HIGHWAYS CONSTRUCTION CO PRIVATE LIMITED Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) AT the instance of the assessee, the Income-tax Appellate Tribunal, Gauhati Bench, has referred the following questions under Section 256(1) of the Income-tax Act, 1961 :

(2.) QUESTION No. (i) refers to a dispute in regard to the assessment years 1973-74 and 1974-75. QUESTION No. (ii) refers to a dispute regarding assessment years 1978-79 and 1979-80.

(3.) IN regard to the assessment years 1978-79 and 1979-80, dealing with the question of interest the INcome-tax Officer referred to the unsecured loans and advances at the close of the accounting year 1977-78 standing at Rs. 7,82,829, out of which Rs. 4,21,231 was in the account of the managing director, to the fact that no interest had been charged by the assessee on the amounts loaned to the managing director as also certain other parties and, having regard to the facts and circumstances of the case as discussed in the assessment order for the earlier year, "added back Rs. 50,000 only as before, being the amount of interest the assessee-company ought to have charged in its business interest". On appeal by the assessee, the Commissioner of INcome-tax (Appeals) referred to the argument of the assessee that it cannot be forced to earn and, in view of the fact that borrowed funds had not been diverted for non-business purposes, the Assessing Officer was not justified in charging notional interest, and also to his own order in the appeal for the assessment year 1977-78 that the Assessing Officer should not charge deemed interest, deleted the addition of Rs. 50,000. The Tribunal, in the appeal at the instance of the Revenue, held, " IN view of what we have decided for the earlier years, the interest added by the INcome-tax Officer is restored ".