TIWARI, S.B.SAKRIKAR

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JUDGMENT A.R. Tiwari, J. 1. The applicant (assessee) has filed this application under Section 256(2) of the Income-tax Act, 1961 (for short "the Act"), seeking a direction to the Income-tax Appellate Tribunal to state the case and refer the undernoted question of law for our answer : "Whether, on the facts and in the circumstances of the case, the Tribunal was right in upholding that the interest received on excess profits duty refund was taxable in the hands of the appellant and in the year of receipt ?" 2. Briefly stated, the facts of the case are that the applicant is an assessee under the Income-tax Act. This application pertains to the assessment year 1972-73. The assessee received interest during the accounting year from the Government. The amount was paid to the then Holkar State. The Holkar State did not return the amount. The assessee, therefore, pursued the matter. Eventually, it succeeded in obtaining the order in February, 1972, for refund of the portion of the excess profits duty along with interest. The interest was to the extent of Rs. 1,02,559 which was credited in the books by the assessee in the interest account. This was charged to tax. During the course of the original proceedings an objection was raised as to the assessability of the amount of interest. This objection was overruled by the Income-tax Officer. Against this order, the assessee preferred an appeal. During the pendency of the appeal an order under Section 263 was passed by the Commissioner of Income-tax. The Tribunal considered the conduct of the assessee and the system of accountancy. It was noticed that no entries were made in the books at the time of accrual. The Tribunal, therefore, held that the interest received on excess profits duty refund was taxable in the hands of the assessee and in the year of its receipt. The Tribunal also decided some other questions against the assessee. The order of assessment dated June 23, 1981 is annexure "A-1". It was passed under Section 143(3)/144B of the Income-tax Act, 1961. An appeal, registered as I.T. 482/81-82, was filed. Thereafter, an appeal, I.T.A. No. 315/Ind of 1982, was filed which was decided on July 10, 1984 (annexure "C"). The applicant filed an application under Section 256(1) of the Act. The order of assessment dated June 23, 1981 is annexure "A-1". It was passed under Section 143(3)/144B of the Income-tax Act, 1961. An appeal, registered as I.T. 482/81-82, was filed. Thereafter, an appeal, I.T.A. No. 315/Ind of 1982, was filed which was decided on July 10, 1984 (annexure "C"). The applicant filed an application under Section 256(1) of the Act. Some questions on the application of the applicant, were referred by the Tribunal which are pending in this court in Miscellaneous Civil Case No. 336 of 1985. The aforesaid question was, however, not referred. The applicant, therefore, filed the application under Section 256(2) of the aforesaid Act. 3. We have heard Shri S.C. Bagadiya, learned counsel for the applicant, and Shri D.D. Vyas, learned counsel for the non-applicant. 4. Shri Bagadiya submitted that absence of entries in the books of account does not necessarily make the amount of interest received in the assessment year taxable. He placed reliance on Kedarnath Jute Mfg. Co. Ltd. v. CIT [1971] 82 ITR 363 (SC) in support of his contention that failure of entries is of no consequence and that the Tribunal was required to make a reference of the question to this court. 5. Shri Vyas, on the other hand, contended that the interest received on excess profits duty amount was rightly taxed in the hands of the assessee in the year of the receipt. 6. The rival contentions go to show that the question is of law and is of importance and is required to be stated and referred. The position that emerges is that the interest had accrued every year but was not paid till February, 1972. That being so whether the interest accrued for the past period and received in a particular year of assessment was liable to be taxed in the manner as it was done is a point to be considered and answered. 7. After considering the submissions, we find that the question as proposed is a question of law and does arise out of the order of the Tribunal passed in the aforesaid appeal and is required to be stated and referred. 8. In the result we do not feel satisfied with the correctness of the decision of the Tribunal and require the Tribunal in terms of Section 256(2) of the Act to state the case and refer the aforesaid question to us for our opinion. 9. 8. In the result we do not feel satisfied with the correctness of the decision of the Tribunal and require the Tribunal in terms of Section 256(2) of the Act to state the case and refer the aforesaid question to us for our opinion. 9. This reference application is accordingly allowed in terms indicated above. 10. A copy of the order shall be sent to the Tribunal under the seal of the court and the signature of the Registrar in terms of Section 256(2) of the Act. 11. The Tribunal shall comply with this order within a period of six months from the date of the receipt of the copy of the order. 12. Counsel's fee for each side is, however, fixed at Rs. 750, if certified.