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2015 (7) TMI 1200 - HC - Income Tax


Issues:
Reference under Section 256(1) of the Income Tax Act for Assessment Year 1985-86.

Analysis:
The judgment deals with a reference under Section 256(1) of the Income Tax Act for the Assessment Year 1985-86. The main question of law pertains to the ITAT's decision on the profit under Section 41(2) not arising for the assessment year 1985-86 due to the absence of a sale, suggesting assessment in the subsequent year when the transaction was complete. The reference involves an addition disallowed under Section 41(2) amounting to Rs. 75,220, with a negligible tax effect. The Respondent argues for the reference to be returned unanswered due to the minimal tax impact.

The judges refer to a previous order in a different case, highlighting the applicability of Instruction No. 5 dated July 10, 2014, along with relevant court decisions. They emphasize the need to consider the financial implications and burden on the department in pursuing appeals and references based on the tax effect. Citing the reduction of departmental burden for cases with tax effects below a certain threshold, they return the present reference unanswered as the tax effect is less than Rs. 30,000.

In conclusion, the judgment underscores the importance of considering the tax effect and departmental burden in deciding whether to pursue appeals and references, especially for cases with minimal financial impact. The judges rely on legal instructions and precedents to support their decision to return the reference unanswered based on the negligible tax effect involved.

 

 

 

 

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