1996 (5) TMI 58 - HC - Income Tax

Summary

Issues:
1. Whether interest under section 215 of the Income-tax Act was chargeable on the basis of assessed income but excluding enhanced share of the assessee determined in the case of the firm where he is a partner?

The judgment pertains to a petition under section 256(2) of the Income-tax Act, 1961, where the primary question was whether interest under section 215 of the Act was correctly charged based on the assessed income, excluding the enhanced share of the assessee determined in the firm where he is a partner. The assessee initially filed a return of income for the assessment year in the status of a Hindu undivided family, declaring a specific net income. However, the assessing authority determined that the income should be assessed in the individual's hands and not as a Hindu undivided family. Subsequently, an appeal was filed against this order, which was accepted by the Deputy Commissioner of Income-tax (Appeals). The appellate authority directed the Income-tax Officer to reevaluate the interest under section 215, even after excluding the addition made in the share income. The Income-tax Appellate Tribunal dismissed the Revenue's appeal, leading to an application for reference under section 256(1) of the Act. The Tribunal referred the first question of law to the High Court but declined to refer the second question, stating it depended on the facts of the case regarding advance tax payment based on the firm's share income. The High Court, after considering arguments from both sides and relevant case law, concluded that the second question raised by the Revenue was indeed a question of law requiring adjudication. The court emphasized that it was not its role to decide the question's merits but to determine if it warranted reference. Citing precedents, the court directed the Tribunal to refer the second question to the High Court for adjudication.

In summary, the judgment addressed the issue of whether interest under section 215 of the Income-tax Act should be charged based on the assessed income, excluding the enhanced share of the assessee from a firm. The court ruled that this question, raised in the context of an appeal and subsequent reference application, constituted a legal issue necessitating adjudication, despite arguments to the contrary. The court's decision was based on a careful analysis of relevant legal principles and precedents, leading to the direction for the Tribunal to refer the question for further consideration.