1987 (4) TMI 91 - AT - Income Tax

Summary

Issues:
1. Taxability of interest earned on unutilized funds deposited in the bank.
2. Disallowance of bonus and other payments accrued during the assessment year.
3. Claim for exemption under sections 10(20A) and/or 10(26B).

Analysis:
Issue 1:
The first appeal was by the Revenue and the second appeal was by the assessee regarding the taxability of interest earned on unutilized funds deposited in the bank. The CIT(A) held that the interest earned was not taxable as it constituted further grants from the Government. The Revenue contended that the interest income belonged to the assessee. The CIT(A) relied on a previous decision not accepted by the Revenue, which was still sub-judice. The Tribunal found that the facts of the present case were identical to a previous case where the claim was allowed. The CIT(A) followed the previous decision and held that the assessing officer was not justified in assessing the interest. The appeal by the Revenue was dismissed based on the Tribunal's decision.

Issue 2:
The second appeal related to the assessment year 1980-81 and involved the disallowance of bonus and other payments accrued during the year. The assessee argued that the liability accrued during the year on receipt of instructions from the Government. The authorities disagreed, stating that the liability related to a previous assessment year. The CIT considered a Supreme Court decision and dismissed the assessee's claim. The Tribunal found that the matter needed further consideration and directed the AAC to reexamine the issue after considering all relevant materials and hearing both sides.

Issue 3:
The final ground of appeal by the assessee related to the claim for exemption under sections 10(20A) and/or 10(26B). The CIT(A) rejected the claim based on a previous decision for the assessment year 1979-80. The Tribunal had previously ruled on the issue for the earlier assessment year, holding that certain income was exempt under section 10(26B). As the facts were the same for the current assessment year, the Tribunal allowed the claim under section 10(26B) and deemed the claim under section 10(20A) as infructuous. The appeal by the Revenue was dismissed, and the appeal by the assessee was partly allowed based on the Tribunal's decision for the earlier assessment year.