2002 (2) TMI 54 - HC - Income Tax

Summary

Issues Involved:
The judgment addresses the issue of whether discounted interest received by assessees should be assessed proportionately over three assessment years or in full in the relevant previous year.

Facts and Decision:
The assessees, individuals, claimed deduction under section 54E of the Income-tax Act for amounts deposited in the National Housing Bank Three Year Bond. They received discounted interest in full during the relevant previous year. The assessees offered one-third of the interest received for income tax for the assessment year 1992-93. The Tribunal held that only one-third of the interest received was taxable for that year. The Revenue disagreed and contended that the entire interest amount received should be taxed for that assessment year.

Arguments and Analysis:
The Revenue argued that the discounted interest represents deferred interest and should be accounted for in the assessment year it was received. The assessees' counsel cited a decision by the Madhya Pradesh High Court to support their position. The Tribunal relied on this decision to rule in favor of the assessees. However, the High Court found that the Madhya Pradesh High Court decision was not applicable to the present case. The interest received by the assessees was not to be spread over multiple years as it was already received in full in the previous year.

Conclusion:
The High Court concluded that the Tribunal misdirected itself by relying on a decision that was not relevant to the case at hand. The discounted interest received by the assessees should be accounted for in the assessment year it was received in full. Therefore, the reference was answered in favor of the Revenue and against the assessees.