COMMISSIONER OF INCOME TAX, KARNATAKA versus M/S BEDI AND COMPANY PVT. LTD.

Citation: [1998] 1 S.C.R. 932 · Decided: 18-02-1998 · Supreme Court of India · Bench: SUJATA V. MANOHAR · Disposal: Dismissed

Judgment (excerpt)

A 
COMMISSIONER OF INCOME TAX, KARNAT AKA 
\~ 
MIS BED! AND COMPANY PVT. LTD. 
I.._ 
FEBRUARY I8, 1998 
B 
[MRS. SUJATA V. MANOHAR AND S.S. MOHAMMED QUADRI, 
JJ.] 
I 
Income Tax Act, 1961 : Sections 256(1) and (2)-Mixed question of 
c 
law and facts-Scope of interference by High Court-Lone transaction under 
an agreement for promoting a paper mill-Assessment order treating the 
loan amount as income from business-Upheld by both the Appellate Assistant 
Commissioner and Tribunal-On reference, High Court's finding that the 
amount was loan and the Revenue failed to prove that it was income from 
business-On appeal, held that question of perversity in finding of fact has 
,
D to be distinguished from mixed question of law and fact-High Court was 
justified in referring to the facts to answer the mixed question of law and fact. 
A. 
Respondent-assessee's regular assessment for the year 1960-61 was 
passed by the Revenue. Subsequently it was noticed that certain amount has 
been received by the assessee purporting to be loan under an agreement The 
E Income-Tax Officer reopened the assessment and after issuing notice passed 
an assessment order treating the said ·amount as income from business. The 
respondent-assessee unsuccessfully challenged the assessment order before 
the Appellate Assistant Commissioner and Income Tax Appellate Tribunal on 
the ground that the said amount was received as loan to promote a paper mill 
F and it was not a business income. However, on reference, the High Court 
took the view that the apparent set of things disclosed that the said amount 
was loan and the Revenue failed to prove the contrary. Aggrieved, Revenue 
T ., 
has filed the present appeal. 
Revenue contended that the High Court erred in arriving at its own 
G finding of fact and that unless the findings recorded by the Tribunal were 
perverse the High Court ought not to have interfered with the findings of 
facts. 
-' .. -......._ .. / 
Dismissing the appeal, this Court 
H 
HELD : 1. No doubt High Court will not address itself to recording 
932 
C.l.T. v. BED! AND COMPANY PVT. LTD. (QUADRI, J.] 
933 
findings of facts unless the subJect matter of the question referred to it hy A 
the Tribunal, either under sub-section (I) or sub-section (2) of Section 256 
of the Income Tax Act, 1961 relates to the pen'ersity of the findings arrived 
at by the Tribunal. That sort of question has to be distinguished from a mixed 
question of facts and law, which also requires consideration and discussion 
of facts but docs not warrant returning findings of facts inconsistent with B 
/ 
~ 
the findings recorded by the Tribunal while giving its opinion on the quci.1ion 
\ 
referred to the High Court. However, in the instant case while answering the 
que~1ion, the High Court bad to deal with various facts on record to determine 
whether the amount in question was loan or income. H such discussion of 
facts has led to arriving at the conclusion that the amount was loan but not 
income, it cannot be urged that the High Court disturbed the finding of fact c 
recorded by the Tribunal. (935-E-F) 
2. The High Court was also .iustificd in holding that without recording 
any finding that the amount was in the nature of commission or any business 
receipt, the Tribunal was not justified in coming to the conclusion that it 
-'--
could be assessed as income. (936-C) 
D 
3. The facts on record apparently indicate that the transaction was one 
of loan. The circumstances relied upon by the Revenue, namely that the loan 
had been advanced without security, that the loan had not been repaid and no 
interest on the loan was paid by the assessee and that the agreement of loan 
was executed contemporaneously with other two agreements with regard of E 
supply of machine and construction of building for the paper Mill cannot, 
without any further material, lead to the inference that the amount was not 
loan hut business income. On the contrary the last mentioned circumstance 
supports the plea of the assessee that the said amount was received as loan. 
Therefore, there is no illegality in the judgment of High Court. (936-E-F) 
J 
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 4122 of F 
1983. 
From the Judgment and Order dated 4.8.80 of the Karnataka High Court 
in I.T.R. No. 180of1975. 
K.N. Sh•.dda, (Hemant Sharma) for B.K. Parsad for th.e Appellant. 
G 
J. 
The Judgment of the Court was delivered by 
QUADRI, J. The Revenue is in appeal, by special leave, against the 

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