The final statement modifying the draft statement cannot be construed as a review of the order preparing the draft statement. The draft statement prepared at the intermediate stage is not the final statement of the case.

Headnote:
Income Tax Act - Challenge to order of Income Tax Appellate Tribunal - Section 256 - Summary of Acts and Sections: Sections 22, 44-C, 40-A(5), 145, and 256(1) of the Income Tax Act, 1961 - The court discussed the application of section 145 in computing income, profits, and gains from interest on securities, the bifurcation of purchase price of securities, applicability of section 44-C, taxation of interest on sticky loans, and disallowance of expenses under section 40-A(5) and section 20. The court also considered the modification of the draft statement of case and the permissibility of such modification in law.
Fact of the Case:

The petitioner, a banking company, challenged the order of the Income Tax Appellate Tribunal which referred questions for the consideration of the High Court under section 256 of the Income Tax Act, 1961. The petitioner objected to the addition of four questions to the draft statement of case by the Tribunal.
Finding of the Court:

The court found that the addition of questions by the Tribunal when the final statement was drawn was permissible and not a review of the earlier decision. The court dismissed the petition.
Issues: Challenge to the addition of questions to the draft statement of case by the Income Tax Appellate Tribunal under section 256 of the Income Tax Act, 1961.
Ratio Decidendi: The draft statement prepared at the intermediate stage is not the final statement of the case, and the final statement modifying the draft statement cannot be construed as a review of the order preparing the draft statement. The court also emphasized that the statement prepared at the intermediate stage has no finality and is only a stage in the process of preparing the final statement of the case.
Final Decision: The petition challenging the addition of questions to the draft statement of case by the Income Tax Appellate Tribunal was dismissed.

JUDGMENT - H.L. GOKHALE, J.:---Heard Mr. Mistry for the petitioners. Mr. Desai appears for the respondents.

2. This petition seeks to challenge the order of the Income Tax Appellate Tribunal dated 30th September, 1986 passed under section 256 of the Income Tax Act, 1961 (the Act for short) insofar as it referred four questions for the consideration of this Court in para 9 of that order in addition to two questions which were initially proposed to be referred when the draft statement of case was prepared. The question sought to be raised in this petition is as to whether such a modification in the draft statement amounts to a review and whether the same is permissible in law.

3. The facts leading to this petition are as follows :-

The petitioner is a company having a licence to carry on banking business in India under section 22 of the Banking Regulation Act, 1949. The Inspecting Assistant Commissioner of Income Tax by his order dated 21st March, 1980, disallowed certain claims of the petitioners for the assessment year 1977-78. On the petitioners filing an appeal, the contentions of the petitioners were partly accepted and the Income Tax Appellate Tribunal by its order dated 13th October, 1983 held as follows :-

(a) that the method of accounting adopted by the petitioner in determining its profits or losses from the sale of securities as also the profit on revaluation and interest of broken period should be followed as in the past;

(b) that in accordance with petitioner's method of accounting in respect of interest on sticky loans these should be taxed on receipt basis;

(d) that section 40-A(5) was not applicable to expenses allowable under section 20 of the Act; and

(e) that Club Membership Subscription Fees were not disallowable under section 40-A(5) of the Act.

4. The respondent No. 4 Commissioner of Income Tax thereafter sought reference of certain questions of law to this Court arising out of that order. The Commissioner moved an application under section 256(1) of the Act and sought a reference on following 8 questions of law :-

(1) Whether on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the provisions of section 145 could not be applied to the case of the assessee in computing the income, profits and gains from the interest on securities?

(2) Whether on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the purchase price of securities should be bifurcated into (i) interest accrued upto date of purchase (ii) balance of the price and that such interest should be allowed as revenue expenditure, in the year of purchase, if it is the practice of banks to charge such interest to revenue account?

(3) Whether on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the past assessments having been made on the footing that the interest accruing on securities upto the date of purchase, having been allowed as revenue expenditure, this should be continued notwithstanding that the Karnataka High Court in the case of (Vijaya Bank Ltd.)1, 1976 CTR (Karnataka) 1 has held that such part of the price is not revenue expenditure and inspite of it not having been established to be the Departmental practice to allow such expenditure in case of all banks?

(4) Without prejudice to the above, whether on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the C.I.T. (A) was justified in directing that the sum of Rs. 4,07,283 being interest received on the broken period of the securities sold by assessee should not be considered as part of the chargeable income for the year of account?

(5) Whether on the facts and in the circumstances of the case, the assessee is not liable to be taxed in respect of the amount credited to the interest suspense account representing interest on sticky loans and a

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