2008 (8) TMI 996 - HC - Income Tax

Tribunal decision on refunded sum not taxable; Appeal dismissed as no substantial legal question.

Commissioner of Income Tax Versus Raghunath Murti

The High Court upheld the Tribunal's decision regarding the refunded sum, ruling that it did not constitute salary for taxation as it was made in ... - Issues involved: 1. Whether the refunded sum constitutes salary for taxationRs. 2. Whether notional interest on interest-free deposit can be included in rent for taxationRs.Issue 1 - Refunded sum as salary for taxation: The appeal concerned the assessment year 1998-99 and disputed the Tribunal's decision regarding the refund of Rs. 10,17,112 by the assessee, contending it did not constitute salary for taxation. The original return declared an income of Rs. 26,81,110, which was later revised to Rs. 16,64,000 after the refund. The Revenue argued that the refund should not be treated as excess salary paid as it had already accrued to the assessee. However, the CIT(A) reversed this finding, stating the refund was made due to legal requirements under the Companies Act, 1956, and was not voluntary. The Tribunal upheld the CIT(A)'s decision, emphasizing that the refund was statutory and not assessable as income under Section 15 of the IT Act, 1961.Issue 2 - Notional interest on interest-free deposit: Regarding the inclusion of notional interest on interest-free deposit in rent for taxation, it was noted that this question was already settled in favor of the assessee by a previous decision of the Court. Therefore, no legal issue remained concerning this matter.In conclusion, the High Court upheld the Tribunal's decision, affirming that the refund made by the assessee was in compliance with statutory provisions of the Companies Act, 1956, and was not voluntary. The Court found no merit in the Revenue's argument and dismissed the appeal, stating that no substantial question of law arose for consideration.