2000 (5) TMI 6 - SC - Income Tax

Tribunal committed error in refusing to make a statement of case when an application was filed u/s 256(1) and the HC also committed error in rejecting the application filed by the Revenue u/s 256(2) - tribunal is directed to referrer the question Whether the claim of the assessee for exemption u/s 10(29) in respect of interest income staff quarter rent miscellaneous income and supervision charges was rightly accepted by the CIT(A) and confirmed by the ITAT to HC

Summary

Issues:
1. Dismissal of application under section 256(2) of the Income-tax Act by the High Court.
2. Allowability of exemption under section 10(29) of the Income-tax Act in respect of certain income.
3. Conflict between decisions regarding interest income.
4. Refusal to make a statement of case by the Tribunal.
5. Error in rejecting the application filed by the Revenue under section 256(2) of the Income-tax Act.

Analysis:
1. The Commissioner of Income-tax, Gujarat, approached the Supreme Court after the High Court dismissed the application under section 256(2) of the Income-tax Act seeking a statement of case. The issue arose from the allowability of exemption under section 10(29) of the Income-tax Act for specific income.

2. The Commissioner (Appeals) and the Tribunal had ruled in favor of the assessee regarding the exemption claim. The Department sought to challenge this decision through applications under section 256(1) and 256(2). The High Court's dismissal of the application under section 256(2) led to the matter being brought before the Supreme Court.

3. A similar issue regarding income derived by the U. P. Warehousing Corporation had been previously addressed by the Supreme Court. The Court noted a potential conflict between decisions on interest income, prompting a referral to a larger Bench. However, the Supreme Court found no conflict between the decisions and emphasized the need to determine if a question of law existed.

4. The Supreme Court concluded that the question of law did indeed arise from the Tribunal's order, criticizing the Tribunal for refusing to make a statement of case. The Court held that the High Court also erred in rejecting the Revenue's application under section 256(2) of the Income-tax Act.

5. Consequently, the Supreme Court directed the Income-tax Appellate Tribunal to refer the question of law regarding the exemption claim under section 10(29) to the High Court of Gujarat for consideration and response. The appeal was disposed of accordingly, highlighting the importance of addressing legal questions and ensuring proper exercise of jurisdiction in such matters.