2009 (7) TMI 89 - HC - Income Tax

Income under the head interest of securities u/s section 18(1)(ii) for the AY 1988-89 Held that - That the interest on debentures bonds issued by all companies, whether or not established by a Central, State or Provincial Act, was liable to be computed as income under the head Interest on securities under the provisions of Section 18(1)(ii) of the Income-tax Act for the assessment years under consideration. - Interest on debentures of ASE and R was liable to be considered as income only when received by the assessees and not when it was due for payment by the respective companies

Summary

The High Court of Gujarat, in the case of Income-tax Application No. 13/1999, reviewed a statement of case by the Income-tax Appellate Tribunal, Ahmedabad Bench-B, for the assessment years 1988-89. The Tribunal had referred questions regarding the computation of interest on debentures issued by companies not established by a Central, State, or Provincial Act. The Court held that interest on debentures from all companies is to be computed as income under the head "Interest on securities" as per the Income-tax Act. Additionally, interest on debentures is considered income only when received by the assessee, not when it becomes due. This judgment was challenged in the Supreme Court and upheld. The Court ruled in favor of the assessee and against the revenue, answering both questions in the affirmative. The reference was concluded without any costs. This case highlights the legal aspects of interest on debentures and its treatment as income under the Income-tax Act.