Commissioner of Income Tax vs Kerala Financial Corporation

K.S. Paripoornan, J.—The Revenue is the petitioner in both these original petitions. The same corporation is the respondent in both the cases. It is an assessee to Income Tax. The matter relates to the assessment years 1980-81 and 1981-82. For the years 1980-81 and 1981-82, the Income Tax Appellate Tribunal passed a common order dated December 9, 1986, in the appeals. Two questions arise for consideration in both these cases. The first relates to the question as to whether the interest credited to the interest suspense account of the corporation could be brought to tax under the Income Tax Act. A similar issue was decided by the Appellate Tribunal for the earlier year 1979-80 in ITA No. 488/Cbch/1983 and the Appellate Tribunal remitted the matter to the Income Tax Officer to consider the question in the light of the Circular of the Central Board of Direct Taxes dated October 9, 1984. The Tribunal directed the Income Tax Officer to investigate as to whether the respondent (assessee-company) is a banking company or not. In the light of the earlier order passed by the Appellate Tribunal, the Appellate Tribunal, for the two relevant years under consideration, held that for these two years also, the matter requires a remit and the Income Tax Officer should dispose of the matter afresh on the basis of his findings for the assessment year 1979-80. The second question is whether the deduction u/s 36(1)(viii) could be given on the gross total income before deducting the relief. The Appellate Tribunal held in the affirmative. The Revenue moved the Appellate Tribunal by an application u/s 256(1) of the Income Tax Act to refer the two questions of law formulated in paragraph 7 of the original petition for the decision of this court. The applications were rejected by a common order dated January 25, 1988. Thereafter, the Revenue has filed these two original petitions.

We heard counsel for the Revenue, Mr. Menon, as also counsel for the respondent-assessee. As to whether the respondent-corporation is a banking company and as to whether the circular issued by the Central Board of Direct. Taxes dated October 9, 1984, is applicable to the respondent-company, and, if so, to what extent, are matters which have been directed by the Appellate Tribunal to be considered afresh by the Income Tax Officer. The Income Tax Officer has to adjudicate on the said question for the earlier year 1979-80 also. At this point of time, there is no concluded decision by the Appellate Tribunal on this matter. The decision to be rendered on the said aspect requires factual investigation and the application of the relevant provisions of law. So, we are of the view that the first question formulated in paragraph 7 of the original petitions, namely, whether the interest credited to the suspense account could be brought to tax under the Income tax Act does not arise out of the appellate order of the Tribunal dated December 9, 1986. At this stage, it is premature to say whether the respondent-assesses is entitled to any relief or not on that score. So, we decline to direct the Appellate Tribunal to refer question No. 1 formulated in paragraph 7 of the original petition for the decision of this court.

Regarding question No. 2, we find that an identical question has been directed to be referred for the decision of this court for the earlier assessment year 1979-80 in Original Petition No. 10796 of 1987. So, we are of the view that question No. 2 formulated in paragraph 7 of the original petitions arises out of the appellate order of the Tribunal and we direct the Appellate Tribunal to refer question No. 2, formulated in paragraph 7 of the original petitions for the decision of this court. Question No. 2 runs as follows :

"2. Whether, on the facts and in the circumstances of the case, the deduction u/s 36(1)(viii) should be given on the gross total income before deducting the relief ?"

The original petitions are disposed of as above.