1963 (2) TMI 66 - HC - Income Tax

Summary

Issues: Interpretation of Section 8 of the Indian Income-tax Act and the notification issued by the Central Government under section 60A

In this case, the central issue revolves around the interpretation of Section 8 of the Indian Income-tax Act and a notification issued under section 60A by the Central Government. The question at hand is whether the assessee is entitled to a rebate of income tax on the interest earned from securities issued by former native States.

Analysis:

The case involves a reference made by the Income-tax Appellate Tribunal regarding the applicability of the Explanation to Section 8 of the Indian Income-tax Act. The Tribunal questioned whether the entire interest earned by the assessee from securities issued by former native States is entitled to a rebate of income tax.

Section 8 of the Indian Income-tax Act outlines the tax payable by an assessee under the head 'Interest on securities.' Provisos and an Explanation under this section provide for exemptions and calculations regarding income tax payable on interest receivable.

One of the key contentions raised was whether the term "State Government" in the third proviso of Section 8 should be limited to Provincial Governments only. The court rejected this contention, emphasizing that such a narrow interpretation would go against the legislative intent expressed in the section.

Another argument presented was regarding the calculation of income tax on interest receivable. The department contended that the tax should be calculated after deducting reasonable expenses, while the assessee's counsel argued for the exemption of the entire interest. However, the court did not delve into this calculation due to the effect of the notification issued under section 60A.

The notification issued under section 60A clearly exempts the interest receivable by an assessee from specified securities issued by former native States. As the interest earned by the assessee fell within the purview of this notification, Section 8 was deemed inapplicable to this interest. Therefore, the court held that the entire interest amount is entitled to a rebate of income tax.

In conclusion, the court answered the question in the affirmative, ruling in favor of the assessee and against the department. The judgment highlights the importance of interpreting tax laws in alignment with legislative intent and specific notifications issued under relevant sections of the Income-tax Act.