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TMI Blog1991 (7) TMI 38X X X X Extracts X X X X X X X X Extracts X X X X ..... the extent of Rs. 1,45,14,126 ? (2) Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal is right in law in confirming the orders of the Commissioner of Income-tax (Appeals) who deleted the addition of Rs. 12,16,33,177 being the interest accrued relatable to the period ended December 31, 1981, but becoming payable after December 31, 1981 ? " The first question was held against the Revenue by the Tribunal on the ground that, actually, the assessee-bank had made a provision for the entire sum and that the sum did not exceed the ceiling prescribed under section 36(1)(vii)(a) of the Act. Though Mr. Raghavendra Rao, learned counsel for the Revenue, tried to contend that, actually, no such provision w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the system of accounting. In fact, the principles enunciated by the Supreme Court are found at page 155, which reads : " As a result of the aforesaid discussion, the following propositions emerge : (1) It is the income which has really accrued or arisen to the assessee that is taxable. Whether the income has really accrued or arisen to the assessee must be judged in the light of the reality of the situation. (2) The concept of real income would apply where there has been surrender of income which in theory may have accrued but in the reality of the situation, no income had resulted because the income did not really accrue. (3) Where a debt has become bad, deduction in compliance with the provisions of the Act should be claimed and allo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ow does an income accrue and what are the consequences that follow from accrual of income are well-settled. The accrual must be real taking into account the actuality of the situation. Whether an accrual has taken place or not must, in appropriate cases, be judged on the principles of real income theory. After accrual, non-charging of tax on the same because of certain conduct based on the ipse dixit of a particular assessee cannot be accepted. In determining the question whether it is hypothetical income or whether real income has materialised or not, various factors will have to be taken into account. It would be difficult and improper to extend the concept of real income to all cases depending upon the ipse dixit of the assessee which wo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proportionate interest cannot be taken as having accrued to the assessee at all and the interest on securities does not arise day-to-day, but would arise only on the date prescribed or agreed upon while issuing the securities. In such a situation, the relevant provision will be section 18. In para 15 (at page 528 of Tax LR) of the judgment, this court observed thus : " The above enunciation has been relied on for the Revenue for two purposes and, in our opinion, justifiably ; first, to repel a contention urged on behalf of the assessee that dealing in securities being a part of the business of banking, and as such they were trading assets, and that hence it was permissible for it (the assessee) to deduct the amount paid towards the inter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o existence and he must have acquired a right to receive the payment. Unless and until his contribution or parenthood is effective in bringing into existence a debt or a right to receive the payment or in other words a debitum in praesenti, solvendum in futuro, it cannot be said that any income has accrued to him." Applying this test, it was pointed out that the interest for the broken period had not accrued or crystallised into a debt and thus has not become due and payable, if it is characterised as income chargeable to tax in the hands of the transferor and hence could be said to be deductible in the hands of the assessee-transferee. We are of the view that this decision entirely covers the question raised by the Revenue. The relevant ..... X X X X Extracts X X X X X X X X Extracts X X X X
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