Commissioner of Income Tax vs Kalani Asbestos Cement Pvt. Ltd.

G.G. Sohani, Actg. C.J.

The order in this case will also govern the disposal of Miscellaneous Civil Cases Nos. 142 of 1986 and 144 of 1986.

These are applications u/s 256(2) of the Income Tax Act, 1961 (hereinafter referred to as "the Act").

The material facts giving rise to these applications, briefly, are as follows : For the assessment years 1980-81 to 1983-84, the Income Tax Officer disallowed u/s 40A(8) of the Act, interest paid by the assessee to certain parties. On appeal, the Commissioner of Income Tax upheld the order passed by the Income Tax Officer disallowing payment of interest to some persons. On further appeal, the Tribunal held that no disallowance of interest u/s 40A(8) of the Act was called for. Aggrieved by the order passed by the Tribunal, the Revenue sought reference, but as the application made by the Revenue in that behalf was rejected, the Revenue has filed this application.

Having heard learned counsel for the parties, we have come to the conclusion that the following question of law does arise out of the order passed by the Tribunal ;

"Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the sums received from the directors and shareholders of the assessee did not amount to ''deposits'' within the meaning of Section 40A(8) of the Act and that no disallowance of interest u/s 40A(8) of the Act was called for ?"

Accordingly, the applications are allowed. The Tribunal is directed to state the case and to refer the aforesaid question of law to this court for its opinion. In the circumstances of the case, parties shall bear their own costs of this reference.