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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 ..... far as interest for the broken period is concerned as interest not accrued. The Appellate Tribunal confirmed the order of the Commissioner of Income Tax (appeals). The Revenue aggrieved by the said order has filed ITA No.148/05. 2. For the assessment year 1998-99 and 1999- 2000, the A.O. did not assess the interest on Government securities for Tax. The Commissioner of Income Tax in Revision U/s.263 of the I.T. Act, set aside the order of the A.O. for the said assessment years and held that interest accrued on Government securities whether actually received or not in view of the amended provisions of Section 145, the interest accrued is to be offered as income and liable to be taxed. 3. The orders passed in revision were challenged before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al position as it existed after the amendment to Section 145 of the Act by the Finance Act of 1995, with effect from 1.4.1997, by taking into account the law which existed prior to the amendment? b) Whether the Assessee is entitled to follow dual system of accounting by offering interest income to tax on cash basis of accounting, when following the mercantile system of accounting for all other purposes including finalisation of accounts and submitting the same before the share holders? 7. In ITA No.147/2008, this Court admitted the appeal and has 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n his returns and the same should be subjected to tax. The Assessing Officer in the assessment order has found that the books of accounts and the balance sheet of the assessee would disclose that the interest accrued for the broken period, has been shown as the income from the interest on the Government securities. Therefore, the A.O. was justified in considering the said amount as the income from interest and on Government securities and accordingly, tax the same as interest accrued to the benefit of the assessee. 11. The Tribunal has failed to properly appreciate the implication of the effect of the amendment to Section 145. When the assessee has shown the interest for the broken period in the balance sheet, the said amount should be con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Jodhpur Bench of the Tribunal was dismissed by the High Court of Rajasthan on January 23, 2008. In that view of the matter and particularly, since the finding of the Tribunal has not been shown to suffer from any perversity, no substantial question of law would arise. " 14. On the basis of the above decisions, it was argued that in so far as Government securities are concerned, the interest is paid once in six months from the date of issue. In the middle of the year, if the securities is issued, the liability to pay interest on the security does not arise. Within a period of assessment year although the assessee is entitled to compute the proportionate interest liable to be payable on such securities in his accounts, he need not disclose t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ived or is deemed to be received in India in such year by or on behalf of such person; or (b) accrues or arises or is deemed to accrue or arise to him in India during such year. 16. It is declared U/s.5 of the Act that when interest is accrued or deemed to have been accrued, it is li able to tax. The word 'accrued' has defined the legal connotation. The interest that becomes due or liable to be payable whether or not it is paid, the interest is accrued or deemed to have been accrued. If the interest does not become due and not liable to pay such part of the interest arise, it cannot be said that the interest has become accrued. It appears from the facts of the case that the assessee is a bank. For its accounting purpose, it has shown the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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