COMMISSIONER OF INCOME TAX Vs. MAHAVIRPRASAD R MORARKA

JUDGEMENT

(1.) THIS reference made under S. 256(1) of the IT Act, 1961, refers for the opinion of this Court the following questions of law arising out of the Tribunal's order dated September 6, 1975, in I. T. A. No. 2230/B/74 75 pertaining to the assessment year 1971 72 :

(2.) ANOTHER company by name Salar Jung Sugar Mills Ltd. was a subsidiary company of this company. In or about 1968, Salar Jung Sugar Mills Ltd. acquired 47per cent shares in a company named Tungabhadra Pulp and Board Mills Ltd. A partnership firm, Straw Board Dealers, which was the sole selling agent of Tungabhadra Pulp and Board Mills Ltd., was entitled to a sum of Rs. 31,39,061 from Tungabhadra Pulp and Board Mills Ltd. This amount was shown as a debt due to Straw Board Dealers in the accounts of the Tungabhadra Pulp and Board Mills Ltd., as on March 31, 1967; towards loan and commission accrued.

(3.) ON September 26, 1968, the assessee and his brother settled their claim with Tungabhadra Pulp and Board Mills Ltd. for an aggregate amount of Rs. 7,50,000, out of which the assessee's share (in the ratio of 3:1) was Rs. 5,62,500. The assessee realised a sum of Rs. 4,72,626 out of his share during the accounting year relating to the asst. year 1971 72. Since the assessee had paid only a sum of Rs. 3,12,142 for purchasing the above claim, the surplus realised out of the transaction was Rs. 1,60,482. The ITO, during the assessment proceedings, treated the said amount of Rs. 1,60,484 in the hands of the assessee as business profits to be taxed as such. He also charged interest under S. 215 of the IT Act, 1961. In the appeal filed by the assessee, the AAC took the view that the amount added by the ITO as business income was merely income of a casual and non recurring nature, not taxable under S. 10 (3) of the Act. He, accordingly, directed the deletion of the said amount in computing the total income of the assessee. Consequent upon this finding, the AAC directed the ITO to give credit to the assessee in respect of taxes deducted at source and not to levy interest under, S. 215 in case the income got reduced to nil on giving effect to the appellate order or, if the interest under S. 215 was found chargeable, to make levy only up to the date of the filing of the return.