1991 (1) TMI 59 - HC - Income Tax

Summary

Issues:
1. Taxability of additional receipt granted to the assessee-firm by the arbitrator in different assessment years.
2. Applicability of section 41(1) of the Income-tax Act.
3. Interpretation of the Tribunal's decision regarding taxability of the amount received.

Analysis:
The petitioner, a building contractor, sought clarification on the tax treatment of an additional receipt granted by an arbitrator. The Income-tax Officer and Commissioner of Income-tax (Appeals) deemed the amount taxable in the assessment year 1979-80 under section 41(1) of the Income-tax Act. The assessee appealed to the Tribunal, contesting this tax liability.

The Tribunal considered two key contentions raised by the Revenue. Firstly, the applicability of section 41(1) and secondly, the taxability of the amount received without invoking this provision. The Tribunal observed that the assessee had suggested spreading the amount over multiple assessment years and noted that the amount had not been previously claimed as a deduction. Citing the Supreme Court decision in Tirunelveli Motor Bus Service Co. Pvt. Ltd. v. CIT [1970] 78 ITR 55, the Tribunal concluded that section 41(1) did not apply in this case. However, the Tribunal did not allow the Revenue to argue that the amount was taxable as a revenue receipt outside the scope of section 41(1).

The High Court opined that the first question regarding the applicability of section 41(1) was settled by the Supreme Court precedent. However, the second question, concerning the Revenue's right to assert tax liability without invoking section 41(1), was deemed a legal issue. The High Court reframed the second question to address whether the Revenue could argue for tax liability in the absence of section 41(1) application.

Ultimately, the High Court directed the Tribunal to reconsider the reframed question and make a reference to the court. The petition was disposed of with no order as to costs.