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Issues involved: Application u/s 256(2) of the Income-tax Act, 1961 for direction to state the case and refer questions regarding nature of income received and treatment of profit or loss in assessment.
Nature of Income Received: The assessee, a private limited company, entered into a contract for construction with the Government of Jammu & Kashmir. Due to war, the work was abandoned and later restarted. The total expenditure incurred was Rs. 13,43,121, while the company received Rs. 11,11,100 as advances. Dispute arose whether this amount was revenue income or repayable advances. The Income-tax Officer treated it as income, leading to a difference in assessed income. The Appellate Assistant Commissioner and the Income-tax Appellate Tribunal upheld this view, considering the amount as income. The Tribunal also discussed the uncertainty of profit or loss due to the circumstances, ultimately deciding to take neither profit nor loss for the year. Treatment of Profit or Loss: The Appellate Tribunal, after considering the facts and circumstances, concluded that it would be fair and reasonable to take neither profit nor loss in the contract for the relevant year. The Tribunal declined to refer the questions raised by the assessee, stating that the conclusions were findings of fact and did not involve legal propositions. The Tribunal's decision was based on the appraisal of evidence and did not give rise to a question of law. The High Court upheld the Tribunal's decision, stating that the questions did not warrant a reference as they involved settled legal principles and factual inferences. In conclusion, the High Court dismissed the petition under section 256(2) of the Income-tax Act, 1961, as the questions raised did not present points of law and were based on factual determinations made by the Tribunal. The Court affirmed the Tribunal's decision to not refer the questions to the Court, as they did not involve legal propositions but rather factual inferences based on the circumstances of the case.
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