COMMISSIONER OF INCOME TAX Vs. SATISH TRADERS

JUDGEMENT

(1.) THE assessee filed the return of income on 31st Oct., 1989, for the asst. year 1989 90. In the return it had appended a note mentioning that "during the year it has received cash compensatory support of Rs. 10,98,368. The same has been treated as a capital receipt in view of the decision of the Tribunal, Delhi Bench, in the case of Gedore Tools (India) (P) Ltd. vs. IAC " After filing of the return, by the Finance Act, 1990, cl. (iiib) was inserted in S. 28 of the IT Act, 1961, with retrospective effect from 1st April, 1967. According to S. 28(iiib), cash compensatory support became chargeable to income tax under the head "Profits and gains of business". The return filed by the assessee was processed under S. 143(1)(a) of the Act and an intimation under S. 143(1)(a) of the Act dt. 23rd July, 1990, was issued to the assessee. In this intimation, the AO had made prima facie adjustment in respect of the cash compensatory support of Rs. 10,98,368 and this amount was brought to tax. On the basis of this addition, additional tax and interest under S. 234B was also charged. The assessee on receipt of the intimation filed an application on 28th Aug., 1990, objecting to the said adjustment but the objection of the assessee was turned down. Aggrieved by the same, the assessee preferred an appeal before the CIT, but the appeal was also dismissed. Thereafter, the assessee carried the matter before the Income tax Appellate Tribunal, Indore Bench (hereinafter referred to as "the Tribunal"). By order dt. 29th March, 1996, it has held that no additional tax can be levied in respect of the amount of compensatory support and no interest under S. 234B can be charged on the tax of the said amount. While doing so, the Tribunal has held as follows :

(2.) AFTER the judgment of the Tribunal, the CIT requested the Tribunal to refer the following question for opinion of this Court :

(3.) WE are not inclined to accede to this prayer. Thus, the question falling for consideration in this reference has been squarely answered by a Division Bench of this Court in the case of Hindustan Electrographite Ltd. (supra). We are in respectful agreement with the reasoning and conclusion arrived at the said case. In view of what has been stated above, the reference has to be answered against the Revenue and in favour of the assessee. We do so accordingly.