COMMISSIONER OF INCOME TAX V. NICOBAR INVESTMENT PVT.LTD.

ITR/428/1992

AI Insights

The case revolves around an income tax dispute concerning the accrual of interest on 11% redeemable bonds of A.S.E. for the assessment year 1983-84. The Income-tax Officer initially added Rs.2,39,671 as interest income on an accrual basis to the assessee, Nicobar Investment Pvt. Ltd. However, this addition was contested and subsequently deleted by the Commissioner of Income-tax (Appeals) and upheld by the Tribunal. The legal question referred to the High Court was whether the Appellate Tribunal was correct in deleting this addition. The court's decision was influenced by its earlier judgments on similar issues, which established that interest on bonds payable annually does not accrue to the transferor for the part of the year they hold the bonds without receiving the interest, particularly when the transferee has reported and taxed the interest for the entire year.

• Counselvise Citation: [2004] 140 COUNSELVISE.COM (IT) 718079 (HC-GUJARAT)
• Appeal Type: Others
• Pronouncement Date: 26-02-2004
• Assessment Year: misc
• Other Referred Cases: CIT vs. Sabarmati Investment Pvt. Ltd., CIT vs. Shilpi Advertising Pvt. Ltd.
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: R K PATEL
• Assessee Lawyers: MANISH BHATT
• Keywords: Accrual basis; Appellate Tribunal; Assessment year 1983-84; Income Tax; Interest on Bonds
• Section: 256(1)

Judgement Text

" IN THE HIGH COURT OF GUJARAT AT AHMEDABAD INCOME TAX REFERENCE No 428 of 1992 For Approval and Signature: HON'BLE MR.JUSTICE M.S.SHAH and HON'BLE MR.JUSTICE A.M.KAPADIA ============================================================ 1. Whether Reporters of Local Papers may be allowed : NO to see the judgements? 2. To be referred to the Reporter or not? : NO 3. Whether Their Lordships wish to see the fair copy : NO of the judgement? 4. Whether this case involves a substantial question : NO of law as to the interpretation of the Constitution of India, 1950 of any Order made thereunder? 5. Whether it is to be circulated to the concerned : NO Magistrate/Magistrates,Judge/Judges,Tribunal/Tribunals? -------------------------------------------------------------- COMMISSIONER OF INCOME TAX Versus NICOBAR INVESTMENT PVT.LTD. -------------------------------------------------------------- Appearance: 1. INCOME TAX REFERENCE No. 428 of 1992 MR MANISH R BHATT for Petitioner No. 1 SERVED BY RPAD - (N) for Respondent No. 1 -------------------------------------------------------------- CORAM : HON'BLE MR.JUSTICE M.S.SHAH and HON'BLE MR.JUSTICE A.M.KAPADIA Date of decision: 26/02/2004 ORAL JUDGEMENT (Per : HON'BLE MR.JUSTICE M.S.SHAH) In this reference at the instance of the revenue under Section 256(1) of the Income-tax Act, 1961, the following question of law has been referred for our opinion for the assessment year 1983-84 :- \"Whether, the Appellate Tribunal is right in law and on facts deleting the addition of Rs.2,39,671/- being interest on bonds received on accrual basis ?\" 2. We have heard Mr Manish R Bhatt, learned standing counsel for the revenue. Mr RK Patel, learned counsel appears and states that he has instructions to appear for the respondent-assessee and undertakes to file vakalatnama within two weeks from today. 3. The Income-tax Officer made addition of Rs.2,39,671/- by way of interest on 11% redeemable bonds of A.S.E. The Commissioner of Income-tax (Appeals) observed that these bonds, which earned the interest only on annual basis, were sold by the assessee on 13.2.82. The interest fell due on the same on 1.7.1982. The Company which bought these bonds viz. M/s Kaushalya Investment Pvt. Ltd. had duly shown in its return the interest due on these bonds for the entire year ending on 1.7.1982. The Commissioner of Income-tax (Appeals), therefore, deleted the said addition. The Tribunal confirmed the decision of the Commissioner of Income-tax (Appeals) following its decision in Shilpi Advertising Ltd. 4. At the hearing of this reference, our attention is invited to the decision dated 10.7.2002 of this Court in CIT vs. Sabarmati Investment Pvt. Ltd. (Income-tax Reference No.110 of 1990) wherein the same controversy was raised and this Court held that when the interest on bonds is payable on year to year basis, there cannot be any deemed accrual of interest for a part of the year during which the debentures are held by the transferor without getting interest, when the transferee has received the interest for the entire year and has also paid tax on such interest. Accordingly, the question was answered in favour of the assessee and against the revenue. Following the said decision, this Court answered a similar question in CIT vs. Shilpi Advertising Pvt. Ltd. (Income-tax Reference No.117 of 1991) in favour of the assessee and against the revenue. 5. Since the controversy raised in the present reference is squarely covered by the aforesaid decisions of this Court, we answer the question referred to us in the affirmative i.e. in favour of the assessee and against the revenue. The reference accordingly stands disposed of. (M.S. Shah, J.) (A.M. Kapadia, J.) sundar/- "