COMM. OF INCOME TAX vs. MALIKA SARABHAI T. NO. 15

ITR/45/2000HC GujaratGJHC24022404200012 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 at the instance of the Commissioner of Income Tax against the assessee, Malika Sarabhai. The reference was made by the Income Tax Appellate Tribunal, Ahmedabad Bench 'A', under Section 256(2) of the Income-tax Act, 1961. The High Court of Gujarat at Ahmedabad was asked to provide its opinion on two questions of law. The court noted that the facts of the case did not require extensive discussion as the referred questions were no longer res integra. The court's decision was based on a previous judgment.

What did the High Court hold?

The High Court of Gujarat, in its judgment dated December 12, 2007, answered the two questions of law referred by the Income Tax Appellate Tribunal. The Court respectfully agreed with the ratio of the judgment in COMMISSIONER OF INCOME-TAX Vs UPNISHAD INVESTMENT PVT. LTD. AND ORS reported in [2003] 260 ITR 532. Consequently, the first question was answered in the negative, meaning in favor of the revenue and against the assessee. This implies that the interest on debentures, under the specified circumstances, is indeed liable to be computed as income under the head 'interest' on securities. The second question was answered in the affirmative, in favor of the assessee and against the revenue. This means that interest on debentures is to be considered income only when it is received by the assessee, not merely when it becomes due. The reference was disposed of with no order as to costs.

What were the issues?

The Tribunal was asked to decide the following questions of law: 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? (Section 18 of the Income-tax Act, 1961 is implicitly relevant here). 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? (This question relates to the accrual basis of accounting for income). Contentions: Assessee: The judgment does not record specific contentions for the assessee. The court stated that the questions were no longer res integra and relied on a previous judgment. Revenue: The judgment does not record specific contentions for the revenue. The court stated that the questions were no longer res integra and relied on a previous judgment.

Which sections of the Income-tax Act were involved?

Section 256(2),Section 18

AI-generated summary — verify with the full judgment below

ITR/45/2000 1/3 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD INCOME TAX REFERENCE No. 45 of 2000 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 ? ========================================================= COMM. OF INCOME TAX - Applicant(s) Versus MALIKA SARABHAI T. NO. 15 - 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/45/2000 2/3 JUDGMENT

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