1980 (12) TMI 13 - HC - Income Tax

Summary

Issues:
1. Whether the Tribunal's findings regarding the forgone interest by the assessee from debtors were based on conjecture and suspicion.
2. Whether the Tribunal's decision to include interest from debtors in the assessee's income was justified.
3. Whether the Tribunal's conclusion on the action of the assessee in not charging interest to a particular debtor was based on conjecture.
4. Whether the additional question for the assessment year 1965-66 was correctly answered by the Tribunal.

Analysis:
The High Court of Calcutta addressed a reference under s. 256(2) of the Income Tax Act, 1961, for the assessment years 1963-64 and 1965-66. The Tribunal's findings on the forgone interest by the assessee from debtors were challenged. The Tribunal observed that the reasons for the advances made to the debtors were not substantiated, and there was a lack of evidence regarding the financial condition of the debtors. The Tribunal concluded that the interest should be included in the assessee's income based on the evidence presented. The Court upheld the Tribunal's decision, stating that the Tribunal's findings were not based on conjecture but on a careful consideration of the evidence.

Regarding the decision not to charge interest to a specific debtor, the Court noted that the contention that the liability for interest would accrue only at the end of the relevant accounting year was not argued before the Tribunal. As this argument was not raised before the Tribunal, it was deemed that the Tribunal's decision was not based on conjecture or suspicion. Therefore, the interest from the debtors was rightly included in the assessee's income. The Court answered the questions in favor of the Revenue, affirming the Tribunal's decision on including the interest in the assessee's income.

For the additional question pertaining to the assessment year 1965-66, the Court concurred with the Tribunal's decision, ruling in favor of the Revenue. The judgment was a unanimous decision by the judges, with each party directed to bear its own costs. The Court's analysis emphasized the importance of presenting arguments before the Tribunal to ensure all relevant aspects are considered in reaching a decision.