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TMI Blog1984 (6) TMI 105X X X X Extracts X X X X X X X X Extracts X X X X ..... -1974. This was reopened and a reassessment was made in which an addition was made of a sum of Rs. 41,250 as interest on securities. This was comprised of Rs. 33,062.50, Rs. 4,750 and Rs. 3,437.50 being interest at the rate of 5 3/4 per cent on K.S.D. Loan, 4 3/4 per cent on K.S.D. Loan Bonds and 5 1/2 per cent on K.S.D. Loan Bonds, respectively. The interest amounts had accrued during the period when the assets were held by the Government and was not, therefore, taxable. The amounts were brought to tax by the ITO in the reassessment by resorting to section 18(2) of the Income-tax Act, 1961 ('the Act'). 3. The Commissioner (Appeals) held that section 18(2) is not attracted in the present case and deleted the addition. Aggrieved by the sam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interest had not been charged to income-tax for any earlier previous year." Sub-section (2) provides that interest on securities received by an assessee in the previous year can be charged to tax if such interest had not been charged to tax for any earlier previous year. The purpose of the section is to tax the interest amount on receipt basis when it had not been taxed on accrual basis. This presupposes that the amount could have been taxed either in the earlier previous year or in the previous year. Sub-section (2) does not seem to cover a case where the interest was not chargeable to tax at all when it accrued due and where it could have been charged to tax in a subsequent assessment year on receipt basis. The sub-section is intended ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, the interest amount had already accrued due to the Government and it formed part of the assets taken over by the assessee. This is confirmed by the deed of sale executed in favour of the company by the Governor of Kerala and the connected papers regarding the valuation of the assets. The assessee merely collected an amount which had accrued due to the predecessor in interest. It was not, therefore, a case of the assessee receiving an income. It was only a case of a recovery of an asset. In this view of the matter also, the interest amount cannot be brought to tax in the hands of the assessee. We, therefore, confirm the order of the Commissioner (Appeals) deleting the additions. 7. In the result, the appeal is dismissed. - - TaxTMI - ..... X X X X Extracts X X X X X X X X Extracts X X X X
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