1993 (8) TMI 9 - HC - Income Tax

Summary

Issues Involved:
The judgment involves the assessment of interest on debentures for the assessment year 1983-84, specifically addressing whether the interest accrued or became due during the relevant accounting year and if it should be assessable.

Summary of Judgment:

Assessment of Interest on Debentures:
During the assessment proceedings, it was found that the assessee had not disclosed income from interest on debentures of two companies. The Assessing Officer added the interest amount to the total income of the assessee. However, on appeal, the Commissioner of Income-tax (Appeals) held that the interest on debentures did not accrue to the assessee during the relevant previous year.

Tribunal's Decision and Analysis:
The Department appealed against the Commissioner's order, arguing that the assessee's right to receive interest was not properly considered. The Tribunal upheld the Commissioner's decision, citing a previous order and stating that the issue was identical to a prior assessment year. The Tribunal concluded that the interest on debentures should not be included in the assessment.

Legal Interpretation and Precedents:
The judgment referenced a case where the Supreme Court defined when income accrues, emphasizing that a debt must become due for income to accrue. Due to the nationalization and takeover of the debtor companies, the right to receive interest on debentures ceased, leading to the conclusion that the interest did not accrue to the assessee.

Final Decision:
The High Court agreed with the Tribunal's decision, stating that the interest on debentures should not be included in the assessment. The judgment highlighted that the assessee had no enforceable right to receive the interest due to the nationalization of the debtor companies. Therefore, the question was answered in favor of the assessee.

Conclusion:
The High Court upheld the Tribunal's decision, ruling that the interest on debentures did not accrue to the assessee during the relevant accounting year, and therefore should not be included in the assessment.