1980 (4) TMI 24 - HC - Income Tax

Summary

Issues:
Assessment of interest income on U.P. Zamindari Abolition Bonds for the assessment year 1961-62, inclusion of interest income in earlier years, applicability of tax on receipt basis, double taxation, relief to the assessee.

Analysis:
The judgment pertains to the assessment of interest income received by the assessee on U.P. Zamindari Abolition Bonds for the assessment year 1961-62. The assessee received a sum of Rs. 30,819 as interest on these bonds, which was payable annually but was not paid each year due to litigation. The Income Tax Officer (ITO), the Appellate Assistant Commissioner (AAC), and the Appellate Tribunal rejected the assessee's claim that only the eighth instalment due on July 1, 1960, should be included for assessment in 1961-62. The primary issue was whether the entire sum of Rs. 30,819 should be assessed in the said assessment year.

The first question addressed was whether the interest income should be assessed on a receipt basis under Section 8 of the Indian Income Tax Act, 1922. The court referred to previous decisions interpreting the term "receivable" to mean income actually received. The court held that under the 1922 Act, interest income was assessable only in the year of its receipt, in accordance with Section 8. The court distinguished this from the provisions of the 1961 Act, which allowed for accrual basis assessment.

The second question involved the issue of double taxation. The court emphasized that income cannot be taxed twice unless provided otherwise. The court cited a Supreme Court decision to support this principle. It was determined that the inclusion of the entire interest amount in the assessment year 1961-62 was correct under the law. However, to avoid double taxation, the department was directed to exclude the income from assessments for previous years and provide appropriate relief to the assessee.

The court highlighted that the department should take immediate steps to rectify the double taxation issue and provide relief to the assessee. The judgment concluded that the interest income of Rs. 30,819 was taxable in the assessment year 1961-62 on a receipt basis, despite being taxed in earlier years. The court emphasized the department's obligation to prevent double taxation and provide necessary relief to the assessee.