2005 (2) TMI 33 - HC - Income Tax

Interest Tax Act 1974 revision - Whether Tribunal was justified in holding that the order of assessment under section 8(2) of the Interest-tax Act 1974 is erroneous and prejudicial to the interests of the Revenue and the Commissioner of Income tax has properly exercised his jurisdiction under section 19 of the Interest-tax Act 1974? - we answer the question against the assessee and in favour of the Revenue (Commissioner of Income-tax).

Summary

Issues:
- Interpretation of the Income-tax Act, 1961, specifically regarding the Commissioner's revisional powers under section 19 of the Interest-tax Act 1974.
- Assessment of interest on sticky loans and export subsidy received from the Reserve Bank of India for the assessment years 1985-86 and 1986-87.
- The validity of the Commissioner's decision to set aside the assessment order dated January 6, 1989, as erroneous and prejudicial to the interests of the Revenue.

Analysis:

1. Interpretation of Commissioner's Revisional Powers:
The High Court analyzed the invocation of the Commissioner's suo motu revisional powers under section 19 of the Interest-tax Act. The Court examined whether the Commissioner was justified in setting aside the assessment order based on the finding that it was both erroneous and prejudicial to the Revenue's interests. The Court compared this power to section 263 of the Income-tax Act and emphasized the importance of a categorical finding by the Commissioner to invoke such jurisdiction.

2. Assessment of Interest on Sticky Loans and Export Subsidy:
The case revolved around the assessment years 1985-86 and 1986-87, where the Assessing Officer granted benefits to the assessee on interest on sticky loans and export subsidy. However, the Commissioner deemed these decisions erroneous and prejudicial to Revenue interests. The Court noted discrepancies in the treatment of these issues, especially regarding the acceptance of the treatment of interest on sticky loans by the Revenue since 1960-61. The Court highlighted the importance of assessing each case based on its unique facts and legal provisions.

3. Validity of Commissioner's Decision:
The High Court upheld the Tribunal's decision regarding the Commissioner's exercise of revisional powers. The Tribunal concluded that the Assessing Officer's order was indeed erroneous and prejudicial to Revenue interests. The Court agreed with the Tribunal's assessment that the Commissioner's decision to set aside the assessment order was proper. It emphasized the duty of the Tribunal to examine such findings and upheld the decision in favor of the Revenue (Commissioner of Income-tax).

In conclusion, the High Court answered the reference question against the assessee, affirming that the assessment order under the Interest-tax Act was erroneous and prejudicial to Revenue interests. The Court found no fault in the Tribunal's approach and upheld the Commissioner's exercise of revisional powers under section 19 of the Act.