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

ITR/22/2003HC GujaratGJHC24025678200312 December 2007Author: HONOURABLE MR. JUSTICE ANIL R. DAVE,HONOURABLE MR. JUSTICE Z.K.SAIYED3 pages
AI SummaryPartly Allowed

What were the facts?

This case involves an Income Tax Reference filed by the revenue (Commissioner of Income-tax) against the respondent assessee, Biradari Investment Pvt. Ltd. The reference was made at the instance of the revenue to the High Court of Gujarat at Ahmedabad under Section 256(2) of the Income-tax Act, 1961. The Income Tax Appellate Tribunal, Ahmedabad Bench 'A', had referred two questions of law for the Court's opinion. The Court heard arguments from both the revenue and the assessee. However, the Court noted that the questions referred were no longer res integra, meaning they had been previously decided.

What did the High Court hold?

The High Court, in respectful agreement with the ratio laid down in the case of COMMISSIONER OF INCOME-TAX Vs UPNISHAD INVESTMENT PVT. LTD. AND ORS reported in [2003] 260 ITR 532, answered the referred questions. The first question was answered in the negative, in favour of the revenue and against the assessee. This implies that the Tribunal was not right in holding that 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. The second question was answered in the affirmative, in favour of the assessee and against the revenue. This means that interest on debentures is to be considered income only when received by the assessee, not merely when it has become due. The reference was disposed of accordingly.

What were the issues?

The Tribunal referred the following questions of law for the Court's 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 a local authority, company, or corporation established by a central, state, or provincial act is not liable to be computed as income under the head “interest” on securities? (This question concerns the classification of income from certain debentures under Section 18 of the Income-tax Act, 1961). 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 versus receipt basis of income recognition for debenture interest). Assessee's Contentions: The judgment does not record specific contentions made by the assessee. The Court proceeded based on prior judgments. Revenue's Contentions: The judgment does not record specific contentions made by the revenue. The Court proceeded based on prior judgments.

Which sections of the Income-tax Act were involved?

Section 256(2),Section 18

AI-generated summary — verify with the full judgment below

ITR/22/2003 1/3 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD INCOME TAX REFERENCE No. 22 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 BIRADARI 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/22/2003 2/3 JUDGMENT

1.

At the instance

The order continues below.

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