B.P.Jeevan Reddy, C.J. - (1.) At the instance of Revenue, the Tribunal has referred the following two questions under Section 256(2) of the Income-tax Act, 1961 : "(1) Whether, on the facts and in the circumstances of the case, there was material before the Tribunal to hold that there was no agreement to charge interest from April 1, 1964, and onwards ? (2) Whether, on the facts and in the circumstances of the case, the Tribunal was legally justified in holding that no interest accrued to the assessee after April 1, 1964 ?"
(2.) The assessee is a public limited company. The assessment years concerned are 1965-66 and 1966-67. Previous year is the respective financial year. The assessee had been advancing certain amounts, from time to time, to a partnership firm, Messrs, Ram Lal Raja Ram, from the year 1956-57 onwards. At the end of each accounting year, account was being taken including interest charged at the rate of 6% per annum. The amount so calculated as on March 31, 1964, came to Rs. 37,04,316. From the financial year 1964-65 onwards, the assessee stopped charging interest. It appears that the debtor was also not crediting interest to the assessee's account in its own books. For the assessment years 1965-66 and 1966-67, the Income-tax Officer took the view that an amount representing interest at the rate of 6% per annum should be added to the assessee's income, notwithstanding the fact that no such interest is shown in the account books of the assessee. Accordingly, he added the appropriate amount. On appeal, it was affirmed by the Appellate Assistant Commissioner. On further appeal, however, the Tribunal took a different view. The Tribunal was of the view that, during the two previous years concerned, there was no agreement between the parties to charge and pay interest nor any with respect to the rate of interest. The Tribunal was of the view that, in such a situation, no amount could have been added on account of interest to the income of the assessee. It is thereupon that the Revenue obtained reference of the aforesaid two questions,
(3.) The main question that arises in this case is whether there was an agreement between the assessee and the, debtor to pay interest for the period concerned herein and if so at what rate. This question has to be decided with reference to the averments made by the assessee in the plaint (suit) filed by him in the Calcutta High Court on March 13, 1968. As dis closed by the assessment order, the assessee filed a suit for recovery of Rs. 42,70,362.42 with interest at the rate of 6% per annum. The suit amount was calculated in the following manner : Rs. P. Balance due as on March 31, 1966 : 41,17,443.63 (after adjustment of payment of Rs. 30,000 on June 23, 1965) and after calculating interest at 6% on the balance of Rs. 37,04,315.71 due on March 31, 1964. Interest from April 1, 1966, to January 31, 4,52,919.841968, at the agreed rate of 6% per annum 45,70,363.47;