C.I.T. vs. SHASTRA INVESTMENT PVT. LTD.

ITR/21/2003HC GujaratGJHC24025677200312 December 2007Author: HONOURABLE MR. JUSTICE ANIL R. DAVE,HONOURABLE MR. JUSTICE Z.K.SAIYED3 pages
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What were the facts?

This case involves an Income Tax Reference filed by the revenue (Commissioner of Income-tax) against the respondent assessee, Shastra Investment Pvt. Ltd. The reference was made at the instance of the revenue to the High Court of Gujarat at Ahmedabad by the Income Tax Appellate Tribunal, Ahmedabad Bench 'A', under Section 256(2) of the Income-tax Act, 1961. The questions of law referred pertain to the taxability of interest on debentures. The High Court, after hearing both parties, stated that the facts did not require detailed discussion as the questions were no longer res integra. The Court referred to a previous judgment in the case of Commissioner of Income-tax Vs Upnishad Investment Pvt. Ltd. and Ors. ([2003] 260 ITR 532).

What did the High Court hold?

The High Court answered the referred questions based on the ratio of the judgment in Commissioner of Income-tax Vs Upnishad Investment Pvt. Ltd. and Ors. ([2003] 260 ITR 532). The Court respectfully agreed with the ratio of that judgment. Consequently, the first question was answered in the negative, meaning the interest on debentures, under the specified circumstances, is indeed liable to be computed as income under the head 'interest' on securities, which is in favor of the revenue and against the assessee. The second question was answered in the affirmative, indicating that interest on debentures is to be considered income only when received by the assessee and not merely when it has become due, which is in favor of the assessee and against the revenue. The reference was disposed of with no order as to costs.

What were the issues?

The Tribunal referred two questions of law to the High Court for its opinion: 1. Whether, in the facts and circumstances of the case, the Appellate Tribunal is right in law that the interest on debentures issued by companies other than local authorities, companies, or corporations established by a central, state, or provincial act is not liable to be computed as income under the head 'interest' on securities? (Question of law turning on the interpretation of provisions related to 'interest' on securities). 2. Whether interest on debentures in all circumstances is liable to be considered income only when received by the assessee and not when it has been due? (Question of mixed law and fact concerning the accrual of income). Arguments: Assessee: Not recorded in the judgment. Revenue: Not recorded in the judgment. The judgment states that the questions are no longer res integra and relies on a previous judgment for its decision.

Which sections of the Income-tax Act were involved?

Section 256(2)

AI-generated summary — verify with the full judgment below

ITR/21/2003 1/3 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD INCOME TAX REFERENCE No. 21 of 2003 For Approval and Signature: HONOURABLE MR.JUSTICE ANIL R. DAVE HONOURABLE MR.JUSTICE Z.K.SAIYED ========================================================= 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the constitution of India, 1950 or any order made thereunder ? 5 Whether it is to be circulated to the civil judge ? ========================================================= C.I.T. - Applicant(s) Versus SHASTRA INVESTMENT PVT. LTD. - Respondent(s) ========================================================= Appearance : MR MANISH R BHATT for Applicant(s) : 1, MR RK PATEL for Respondent(s) : 1, ========================================================= CORAM : HONOURABLE MR.JUSTICE ANIL R. DAVE and HONOURABLE MR.JUSTICE Z.K.SAIYED Date : 12/12/2007 ORAL JUDGMENT (Per : HONOURABLE MR.JUSTICE ANIL R. DAVE)

ITR/21/2003 2/3 JUDGMENT

1.

At the instance

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