COMMISSIONER OF INCOME TAX Vs. SATYANARAYAN GUPTA (HUF).

JUDGEMENT

(1.) THE present reference is at the instance of the Commissioner of Income Tax, Orissa, raising the following question : Whether, on the facts and in the circumstances of the case, income received by the assessee by way of interest under section 244 of the Income Tax Act, 1961, on refund determined and quantified under section 240 of the said Act was not assessable in the year of receipt ?

(2.) THE facts indicate, inter alia, that the assessee is a Hindu undivided family. The assessment year involved was 1982 -83 and the accounting year ended on October 27, 1981. The assessee, on April 22, 1981, received Income Tax refund and also interest thereon under section 244 of the Income Tax Act. The assessee pleaded before the Income Tax Officer that the interest received by it should have been spread over because it followed the mercantile system of accounting which the Income Tax Officer refused. On appeal, the Appellate Assistant Commissioner restored the matter to the file of the Income Tax Officer directing him to verify whether, in fact, the mercantile system of accounting was followed by the assessee and it was directed that if it was found that the system of accounting was mercantile, then the assessees contention was to be accepted. On appeal by the Revenue, the Tribunal found that the assessee was maintaining the books of account on the basis of the mercantile system of accounting.

(3.) IT is brought to our notice that in Jagannathram Gangaram v. CIT : [1995] 212 ITR 291, this court had decided that in view of the finding that the assessee was maintaining its accounts on cash basis, the Tribunal was justified in holding that the interest was assessable for the relevant year. Following the ratio of the said decision, we answer the question in favour of the assessee and against the Revenue.