1984 (9) TMI 34 - HC - Income Tax

Summary

Issues:
1. Whether the refund amount of Rs. 2,53,185 is taxable as a trading receipt in the hands of the assessee company?

Analysis:
The judgment was delivered by Judge Oza, Acting Chief Justice, addressing a reference made by the Income-tax Appellate Tribunal regarding the taxability of a refund amount in the hands of the assessee company. The assessee, a private limited company engaged in manufacturing and sale, purchased aluminum from a supplier and supplied products to the Madhya Pradesh Electricity Board. A dispute arose regarding the Central sales tax charged by the supplier, leading to a refund of Rs. 2,53,185 credited to the assessee. The Income-tax authorities treated this amount as a trading receipt taxable under section 41(1) of the Income-tax Act, 1961. However, the Tribunal held that the money belonged to the Electricity Board and not the assessee, thus not constituting a trading receipt. The Tribunal allowed the appeal, prompting the Revenue to challenge this decision.

The Revenue contended that the money should be considered a trading receipt as it was not claimed by the Electricity Board. Conversely, the assessee argued that the Tribunal correctly determined the ownership of the money based on the agreement between the parties. The Tribunal's decision was based on factual findings that the money belonged to the Electricity Board and not the assessee, thus not taxable as a trading receipt. The Court noted that it cannot interfere with Tribunal's factual findings unless a question of law arises.

The Tribunal's order emphasized that the money did not belong to the assessee and had to be considered in the hands of the Electricity Board. The Court reiterated that the Tribunal's conclusion was a factual finding based on the evidence presented. The Court clarified that the question referred did not raise any legal issue since the Tribunal had determined the money did not belong to the assessee, precluding it from being taxed as a trading receipt. The Revenue's argument that unclaimed money becomes a trading receipt was dismissed due to lack of evidence regarding the Electricity Board's claim status.

Ultimately, the Court rejected the reference, stating no question of law arose from the Tribunal's decision. The parties were directed to bear their own costs, concluding the judgment on the taxability of the refund amount in the hands of the assessee company.