1952 (3) TMI 39 - HC - Income Tax

Summary

Issues:
1. Interpretation of the term "receivable" in Section 8 of the Income-tax Act.
2. Determination of the assessment year for half-yearly interest on securities.

Analysis:

Issue 1: Interpretation of the term "receivable" in Section 8 of the Income-tax Act:
The case involved a question of law regarding the interpretation of the term "receivable" in Section 8 of the Income-tax Act. The dispute arose from the treatment of interest on securities by the Income-tax Department for the assessment year 1945-46. The Tribunal held that "receivable" does not mean "received" but rather "capable of being received." However, the High Court analyzed the legislative intent behind the term and concluded that "receivable" refers to the amount entitled to the assessee based on the securities' terms, not just the amount capable of being received. The Court highlighted the distinction between the actual receipt of income and the amount due according to the securities' conditions.

Issue 2: Determination of the assessment year for half-yearly interest on securities:
The primary contention was whether the half-yearly interest amounting to a specific sum, due on 15th October 1944, should be considered as the income of the assessment year 1945-46 or 1946-47. The Tribunal based its decision on the principle that the interest was capable of being received on 15th October, making it taxable for the assessment year 1945-46. However, the High Court emphasized that income on securities becomes taxable only when actually received, not when it is due or capable of being received. The Court cited precedents and provisions of the Income-tax Act to support the conclusion that interest on securities is recognized as income only upon actual receipt, aligning with the principles of Section 4 of the Act.

In conclusion, the High Court answered the reference question by determining that the half-yearly interest should be considered as the income of the assessment year 1946-47. The judgment clarified the distinction between income receivable and income received, emphasizing the timing of actual receipt as the trigger for tax liability on interest on securities. The decision provided a comprehensive analysis of the legislative framework and relevant precedents to interpret the term "receivable" in the context of income-tax assessment.