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Issues:
1. Interpretation of remission of interest under section 41(2) of the Income-tax Act. 2. Referral of questions of law to the High Court under section 256(2) of the Income-tax Act. Analysis: The case involved a dispute regarding the taxation of remission of interest under section 41(2) of the Income-tax Act for the assessment year 1982-83. The Commissioner of Income-tax revised the assessment, considering a remission of interest of Rs. 1,20,373 as taxable. The respondent, having settled an amount with a bank, argued that the remission was not taxable. The Income-tax Appellate Tribunal analyzed the settlement proposal and bank resolution, concluding that the remission was not taxable under section 41(2) based on the payment allocation principle. The petitioner sought to refer two questions of law to the High Court under section 256(2) of the Act. The Tribunal declined to refer the second question to the High Court due to the absence of a crucial document, the bank's letter, during the Tribunal proceedings. However, regarding the first question, the High Court found that a question of law arose from the interpretation of the settlement offer, recommendation to the board, and resolution passed. The Court noted that the Tribunal failed to consider the part where the assessee sought a concession in interest. Consequently, the High Court directed the Tribunal to refer the first question of law to the Court for consideration. In conclusion, the High Court directed the Income-tax Appellate Tribunal to refer the question of law regarding the interpretation of the remission of interest to the Court. The decision highlighted the importance of considering all relevant aspects of a case to determine the applicability of tax provisions accurately.
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