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TMI Blog2011 (3) TMI 1062X X X X Extracts X X X X X X X X Extracts X X X X ..... engaged in procuring and processing of milk collected from different village labourer society members of Puri District. The assessee filed return declaring NIL income after adjustment of brought forward losses. The Assessing Officer in his order under section 143(3) held that the assessee was holding fixed deposits in the banks amounting to Rs. 1.27 crores. The assessee had failed to show any interest income thereon for the financial year which he queried from the assessee. They submitted that the rate of interest on a premature fixed deposit could not be ascertained by the assessee and in any case the income for the term deposit would be rendered to tax on its receipts from the bank who will also deduct tax at source on the total interest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bank as well as the society to render the income as and when credited in the bank on maturity or on the basis of TDS certificate issued by the bank. He pointed out that the tax deducted at source on the amount matured for the term period should not be for one year alone. Therefore, it was not the case of the learned CIT(A) to hold that the TDS has no bearing on the method of accounting by the assessee in view of the fact that the assessee being a cooperative society is subjected to different slabs of taxation when the income from the fixed deposits may be considered as income from business was to be given credit for the TDS as and when deducted by the bank. In any case, it would have been an exercise to pay tax on income which is not intima ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terest accrued but not due by the assessee to show the true and correct income for the impugned assessment year. He supported the orders of the authorities below for his part submissions. 5. We have heard the rival contentions and perused the material available on record. On our careful consideration of the facts and circumstance, we are inclined to hold that a true income could not be found even if the assessee tried to compute the interest accrued on fixed deposits but not due to the assessee on the basis of the Term Deposits Rules. The CBDT, therefore, clarified the issue that when the term deposit exceed the term of one year or is encashed in the middle of the year the core banking software was only to be considered for taxation on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ged by the bank or by the assessee itself. The investment in fixed deposits could not have been inflated by the assessee as is to be considered in the case of investment in shares by assessees when the book value of the share as on the close of the financial year has to be inflated when the same is held as stock-in-trade. The valuation of the investment, therefore, cannot be subjected to tax under the mercantile system of accounting which has to follow the rigour of various statutes and law. Taxing income which has not been received and which has not been acknowledged as payable to an assessee cannot be taxed. In view thereof, we are inclined to hold that the interest income so brought to tax and confirmed by the learned CIT(A) is bound to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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