High Court declines to answer reference cases for assessment, citing minimal tax impact and past decisions.

The High Court of Andhra Pradesh declined to answer the reference cases regarding the assessment of a firm for the year 1979-80 and the payment of annuity to a widow. The court exercised its discretionary power, allowing the Department to withdraw the references due to the minimal tax amount involved, in line with previous decisions emphasizing the court's authority to refuse to answer references when a party seeks to withdraw them. The court considered the negligible tax effect and circulars from the Central Board of Direct Taxes, ultimately permitting the Revenue's request to withdraw the references.

---

---

Issues:
1. Whether the Tribunal's decision on the assessment of the firm for the assessment year 1979-80 was correct.
2. Whether the payment of annuity to the widow constitutes an application of income of the firm or diversion at source.

Analysis:
The High Court of Andhra Pradesh was presented with two questions for consideration in this judgment. The first issue pertained to the correctness of the Tribunal's decision regarding the assessment of the firm for the year 1979-80. The second issue revolved around whether the payment of annuity to the widow should be considered as an application of income of the firm or diversion at source. The counsel for the respondent-assessee highlighted that the tax amount involved was minimal, less than Rs. 500. Reference was made to decisions from the Bombay High Court and the Rajasthan High Court, emphasizing the negligible tax effect. However, the court noted that the references were already before them for opinion, not as reference applications.

The Department sought to withdraw the reference cases due to the insignificant tax amount involved, as instructed by the Chief Commissioner of Income-tax, Hyderabad. The court referred to a previous decision where it was held that if a party shows disinterest in pursuing the matter, the High Court may refuse to answer the reference. The court cited various judgments from different High Courts emphasizing the discretionary power of the court to answer or decline to answer a reference based on the circumstances, especially when the party initiating the reference seeks to withdraw it.

The court further discussed the discretion of the High Court in answering references, especially when the tax amount involved is minimal. Citing circulars issued by the Central Board of Direct Taxes, the court concluded that it can refuse to answer the reference and allow the party to withdraw it, particularly in cases with insignificant tax implications. Consequently, the court acceded to the Revenue's request and declined to answer the references, permitting their withdrawal.

---