TMI Blog2023 (1) TMI 725X X X X Extracts X X X X X X X X Extracts X X X X ..... as to the finding of the Bombay High Court that the interest income on securities has to be taxed on due basis, nonetheless, by the aforesaid decision, the appeals preferred by the revenue were dismissed. As in Commissioner of Income Tax v. State Bank of India [ 2016 (8) TMI 963 - BOMBAY HIGH COURT] one of the substantial questions of law which was considered by the Bombay High Court was whether Tribunal was right in law in accepting the plea of the assessee that the interest income on the securities had to be taxed on due basis only instead of accrual basis as per the mercantile system of accounting followed by the assessee. Insofar this question is concerned, Bombay High Court referred to its previous decision in Credit Suisse Firs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at under the provisions of Section 145 of the Act (as it stood at the relevant time), income from interest on securities should necessarily be computed on accrual basis and not on due basis for this particular assessment year 1994-95 ? (ii) Whether on the facts and in the circumstances of this case, the Tribunal is justified in ignoring the letter dated 02.01.1995 addressed by the Central Board of Direct Taxes to the Chief Commissioner of Income Tax, Bangalore, in respect of the assessment of Canara Bank, while deciding the present appeal of State Bank of Hyderabad ? (iii) Whether on the facts and in the circumstances of this case, the Tribunal is justified in relying on the earlier decision of the Supreme Court of State Bank of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 004 held that interest had accrued on day-to-day basis and therefore has to be taxed on accrual basis only. 7. Issue raised in this appeal has been gone into by the Bombay High Court in Director of Income Tax (International Taxation) v. M/s. Credit Suisse First Boston (Cyprus) Limited (2013) 351 ITR 323. Bombay High Court has held as follows: The appellant's submission is entirely unfounded and is based on the erroneous premise that the amount received upon the sale of a security in excess of the face value thereof includes the interest for the proportionate period upto the date of the sale. The erroneous presumption is that interest accrues de die in diem even when the agreement between the parties stipulates interest to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... but only on the terms of the security and subject to all the incidents thereof as were applicable to the original owner. 8. Thus, it has been held that interest can be said to have accrued only on the date on which it was due as per the terms and conditions of the security. When an instrument or an agreement stipulates interest to be payable at specified date, interest does not accrue to the holder thereof on any date prior thereto. Interest would accrue or arise only on the date specified in the instrument. This decision of the Bombay High Court was followed by the same High Court in Commissioner of Income Tax v. State Bank of India 2016 SCC Online Bombay 9749. One of the substantial questions of law which was considered by the Bom ..... X X X X Extracts X X X X X X X X Extracts X X X X
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