SALEM COOPERATIVE CENTRAL BANK LIMITED vs. COMMISSIONER OF INCOME TAX, MADRAS

CIVIL APPEAL No. 2169/1993Supreme Court[1993] 2 S.C.R. 99706 April 1993Bench: 2 JudgesAuthor: B.P. JEEVAN REDDY, N. VENKATACHALA COOPERATIVE CENTRAL BANK9 pages
AI SummaryDismissed

What were the facts?

The assessee, Salem Cooperative Central Bank Limited, is a cooperative society engaged in banking. For the assessment year 1963-64, it received Rs. 19 as interest on a deposit made with an Electricity Distribution Company, a requirement for energy supply. The assessee's business income was exempt under Section 81(1) of the Income Tax Act, 1961. The Income Tax Officer treated the Rs. 19 as income from other sources and levied an additional surcharge of Rs. 81,920. The Appellate Assistant Commissioner deleted the surcharge, holding the interest as business income and thus exempt. The Income Tax Appellate Tribunal dismissed the Revenue's appeal. At the Revenue's instance, the Tribunal referred a question of law to the High Court. The High Court returned the reference unanswered, directing the Tribunal to consider all points regarding the attraction of additional surcharge.

What did the Supreme Court hold?

The Supreme Court dismissed the appeal, holding that the High Court did not exceed its jurisdiction. The Court reasoned that the High Court's direction to the Tribunal to consider whether the additional surcharge was attracted, even if the Rs. 19 was treated as business income, was justified. The Court relied on the principle established in C.I.T. Bombay v. Scindia Steam Navigation Ltd., which states that a question of law framed by the Tribunal might be complex and involve multiple aspects. The High Court is empowered to examine all relevant aspects of such a question, even if not all aspects were argued before the Tribunal, to arrive at a correct legal decision. The fact that the Revenue had also made an erroneous assumption of law before the Tribunal did not preclude it from raising a correct legal submission before the High Court. The Court found that the High Court's action was in the interest of law and justice, ensuring the correct determination of the additional surcharge liability.

What were the issues?

1. Whether the High Court exceeded its jurisdiction under Section 256 of the Income Tax Act, 1961, by directing the Tribunal to consider all points regarding the attraction of additional surcharge, thereby widening the scope of enquiry beyond the question stated. Assessee's contention: The High Court erred by expanding the scope of the reference beyond the specific question of law framed by the Tribunal. The matter should have been sent back to the High Court for answering the stated question of law. Revenue's contention: The High Court correctly directed the Tribunal to consider all aspects of the additional surcharge's applicability, even if a new legal submission was raised for the first time, to ensure a correct decision in law. The Revenue argued that the High Court's power under Section 256 is broad enough to address all relevant legal points arising from the Tribunal's order, citing the principle from C.I.T. Bombay v. Scindia Steam Navigation Ltd.

Which sections of the Income-tax Act were involved?

Section 81(1),Section 256

AI-generated summary — verify with the full judgment below

- - SALEM COOPERATIVE CENTRAL BANK LIMIJ'ED A v. COMMISSIONER OF INCOME TAX, MADRAS' APRIL 6; 1993 [B.P. JEEVAN REDDY AND N. VENKATACHALA, JJ.) • B Income Tax Act, 1961: Sections 86(i) and 256--Cooperative Society carrying on banking busi- ness--Business income exempt from income·t~nterest 011 Security Deposit C for supply of electricity-Whether additio11al surcharge leviable-'-Tribunal holding interest to be business income-Reference to High Court-High CouTt returning reference and directing Tribunal to consider all poin.ts whether additional surcharge attracted--Whether High CouTt exceeded the reference juri iction. · D The appellant-assessee was. a cooperative society engaged in the business or banking. The previous year relevant to the assessment year 19634i4 was the year ending June 30, 1962. The business income or the assessee was exempt under the provisions or Section 80(1) as it then stood.

During the aforesaid accounting year, th.e assessee received a sum or Rs. E 19 being the interest on the deposit made by it with an Electricity Distribo· tioo Company. This deposit had to be made by the assessee as it was required by the conditions notified by th

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