COMMISSIONER OF INCOME-TAX V. SABARMATI INVESTMENT PVT LTD

ITR/110/1990

AI Insights

The case involves a reference made by the Commissioner of Income-Tax and Sabarmati Investment Pvt Ltd to the Gujarat High Court concerning the interpretation and application of the Income Tax Act, 1961. The primary issue was whether the Tribunal was correct in law and on facts in deleting the addition of Rs.1,61,805 made by the I.T.O. on account of accrued interest on debentures of Ambalal Sarabhai Enterprises Ltd. Additionally, the assessee questioned the denial of deduction of expenses under section 57(iii) and the reliance on a Supreme Court judgment in Mac Dowel & Co. Ltd. The High Court's decision favored the assessee on the first issue, acknowledging the timing of income recognition and taxability under the Act. The other two questions were not addressed as the assessee chose to withdraw them.

• Counselvise Citation: [2002] 140 COUNSELVISE.COM (IT) 718259 (HC-GUJARAT)
• Appeal Type: Others
• Pronouncement Date: 10-07-2002
• Assessment Year: misc
• Other Referred Cases: Mac Dowel & Co. Ltd., 154 ITR 148
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: R K PATEL
• Assessee Lawyers: TANVISH BHATT
• Keywords: Accrued interest; Assessment Year; Debentures; Income Tax; Taxable income
• Section: 18; 57(iii)

Judgement Text

" IN THE HIGH COURT OF GUJARAT AT AHMEDABAD INCOME TAX REFERENCE No 110 of 1990 For Approval and Signature: Hon'ble MR.JUSTICE M.S.SHAH and Hon'ble MR.JUSTICE K.A.PUJ ============================================================ 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 Civil Judge? : NO @ COMMISSIONER OF INCOME-TAX Versus SABARMATI INVESTMENT PVT LTD -------------------------------------------------------------- Appearance: 1. INCOME TAX REFERENCE No. 110 of 1990 MR TANVISH BHATT for Petitioner No. 1 MR RK PATEL for Respondent No. 1 -------------------------------------------------------------- CORAM : MR.JUSTICE M.S.SHAH and MR.JUSTICE K.A.PUJ Date of decision: 10/07/2002 ORAL JUDGEMENT (Per : MR.JUSTICE K.A.PUJ) This reference is arising out of the cross reference application filed by the assessee as well as by the Department before the Tribunal. 2. At the instance of the revenue, the following question of law is referred to this Court for its opinion:- (i) \"Whether the Tribunal is right in law and on facts in deleting the addition of Rs.1,61,805/made by I.T.O. on account of accrued interest on the debentures of Ambalal Sarabhai Enterprises Ltd.?\" 3. Similarly, at the instance of the assessee, the following two questions are referred to this Court for its opinion:- (ii) Whether on the facts and in the circumstances the Tribunal is right in law in holding that the assessee company was not entitled to claim deduction of expenses of Rs.23,088/- u/s.57(iii) of the I.T. Act, 1961? (iii) Whether on the facts and in the circumstances of the case the Tribunal was justified in law in approving reference to and reliance upon the judgment of Supreme Court in the case of Mac Dowel & Co. Ltd., 154 ITR 148 by the C.I.T. (A)? 4. As far as the first question is concerned, it is observed by the Tribunal in its order that the interest on debentures was payable on third day of June every year and interest for the period from 2-6-1982 to 1-6-1983 became payable on 3-6-1983. The assessee has received interest amounting to Rs.2,08,626/- pertaining to the period from 2-6-1982 to 1-6-1983 in the assessment year 1984-85 and the same was said to have been subjected to tax in the subsequent year. The inclusion of such income in assessment year 1984-85 was based on the method of accounting adopted by the assessee with regard to the said interest income. The Tribunal has also taken note of the provisions contained in Section 18 of the Act, which says that interest on debentures would be liable to tax only it becomes due for payment to the assessee. The interest on the aforesaid debentures became due for payment to the assessee on 3-6-1983 and prior to that date it could not be validly contended that the assessee became entitled to receive interest on the aforesaid amount of investment made in the debentures. Considering these two aspects of the matter, the Tribunal has deleted the addition of income amounting to Rs.1,61,805/-. 5. Since the entire interest income on debentures was taxed in subsequent year and there was no dispute with regard to that fact, we are of the view that the Tribunal has rightly come to the conclusion of deleting the said interest income from the total income of the year under reference. We, therefore, answer question No.1 in the affirmative i.e. in favour of the assessee and against the revenue. 6. As far as questions No.2 and 3 are concerned, it is brought to our notice that the Tribunal has followed its earlier decision for assessment year 1982-83 and the Reference arising from the order of the Tribunal for that assessment year has already been withdrawn by the applicant - assessee. 7. Mr RK Patel, learned advocate for the applicant assessee seeks permission to withdraw this reference. Accordingly, we grant this permission and decline to give any answer to questions No.2 and 3 referred to us at the instance of the assessee. 8. The Reference is accordingly disposed of with no order as to costs. (M.S. Shah,J) (K.A. Puj,J) zgs/- "