1984 (2) TMI 14 - HC - Income Tax

Summary

Issues:
1. Computation of capital gains on the sale of shares.
2. Change in the basis of computing relief on dividend income.
3. Interpretation of section 85A of the Income-tax Act, 1961.
4. Legality of altering the rate of relief on dividend income.

Analysis:

1. The case involved the computation of capital gains on the sale of shares by the assessee during the assessment year 1965-66. The Income-tax Officer initially calculated the gains at Rs. 25,49,538, which was later reduced to Rs. 20,07,728 by the Appellate Assistant Commissioner. However, a dispute arose regarding the change in the basis of computing relief on dividend income while giving effect to the Appellate Assistant Commissioner's order.

2. The Income-tax Officer altered the tax rate for relief on dividend income from 25% to 53.51% while implementing the Appellate Assistant Commissioner's decision. The assessee contended that this change was beyond the Income-tax Officer's jurisdiction and illegal. Although the Tribunal allowed the appeal of the assessee, it did not address this specific contention in its order.

3. Question No. 1 referred to the court concerned the interpretation of section 85A of the Income-tax Act, 1961, regarding the calculation of the average rate of tax. The court relied on a previous decision by a Division Bench and ruled against the assessee based on the precedent set in Birla Bombay P. Ltd. v. CIT [1980] 121 ITR 142.

4. Question No. 2 raised the issue of the legality of the Income-tax Officer altering the rate of relief on dividend income from 40% to 11.49% while implementing the Appellate Assistant Commissioner's order related to the computation of capital gains. The court emphasized that the Tribunal did not address this specific controversy, and as a result, it was not appropriate for the court to consider and determine the question. The court highlighted the importance of parties filing reference applications to specify questions of law for consideration.