HOPE TEXTILES LIMITED Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(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 :

(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. 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.) 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.