Rajasthan High Court - Jaipur
Jabar Mal Dugar vs Commissioner Of Income-Tax on 27 September, 2001
Equivalent citations: [2001]258ITR286(RAJ)
Author: N.N. Mathur
Bench: N.N. Mathur
JUDGMENT N.N. Mathur, J.
1. Heard Mr. Rajendra Mehta, learned counsel for the applicant-assessee, and Mr. L.M. Lodha, learned counsel for the Revenue.
This is an application under Section 256(2) of the Income-tax Act, 1961, arising out of the order of the Income-tax Tribunal, Jaipur Bench, Jaipur rejecting the Reference Application No. 117/JP of 1990 dated January 24, 1991, pertaining to the assessment year 1982-83 refusing to refer the following questions of law arising out of the order of the Tribunal in I. T. A. No. 484JP of 1986 dated February 15, 1990 :
"(1) Whether the learned Tribunal was right in law in holding that the amount of interest on estate duty refund of the late Shri Budhmal Dugar as not a capital receipt but as a revenue receipt liable to income-tax for the assessment year 1982-83 ?
(2) Whether the learned Tribunal was right in law in holding that the amount of interest is not to be spread over the year of payment to the date of actual refund of estate duty but is liable to be taxed in the assessment year 1982-83 because the refund voucher was received by the assessee on April 20, 1981 ?
(3) Whether the learned Tribunal was right in law in holding that interest was not liable to be taxed in the assessment year 1981-82 though the Commissioner of Income-tax made the order for payment of interest on February 12, 1981, and refund voucher was issued on March 25, 1981 ?
(4) Whether the learned Tribunal was right on the facts and in law in holding that the system of account of the assessee was not mercantile but was cash ?
(5) Whether the learned Tribunal was right in holding that the system of accounting for the assessment years 1981-82 and 1982-83 was cash when copies of interest account and other accounts for the assessment years 1981-82, 1982-83 and other years were placed on records, which prove that interest, salary, etc., were adjusted at the end of the accounting year though not received or paid ?
(6) Whether the learned Tribunal had material for the finding that the system of account was cash and not mercantile ?
(7) Whether the learned Tribunal was right in ignoring the material evidence placed before it in the paper book and pointed attention was drawn during hearing ?
(8) Whether the order of the Tribunal is not perverse on account of ignoring the material evidence placed in the paper book and referred to, relied upon in the course of hearing ?
(9) Whether the finding of the Tribunal that system of accounting of the assessee during the assessment years 1981-82 and 1982-83 was cash is not perverse ?
(10) Whether the learned Tribunal was right in holding that the method of accounting was cash when the assessment orders for the assessment years 1978-79, 1979-80, 1980-81, 1981-82 and 1982-83 do not specify the method of accounting as 'cash' and no assessment order for any of the years was produced by the Revenue wherein the learned Income-tax Officer had specified method of accounting as cash when number of orders were placed by the assessee wherein the learned Income-tax Officer had specifically specified method of accounting 'mercantile' ?
(11) Whether the learned Tribunal erred in drawing adverse inference against the assessee on account of some inadvertant mistakes committed in the returns of income ?
(12) Whether the learned Tribunal was right in law in holding that the question of interest under Section 215 could not be objected to in the appeal ?
(13) Whether the learned Tribunal was right in law in holding that the decision of the Rajasthan High Court in CIT v. Golcha Properties (P.) Ltd. [1988] 169 ITR 493, does not help the assessee ?"
