The importance of the agreement between the parties in determining the nature of interest charged, and the rebuttal of presumptions based on documents found at the assessee's premises.

Headnote:
Interest - Income-tax Act, 1961 - The controversy was whether the interest charged by the assessee was simple interest or compound interest. The Revenue's contention was based on a document found at the assessee's premises, but the Tribunal held that the presumption of compound interest was rebutted and the interest was simple interest as per the agreement between the parties.
Fact of the Case:

The Revenue applied for a direction to the Tribunal to state a case and refer the question of law arising from the Tribunal's order regarding the interest charged by the assessee.
Finding of the Court:

The application by the Revenue was rejected as the Tribunal had already held that the interest charged was simple interest, and the presumption of compound interest based on a document found at the assessee's premises was rebutted.
Issues: Controversy over whether the interest charged was simple or compound interest, and the application by the Revenue under section 256(2) of the Income-tax Act, 1961.
Ratio Decidendi: The Tribunal's finding that the presumption of compound interest was rebutted and the interest charged was simple interest as per the agreement between the parties.
Final Decision: The application by the Revenue was rejected as there was no ground to allow it.

JUDGMENT

1. This application is made by the Revenue under section 256(2) of the Income-tax Act, 1961, for a direction to the Tribunal to state a case and refer the question of law said to arise out of the Tribunal's order which is indicated in the application.

2. The only real controversy is, whether the interest charged by the assessee was simple interest as claimed by the assessee and accepted by the Tribunal or it was compound interest at the same rate as claimed by the Revenue. The Revenue's contention is based on a slip of paper containing calculation of interest at compound rate. According to learned counsel for the Revenue, the seizure of this document from the premises of the assessee raises a presumption that interest was chargeable at compound rate notwithstanding the fact that in the agreement between the parties, the interest chargeable was only simple interest. Even assuming that such a presumption arose, as claimed by the Revenue, the same was a rebuttable presumption relating to a question of fact and the Tribunal has held that the same has been duly rebutted. The question involved is, therefore, a question of fact. There is no ground to allow this application. It is accordingly rejected.

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1988 Supreme(Raj) 487

RAJASTHAN HIGH COURT AT JAIPUR BENCHJ.S.Verma, I.S.Israni, JJ.Commissioner of Income - AppellantVersusS.M.S. Investment Corporation - RespondentD.B.I.T. References Nos. 314, 315 and 316 of 1985.Decided On : 13-04-1988

The importance of the agreement between the parties in determining the nature of interest charged, and the rebuttal of presumptions based on documents found at the assessee's premises.

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RAJASTHAN HIGH COURT AT JAIPUR BENCH
J.S.Verma, I.S.Israni, JJ.
Commissioner of Income - Appellant
Versus
S.M.S. Investment Corporation - Respondent
D.B.I.T. References Nos. 314, 315 and 316 of 1985.
Decided On : 13-04-1988