Law: Income Tax Act, 1961

Section: 81(i),256

Income-tax----High Court---Reference---Scope of jurisdiction-Cooperative society carrying on banking business---Exempt from income-tax on business income--¬Interest on deposit for supply of electricity---Department and assessee making clear to Tribunal that if interest was business income no additional surcharge was leviable ---Tribunal holding interest to be business income---Reference of question whether interest is business receipt---High Court setting aside order of Tribunal and directing Tribunal to consider on all points whether additional surcharge was attracted---Within scope of High Court's jurisdiction---Indian Income Tax Act, 1961, Ss.81(i) & 256---Finance Act, 1963, S.2, Sched. I, Part I, Para. C(c). The appellant, a cooperative society engaged in the business of banking, whose business income was exempt from income-tax under the provisions of section 81(i) of the Income Tax Act, 1961, received during the accounting year relevant to the assessment year 1963-64 a sum of Rs.19 by way of interest on a deposit made with an electricity company for supply of electricity. The Income-tax Officer treated the sum as "income from other sources" and on that basis levied additional surcharge in the sum of Rs.81,920 under Paragraph C(c) of Part I of Schedule I to the Finance Act, 1963. The Appellate Assistant Commissioner, on appeal, upheld the appellant's claim that the sum of Rs.19 constituted business income and held the levy of additional surcharge unsustainable. On appeal by the Department before the Appellate Tribunal, it was made clear by both the sides that the levy of additional surcharge would depend upon the classification of the head of income for the interest of Rs.19 and that if it fell under income from business, the appeal had to be dismissed. The Tribunal held that the sum of Rs.19 was income from business and dismissed the appeal. On a reference at the instance of the Department, the Department for the first time contended before the High Court that the Tribunal laboured under an erroneous assumption that liability to additional surcharge was not attracted if the sum of Rs.19 represented business income and that whether that amount was…

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