2. The brief facts giving rise to this application are that one Budhmal Dugar the adoptive father of the applicant Jabar Mal Dugar, expired on March 17, 1954. The estate duty payable on his property was assessed at Rs. 6,03,926 by the order of the Deputy Controller of Estate Duty dated October 30, 1958. The assessee deposited the said amount but contested, which ultimately culminated in the order of the High Court dated November 30, 1971, wherein this court held that it is only l/3rd share of the properties belonging to the Hindu undivided family of the deceased as "karta" and coparcener could pass on the death of the deceased and not the whole property. The assessing authority made a reassessment as per the directions of the judgment of the High Court and directed a refund of a sum of Rs. 4,66,184 by the order dated February 28, 1973. The petitioner-assessee claimed interest under Section 64(7) of the Estate Duty Act on the amount of refund. This application was rejected by the Controller of Estate Duty. The petitioner approached the High Court in second round. The High Court by its judgment dated July 20, 1979, directed the Controller of Estate Duty to grant interest on the amount of refund to the petitioner. Accordingly, the petitioner was paid amount of interest of a sum of Rs. 3,93,925 in the month of April, 1981. The amount of interest was payable on refund from the date of payment of estate duty to the date of refund order, i.e., on February 28, 1973. It is alleged that a partition of the Hindu undivided family between Jabar Mal and his sons took place in March, 1974, with respect to movable and immovable properties of the family worth Rs. 12,00,000. It was recognised as a partial partition by the order of the Income-tax Officer dated March 7, 1975. The petitioner-assessee also claimed that the amount of interest received after partition of the Hindu undivided family was a capital receipt and not a revenue receipt liable to income-tax. In alternate, it was contended that even if it is liable to tax, it is to be charged on accrual basis from year to year. The assessing authority rejected the contention and included the amount of interest in the taxable income of the previous year relevant to the assessment year 1982-83. On appeal, the Commissioner of Income-tax (Appeals), Jodhpur, confirmed the view of the assessing authority with respect to the interest. The assessee preferred an appeal to the Income-tax Appellate Tribunal which was also rejected by order dated February 15, 1990. The assessee moved an application under Section 256(1) for referring questions of law enumerated in the preceding para. The said application was rejected by the order of the Tribunal dated February 28, 1991.
3. It is contended by Mr. Rajendra Mehta learned counsel for the petitioner-assessee, that the issue of spreading over of the interest over the year of actual payment to the year of actual receipt instead of being charged as an accumulated sum in the year in which the interest has been received, is a question of law and not a question of fact. In this context learned counsel has placed reliance on a decision of the apex court in Rama Bai v. CIT [1990] 181 ITR 400, wherein the court dealing with the case of compensation for land acquisition held that interest on enhanced amount of compensation awarded by the court on a reference under Section 18 of the Land Acquisition Act, on further appeal has to be taken to have accrued not on the date of the order of the court granting enhanced compensation but having accrued year after year from the date of delivery of possession of the land till the date of such order and such interest cannot be assessed to income-tax in one lump sum in the year in which the order is made.
4. It is also argued that in the instant case, the assessee had challenged the finding of the Tribunal that the applicant is maintaining the account books on cash basis and not on mercantile basis or mixed basis by raising a specific question and referring to materials which have been placed before the Tribunal which have not been considered by the Tribunal. It is submitted that the Tribunal itself has observed in the order dated February 15, 1990, that the assessee might have been maintaining the books of account on mercantile basis in the past. The material on record shows that in none of the assessment orders the system of accounting has been recorded as cash nor it has been recorded whether the assessee has changed his system of account from mercantile to cash at any time in past. Learned counsel has placed reliance on a decision of the apex court in CIT v. Prabhu Dayal [1971] 82 ITR 804, wherein it is held that the question whether a particular receipt is capital or income is not one of fact; though it is dependent to a very great extent on the particular facts of each case, the question does involve conclusions of law to be drawn from those facts.
5. Having given anxious consideration to the contentions raised by learned counsel for the parties, we are of the view that the order of the Tribunal rejecting the application under Section 256(1) is erroneous.
6. Accordingly, the application under Section 256(2) of the Income-tax Act filed by the petitioner-assessee is allowed and we direct the Tribunal to state the case and refer the following questions of law arising out of the Tribunal's order for the opinion of this court:
"(1) Whether the learned Tribunal was right in law in holding that the amount of interest on estate duty refund of the late Shri Budhmal Dugar is not a capital receipt but is a revenue receipt liable to income-tax for the assessment year 1982-83 ?
(2) Whether the learned Tribunal was right on the facts and in law in holding that the system of account of the assessee was not mercantile but cash ?
(3) Whether the learned Tribunal was right in law in holding that the amount of interest is not to be spread over the year of payment to the date of actual refund of estate duty but is liable to be taxed in the assessment year 1982-83 because the refund voucher was received by the assessee on April 20, 1981 ?"