Commissioner of Income Tax vs Tirath Ram Ahuja Ltd.

By this petition u/s 256(2) of the Income Tax Act, 1961 (for short "the Act"), pertaining to the assessment years 1989-90 and 1990-91, the Revenue seeks a direction to the Income Tax Appellate Tribunal to state the case and refer the following question for the opinion of this court :

"Whether, on the facts and in the circumstances of the case, the Tribunal was correct in holding that interest income constitutes an eligible income for the purposes of deduction u/s 32AB of the Income Tax Act, 1961 ?"

The assessee-company is in the business of construction. In respect of the relevant assessment years it claimed deduction u/s 32AB of the Act, as it existed at the relevant time, by taking into account the income earned by it from interest. The said claim made by the assessed was disallowed by the Assessing Officer on the ground that the income from interest did not form part of the eligible business or profession, as defined in Sub-clause (ii) of Section 32AB(1) of the Act. Aggrieved, the asses-see appealed to the Commissioner of Income Tax (Appeals). The Appellate Commissioner held that the interest income earned by the assessed on deposit of securities in the normal course of its business of construction activity has to be treated as income from business and profession and, Therefore, it will have to be considered eligible for deduction u/s 32AB of the Act on the amount of interest so earned. The Revenue took the matter in further appeal to the Tribunal which upheld the order of the Appellate Commissioner on the ground that the finding recorded by the Appellate Commissioner to the effect that the interest income earned by the assessed bears a nexus to its business activity of construction has not been challenged by the Revenue.

The Revenue''s application u/s 256(1) of the Act having been dismissed by the Tribunal, the present petition has been filed.

We have heard Mr. R. D. Jolly learned counsel for the Revenue, and Mr. Anoop Sharma, learned counsel for the assessee.

Having perused the order of the Appellate Tribunal, we are of the prima facie view that the Tribunal has not considered the true scope of the word "eligible" as it existed in Sub-clause (ii) of Sub-section (1) of Section 32AB of the Act. At this stage, we say no more, lest it may prejudice the case of either of the parties.

We are of the view that the question set out hereinabove does arise out of the order of the Tribunal. We accordingly direct the Tribunal to state the case and refer the afore noted question for the opinion of this court.

The petition stands disposed of. No costs.