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TMI Blog2014 (11) TMI 221X X X X Extracts X X X X X X X X Extracts X X X X ..... one be considered as income accrue d and that should be offered as tax - The fact that the assessee in its internal books of accounting mentions the proportionate interest, which is entitled to receive, in its balance sheet for the purpose of profit and loss cannot be deemed as income accrued, unless such income has become due and payable – there was no inconsistency between the amended provisions of Sections 145 and 5 of the I.T. Act - Merely because in the books of accounts, the interest income, which is not due and payable is shown in the account of the assessee - That itself will not give right to A.O to tax unless it has become due and payable as per provisions of Section 5 of the I.T. Act - the AO has to redo the assessment regarding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nst the said orders, the revenue is in appeal in ITA Nos.433-434/06. 4. The A.O. immediately after the orders passed by the Commissioner of Income Tax in revision, took up the re-assessment and computed the income earned on Government securities and assessed the same to tax. The assessee aggrieved by the said order, filed the appeal. The appeals of the assessee were allowed. The Appellate Tribunal also confirmed the orders of the Commissioner of In come Tax (Appeals). The Revenue aggrieved by the said orders , filed ITA 149 and ITA 147/08. 5. In ITA No.433/06, the following questions of la w were raised: a) Whether the Tribunal was correct in applying the legal position as it existed after the amendment to Section 145 of the Act by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TA No.148/08, this Court admitted the appeal and framed the following substantial questions of law:- Whether the Tribunal as well as the first Appellate Authority were justified in deleting the interest earned by the respondent-assessee on the securities and further holding the same as not taxable? 9. In ITA No.149/08, this Court admitted the appeal and framed the following substantial questions of law. Whether the Tribunal as well as the first Appellate Authority were justified in deleting the interest earned by the respondent-assessee on the securities and further holding the same as not taxable? 10. Sri E.K. Indra Kumar, Senior Standing Counsel for the revenue submits that position of law prior to Finance Act, 1995, the provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of account of assessee and liable to tax. The assessee in the course of scrutiny assessment, had submitted recast statement wherein the interest on government securities for the broken period, was deleted. The said deletion was impermissible and A.O. correctly assessed the said income. 12. Sri Sarangan, learned counsel for the assessee relied upon the decision of the COMMISSIONER OF INCOME TAX vs CANARA BANK reported in 195 ITR P 66 to bring home the point that the question of proportionate interest cannot be taken as having accrued to the assessee at all and the interest on securities does not arise day today but would arise only on the date prescribed or agreed upon while issuing the securities. 13. The decision of the Bombay High ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome is accrued or deemed to have been accrued. In the instant case, the assessee in the recast statement had deleted the proportionate interest on Government securities for the broken period as not having been accrued du ring the relevant assessment period. Therefore, the Assessing Officer was wrong in considering such income for tax when the interest has not really accrued within the meaning of Section 5 of the I.T. Act. 15. The provisions of Section 5 of the I.T. Act are extracted hereunder for convenient reference:- Scope of total income:- (1) Subject to the provisions of this Act, the total income of any previous year of a person who is a resident includes all income from whatever source derived which - (a) is received or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tled to receive on the Government securities. But for the assessment year, although it is not accrued, in the legal sense and in terms of Sections 5 and 145 of the I.T. Act. The contention of the Revenue that in the books of accounts, the proportionate interest shown for the broken period in the balance sheet, should be construed as the income accrued, is not tenable. In other words, the income which has become due and payable should alone be considered as income accrue d and that should be offered as tax. The contention that Assessing Officer is entitled to tax on the interest income although not due and payable as accrued, is untenable. The fact that the assessee in its internal books of accounting mentions the proportionate interest, whi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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