GUJARAT STATE PETROCHEMICALS CORPN. vs. COMMISSIONER OF INCOME TAX

ITR/94/1987HC GujaratGJHC24011827198706 August 2001Author: HONOURABLE MR. JUSTICE ANIL R. DAVE,HONOURABLE MR. JUSTICE D.A.MEHTA2 pages
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What were the facts?

The assessee, Gujarat State Petrochemicals Corpn., earned interest of Rs. 66,042 during its pre-production stage. The Income Tax Appellate Tribunal (ITAT), Ahmedabad Bench 'A', held that this interest was not a receipt on capital account and was taxable as income under 'other sources'. The Commissioner of Income Tax is the respondent. The case comes before the High Court of Gujarat at Ahmedabad as an Income Tax Reference No. 94 of 1987, filed by the assessee. The procedural history involves a reference made by the ITAT to the High Court under Section 256(1) of the Income Tax Act, 1961, for the Court's opinion on a specific question of law.

What did the High Court hold?

The High Court of Gujarat held that the interest of Rs. 66,042 earned by the assessee during the pre-production stage is taxable as income under 'other sources' and is not a receipt on capital account. The Court reached this conclusion by relying on the ratio of the Supreme Court's decision in the case of Tuticorin Alkali Chemicals and Fertilizers Ltd. v. Commissioner of Income Tax, reported in 227 I.T.R. 172. The principle established by this precedent is that interest earned during the pre-production period, even if related to capital expenditure, is taxable as income. The Court answered the reference in the affirmative, in favour of the revenue and against the assessee. The reference was disposed of accordingly, with no order as to costs.

What were the issues?

1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the interest of Rs. 66,042 earned by the assessee during the pre-production stage is not a receipt on capital account and is taxable as income under other source? (Question of law turning on the interpretation of provisions related to the taxability of income under 'other sources' and the nature of receipts during the pre-production stage). Assessee's Contention: The assessee, through its advocate Shri M.J. Shah, did not present specific arguments but acknowledged that the controversy is concluded by a Supreme Court decision. Revenue's Contention: The revenue, through its advocate Shri Akil Qureshi, also did not present specific arguments, acknowledging that the controversy is concluded by a Supreme Court decision.

Which sections of the Income-tax Act were involved?

Section 256(1)

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

INCOME TAX REFERENCE No 94 of 1987

For Approval and Signature:

Hon'ble MR.JUSTICE A.R.DAVE and Hon'ble MR.JUSTICE D.A.MEHTA

============================================================ 1. Whether Reporters of Local Papers may be allowed : NO to see the judgements?

2.

To be referred to the Reporter or not? : NO 3. Whether Their Lordships wish to see the fair copy : NO of the judgement?

4.

Whether this case involves a substantial question : NO of law as to the interpretation of the Constitution of India, 1950 of any Order made thereunder?

5.

Whether it is to be circulated to the Civil Judge? : NO -----

The order continues below.

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