1995 (12) TMI 57 - HC - Income Tax

Summary

Issues:
1. Interpretation of taxability of interest received on excess profits duty refund.
2. Requirement of making a reference to the High Court under section 256(2) of the Income-tax Act, 1961.

Analysis:
The judgment pertains to an application filed by the assessee under section 256(2) of the Income-tax Act, 1961, seeking a direction for the Income-tax Appellate Tribunal to refer a question of law regarding the taxability of interest received on excess profits duty refund. The applicant argued that the absence of entries in the books of account does not automatically render the interest taxable, citing precedent in Kedarnath Jute Mfg. Co. Ltd. v. CIT [1971] 82 ITR 363 (SC). On the other hand, the non-applicant contended that the interest was rightly taxed in the hands of the assessee in the year of receipt.

The court deliberated on whether the interest accrued over previous years but was received in a specific assessment year should be taxed as done by the Tribunal. After considering the arguments, the court found the question to be a significant legal issue arising from the Tribunal's order and mandated the Tribunal to refer the question to the court for opinion under section 256(2) of the Act.

The court allowed the reference application, directing the Tribunal to refer the question to them. The Tribunal was instructed to comply with the order within six months. Additionally, the court fixed the counsel's fee for each side at Rs. 750, subject to certification.