Law:

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Section 41(1), read with section 256 of the Income-tax Act, 1961 - Remission or cessation of trading liability - Assessee got credit note from a company towards refund of excess sales tax charged in earlier years - Said amount was treated as income under section 41(1) - On appeal before Tribunal, assessee contended that same High Court in another case had held similar amount as not taxable - Tribunal, however, dismissed assessee's appeal and further application for rectification filed before it was also dismissed - Whether question of law arose out of Tribunal's order - Held, yes FACTS The assessee, carrying on business in manufacture and sale of conductors, received a credit note from 'H' towards refund of excess sales tax charged in earlier years. The assessee contended that in pursuance of the agreement entered into with the State Electricity Board, the said amount was payable by the assessee to that Board and, hence, could not be taxed under section 41(1). The IAC rejected this contention and included the said amount in the income of the assessee. The assessee's appeal before the Commissioner (Appeals) was dismissed. On second appeal, the assessee referred to the decision in CIT v. Deora Pu Canbeon Mfg. Co. P. Ltd. [1985] 156 ITR 831 (MP) and contended that the High Court, in identical circumstances, had upheld a similar claim made by an assessee. The Tribunal, however, dismissed the appeal. The application for rectification filed by assessee was also dismissed. The Tribunal also declined reference under section 256(1). On application under section 256(2) : HELD The question as to whether the Tribunal was justified in refusing to rectify the order passed by it dismissing the appeal preferred by the assessee, was a question of law. Note : The decision is in favour of the assessee. CASE REFERRED TO CIT v. Deora Pu Canbeon Mfg. Co. (P.) Ltd. [1985] 156 ITR 831 (MP). Chaphekar for the Applicant. Samvatsar for the Respondent. JUDGMENT G.G. Sohani, Actg, C.J-This is an application under section 256(2) of the Income-tax Act, 1961 (hereinafter referred to as "the Act"). The material facts giving rise to this application, briefly, are as follows: The assessee…

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